Tradesight Market Preview for 8/9/11
Following the S&P downgrade of the US debt rating the SP gapped lower made an attempt to fill then was sold all day long. The futures lost 86 on the day settling below the 0/8 Gann level. All of the price oscillators are extremely oversold. 1100 is the 38% fib retracement from the 2009 low to the 2011 high. This is a very key area of support.
Below is the weekly SP chart with fibs off the 2008 high:
Naz lost 149 handles, settling below the -2/8 level with will shift the Gann frame lower. Like the SP, all the technical indicators are flashing oversold signals.
Below is the weekly Naz chart with fibs:
The multi sector daily chart looks like all the components fell down an elevator shaft. Seasoned traders know that when the margin clerks call, everything can be a source of funds.
The 10-day Trin is solidly in oversold territory.
The put/call ratio closed at a super climatic reading of 1.42 as traders paid up for option protection. This is the highest close since 12/31/07.
The Dow/gold ratio closed at a new low on the move. Keep in mind that super-cycle financial crisis usually see a Dow/gold ratio under 2. To achieve this, even conservatively using the 2008 low of the Dow, gold would have to be >$3000 to get the ratio below 2.
Even with gold up the most in dollar terms in a single day, the margin clerks used the XAU as a source of funds.
The SOX outperformed the Naz only losing 19 on the day. Support levels are 328 and 312.
The XAL is in Gann oversold territory and is 12 days down in the Seeker count.
The BTK traded inline with the market—first support 1062, better support at 1k.
The Trans closed right on support at 4375, next support 4218.
The CYC is just above last support before a frame shift.
The OSX was much weaker than the broad market, down 10%. The Gann box will frame shift tomorrow, but the CCI is buried enough for some upside.
The BKX was the last laggard on the day, thumped 11%. Following the channel breakdown, the banks are currently very oversold with the CCI at -346! Note that the sector is 9 days down.
Oil was a source of funds and will frame shift tomorrow.
Gold was a place to park money and is getting close to the 1750 8/8 level.
Stock Picks Recap for 8/8/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, NUAN triggered short (without market support due to opening five minutes) and essentially worked, but not the type of trade you'd want to be taking on a big gap down in the market anyway:
From the Messenger, Rich's TZOO triggered short (with market support) and worked:
GOOG triggered short (with market support) and worked:
Rich's FCX triggered short (with market support) and didn't work, although it worked later:
RIMM triggered short (with market support) and worked:
NFLX triggered short (with market support) and worked:
Rich's DECK triggered short (with market support) and worked:
His PNRA triggered short (with market support) and worked:
His SFLY triggered short (with market support) and worked:
His SHLD triggered short (with market support) and worked enough for a partial:
His RL triggered short (with market support) and worked enough for a partial:
His AZO triggered short (with market support) and worked:
His VMW triggered long (without market support) and worked for over a point:
EBAY triggered short (with market support) and worked:
AMGN triggered short (with market support) and worked enough for a partial:
Rich's RIMM triggered long (without market support) and worked enough for a partial:
His FRX triggered long (without market support) and didn't work:
His JPM triggered long (without market support) and didn't work:
AMZN triggered long (without market support) and didn't work:
In total, that's 13 trades triggering with market support, 12 of them worked, 1 did not.
Stock Picks Recap for 8/8/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, NUAN triggered short (without market support due to opening five minutes) and essentially worked, but not the type of trade you'd want to be taking on a big gap down in the market anyway:
From the Messenger, Rich's TZOO triggered short (with market support) and worked:
GOOG triggered short (with market support) and worked:
Rich's FCX triggered short (with market support) and didn't work, although it worked later:
RIMM triggered short (with market support) and worked:
NFLX triggered short (with market support) and worked:
Rich's DECK triggered short (with market support) and worked:
His PNRA triggered short (with market support) and worked:
His SFLY triggered short (with market support) and worked:
His SHLD triggered short (with market support) and worked enough for a partial:
His RL triggered short (with market support) and worked enough for a partial:
His AZO triggered short (with market support) and worked:
His VMW triggered long (without market support) and worked for over a point:
EBAY triggered short (with market support) and worked:
AMGN triggered short (with market support) and worked enough for a partial:
Rich's RIMM triggered long (without market support) and worked enough for a partial:
His FRX triggered long (without market support) and didn't work:
His JPM triggered long (without market support) and didn't work:
AMZN triggered long (without market support) and didn't work:
In total, that's 13 trades triggering with market support, 12 of them worked, 1 did not.
Forex Calls Recap for 8/8/11
Forex trading was actually fairly stable after the news of the weekend. There was a gap early, which messes up the Levels, but the GBPUSD for example ended up right about where it closed Friday. I kept trading light given the environment, and you can read the recap below.
Here's the US Dollar Index intraday with market directional lines:
New calls and Chat tonight.
GBPUSD:
Very early short triggers at A and B both stopped. On the main session, triggered long at C and stopped. Triggered short at D, hit first target at E, closed final piece at F:
Forex Calls Recap for 8/8/11
Forex trading was actually fairly stable after the news of the weekend. There was a gap early, which messes up the Levels, but the GBPUSD for example ended up right about where it closed Friday. I kept trading light given the environment, and you can read the recap below.
Here's the US Dollar Index intraday with market directional lines:
New calls and Chat tonight.
GBPUSD:
Very early short triggers at A and B both stopped. On the main session, triggered long at C and stopped. Triggered short at D, hit first target at E, closed final piece at F:
The Global Meltdown
So, will the US stock market break hard on Monday? Let's analyze the pros and cons and try to figure out what is most likely to happen.
First of all, as I write this at 2 am EST / 11 pm PST Sunday night, global markets are down. Asia is down 2-4 percent across the board. Europe is about to open. S&P and NDX futures here in the US are indicating a 2.5% down opening. Let's also realize that 2.5 percent on the Dow Jones is about 200 points. The breakers don't shut down the market until 1000 points on the Dow. We're not in that territory yet.
Factors in favor of a breakdown:
The S&P downgrade certainly has implications for US Treasuries and entities that hold US Treasuries. There will probably be long-term ramifications of the downgrade for months.
Margin calls. We're in margin call territory in the US, although the Asia markets have much higher margin levels than the US stock markets. If this puts firms at risk due to margin, you won't see it in the opening action. It will hit the most over midday lunch activity and the last hour.
Overvalued to begin with. A lot of people are making the argument that pricing in US stocks due to QE2 puts prices at beyond reasonable levels if you ignore the S&P downgrade, and even morese if the economy contracts.
Destructive behavior in Washington. If you read the S&P downgrade statement carefully, it doesn't say that it feels like the US can't pay its debts. It basically says that Washington is so irrational today that it has zero faith that it will take the proper steps to finish the business that it left on the table. It even goes as far as to say that the expiration of the high-end Bush tax cuts are necessary to stabilizing the markets, and that it no longer is certain that this will occur. In other words, the inmates are running the asylum, and here's the penalty and extended punishment. Go back to what I wrote last week. Contracting an economy in the middle of 9% unemployment is just dumb.
That's actually a fairly short list, to be honest.
Factors against a breakdown:
Two other ratings agencies DIDN'T agree with the downgrade. This is a key point that is being overlooked. Not everyone is sure about this.
We're not close to August options expiration. The great crashes in stock market history occur when there is no options protection (including 1987, 1989, and 2000); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES but this isn't that point.
We sold off sharply last week, at least part of which was in anticipation of the downgrade. This doesn't mean that Monday will be a bottom, but it suggests that Monday won't be as bad as it could be.
The active sellers don't own stocks anyway. Frankly, most of them got wiped late in 2008 at the end of the largest drop in market history when the VIX spiked to levels it had never seen. They've missed the run, they don't believe in it to begin with, so they don't have stocks to sell.
The US Dollar has been strong in the FX market since the open.
So what does that leave us with?
Never underestimate how much selling pressure gets factored into the markets before we get to the US session. My general view is that this does NOT lead to a sharp sell-off in the US markets after the open on Monday. Washington may have made a lot of mistakes in their efforts last week. Let me give you the version of how this should have worked. The stimulus back in 2009 should have been $1.5 trillion bigger (or more) and not in the form of greater tax cuts but in the form of job-creating spending like we did in the early 1930's. When unemployment and the economy improved, it should have been a long-term debt/deficit agreement that included bigger commitments to debt reduction funded by 75% spending cuts and 25% tax increases, mostly on the rich, who haven't felt any of this comparatively. But, we did the stimulus wrong, and we did the debt reduction too early and even more poorly. So are the markets going to punish us as I said they might last week if they felt that the spending contraction would lead to a recession in 6-9 months? And I think the answer is that the downgrade is probably factored in in the short term and the rich got short last week on the heavy volume that we saw, and there will be buyers Monday, but after that, the sky's the limit.
And either way, we'll trade it the way we see it, based on market direction, which is great since we're giving a free webinar at noon EST tomorrow on that very subject that was already planned. Non-subscribers, access the Lab here for free with any username and password "august" without the quotes.
The Global Meltdown
So, will the US stock market break hard on Monday? Let's analyze the pros and cons and try to figure out what is most likely to happen.
First of all, as I write this at 2 am EST / 11 pm PST Sunday night, global markets are down. Asia is down 2-4 percent across the board. Europe is about to open. S&P and NDX futures here in the US are indicating a 2.5% down opening. Let's also realize that 2.5 percent on the Dow Jones is about 200 points. The breakers don't shut down the market until 1000 points on the Dow. We're not in that territory yet.
Factors in favor of a breakdown:
The S&P downgrade certainly has implications for US Treasuries and entities that hold US Treasuries. There will probably be long-term ramifications of the downgrade for months.
Margin calls. We're in margin call territory in the US, although the Asia markets have much higher margin levels than the US stock markets. If this puts firms at risk due to margin, you won't see it in the opening action. It will hit the most over midday lunch activity and the last hour.
Overvalued to begin with. A lot of people are making the argument that pricing in US stocks due to QE2 puts prices at beyond reasonable levels if you ignore the S&P downgrade, and even morese if the economy contracts.
Destructive behavior in Washington. If you read the S&P downgrade statement carefully, it doesn't say that it feels like the US can't pay its debts. It basically says that Washington is so irrational today that it has zero faith that it will take the proper steps to finish the business that it left on the table. It even goes as far as to say that the expiration of the high-end Bush tax cuts are necessary to stabilizing the markets, and that it no longer is certain that this will occur. In other words, the inmates are running the asylum, and here's the penalty and extended punishment. Go back to what I wrote last week. Contracting an economy in the middle of 9% unemployment is just dumb.
That's actually a fairly short list, to be honest.
Factors against a breakdown:
Two other ratings agencies DIDN'T agree with the downgrade. This is a key point that is being overlooked. Not everyone is sure about this.
We're not close to August options expiration. The great crashes in stock market history occur when there is no options protection (including 1987, 1989, and 2000); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES but this isn't that point.
We sold off sharply last week, at least part of which was in anticipation of the downgrade. This doesn't mean that Monday will be a bottom, but it suggests that Monday won't be as bad as it could be.
The active sellers don't own stocks anyway. Frankly, most of them got wiped late in 2008 at the end of the largest drop in market history when the VIX spiked to levels it had never seen. They've missed the run, they don't believe in it to begin with, so they don't have stocks to sell.
The US Dollar has been strong in the FX market since the open.
So what does that leave us with?
Never underestimate how much selling pressure gets factored into the markets before we get to the US session. My general view is that this does NOT lead to a sharp sell-off in the US markets after the open on Monday. Washington may have made a lot of mistakes in their efforts last week. Let me give you the version of how this should have worked. The stimulus back in 2009 should have been $1.5 trillion bigger (or more) and not in the form of greater tax cuts but in the form of job-creating spending like we did in the early 1930's. When unemployment and the economy improved, it should have been a long-term debt/deficit agreement that included bigger commitments to debt reduction funded by 75% spending cuts and 25% tax increases, mostly on the rich, who haven't felt any of this comparatively. But, we did the stimulus wrong, and we did the debt reduction too early and even more poorly. So are the markets going to punish us as I said they might last week if they felt that the spending contraction would lead to a recession in 6-9 months? And I think the answer is that the downgrade is probably factored in in the short term and the rich got short last week on the heavy volume that we saw, and there will be buyers Monday, but after that, the sky's the limit.
And either way, we'll trade it the way we see it, based on market direction, which is great since we're giving a free webinar at noon EST tomorrow on that very subject that was already planned. Non-subscribers, access the Lab here for free with any username and password "august" without the quotes.
Tradesight July Forex Results
Before we get to June’s numbers (which were huge); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES here is a short reminder of the results from June. The full report from June can be found here and you can get the last several months in a row vertically by clicking here and scrolling down.
Tradesight Pip Results for June 2011
Number of trades: 42
Number of losers: 17
Winning percentage: 59.5%
Worst losing streak: 3 in a row (June 26-27)
Net pips: +645
Reminder: Here are the rules.
1) Calls made in the calendar month count. In other words, a call made on August 31 that triggered the morning of September 1 is not part of September. Calls made on Thursday, September 30 that triggered between then and the morning of October 1 ARE part of September.
2) Trades that triggered before 8 pm EST / 5 pm PST (i.e. pre Asia) and NEVER gave you a chance to re-enter are NOT counted. Everything else is counted equally.
3) All trades are broken into two pieces, with the assumption that one half is sold at the first target and one half is sold at the final exit. These are then averaged. So if we made 40 pips on one half and 60 on the second, that’s a 50-pip winner. If we made 40 pips on one half, never adjusted our stop, and the second half stopped for the 25 pip loser, then that’s a 7 pip winner (15 divided by 2 is 7.5, and I rounded down).
4) Pure losers (trades that just stop out) are considered 25 pip losers. In some cases, this can be a few more or a few less, but it should average right in there, so instead of making it complicated, I count them as 25 pips.
5) Trade re-entries are valid if a trade stops except between 3 am EST and 9 am EST (when I’m sleeping). So in other words, even if you are awake in those hours and you could have re-entered, I’m only counting things that I would have done. This is important because otherwise the implication is that you need to be awake 24/6. Triggers that occur right on the Big Three news announcements each month don’t count as you shouldn’t have orders in that close at that time.
You can go through the reports and compare the breakdown that I give as each trade is reviewed.
Tradesight Pip Results for July 2011
Number of trades: 41
Number of losers: 18
Winning percentage: 56.1%
Worst losing streak: 4 in a row (July 30-31)
Net pips: +410
After a huge month of June that I believe set a near record for gains for us, July wasn't too shabby either. We netted out 410 pips. After a while, you should see the pattern emerging if you go back and look at that results going back several months. We almost always average between 50 and 60 percent winners. The one month of the year that we were significantly under that at 37% (January of 2011) was a negative month. However, all of the other months averaged right in that range (one month was higher as well). That's about exactly where our system is meant to land, with the losers then being kept to a very specific small amount and the winners being allowed to run when they do. I'll be doing a complete summary of all of 2011 at the end of the year, but right now, I can tell you that our win ratio for the year is about 55%. Some people think you need to be higher to win at forex, but I don't agree. I think systems that have higher win ratios have to take on more risk per trade, and that's the secret to success.
Not much to say about the ranges this month. The six month Average Daily Range of almost all of the pairs stayed relatively stable, which means that our ranges this month were not extremely high or low. Obviously, things got wider in the last few days of the month, but overall, it's right where we like to see it. We had 6 trades during the month that led to over 100 pip winners to the final exit, so it wasn't that you had to catch one of two specific trades to make most of the gains, as has happened a couple of times.
Looking ahead, August is typically the slowest Forex trading month of the year, but obviously there is a lot going on in the world, and this August might be the exception. I usually drop to half size trading when the ranges drop in August, but we haven't seen that yet, and I'm not going to do that until it happens.
Tradesight July Forex Results
Before we get to June’s numbers (which were huge); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES here is a short reminder of the results from June. The full report from June can be found here and you can get the last several months in a row vertically by clicking here and scrolling down.
Tradesight Pip Results for June 2011
Number of trades: 42
Number of losers: 17
Winning percentage: 59.5%
Worst losing streak: 3 in a row (June 26-27)
Net pips: +645
Reminder: Here are the rules.
1) Calls made in the calendar month count. In other words, a call made on August 31 that triggered the morning of September 1 is not part of September. Calls made on Thursday, September 30 that triggered between then and the morning of October 1 ARE part of September.
2) Trades that triggered before 8 pm EST / 5 pm PST (i.e. pre Asia) and NEVER gave you a chance to re-enter are NOT counted. Everything else is counted equally.
3) All trades are broken into two pieces, with the assumption that one half is sold at the first target and one half is sold at the final exit. These are then averaged. So if we made 40 pips on one half and 60 on the second, that’s a 50-pip winner. If we made 40 pips on one half, never adjusted our stop, and the second half stopped for the 25 pip loser, then that’s a 7 pip winner (15 divided by 2 is 7.5, and I rounded down).
4) Pure losers (trades that just stop out) are considered 25 pip losers. In some cases, this can be a few more or a few less, but it should average right in there, so instead of making it complicated, I count them as 25 pips.
5) Trade re-entries are valid if a trade stops except between 3 am EST and 9 am EST (when I’m sleeping). So in other words, even if you are awake in those hours and you could have re-entered, I’m only counting things that I would have done. This is important because otherwise the implication is that you need to be awake 24/6. Triggers that occur right on the Big Three news announcements each month don’t count as you shouldn’t have orders in that close at that time.
You can go through the reports and compare the breakdown that I give as each trade is reviewed.
Tradesight Pip Results for July 2011
Number of trades: 41
Number of losers: 18
Winning percentage: 56.1%
Worst losing streak: 4 in a row (July 30-31)
Net pips: +410
After a huge month of June that I believe set a near record for gains for us, July wasn't too shabby either. We netted out 410 pips. After a while, you should see the pattern emerging if you go back and look at that results going back several months. We almost always average between 50 and 60 percent winners. The one month of the year that we were significantly under that at 37% (January of 2011) was a negative month. However, all of the other months averaged right in that range (one month was higher as well). That's about exactly where our system is meant to land, with the losers then being kept to a very specific small amount and the winners being allowed to run when they do. I'll be doing a complete summary of all of 2011 at the end of the year, but right now, I can tell you that our win ratio for the year is about 55%. Some people think you need to be higher to win at forex, but I don't agree. I think systems that have higher win ratios have to take on more risk per trade, and that's the secret to success.
Not much to say about the ranges this month. The six month Average Daily Range of almost all of the pairs stayed relatively stable, which means that our ranges this month were not extremely high or low. Obviously, things got wider in the last few days of the month, but overall, it's right where we like to see it. We had 6 trades during the month that led to over 100 pip winners to the final exit, so it wasn't that you had to catch one of two specific trades to make most of the gains, as has happened a couple of times.
Looking ahead, August is typically the slowest Forex trading month of the year, but obviously there is a lot going on in the world, and this August might be the exception. I usually drop to half size trading when the ranges drop in August, but we haven't seen that yet, and I'm not going to do that until it happens.
Stock Picks Recap for 8/5/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, ACOR triggered short (with market support) and worked:
PWRD triggered short (without market support due to opening five minutes) and worked:
CREE triggered short (with market support) and worked great:
SYMC triggered short (with market support) and worked enough for a partial:
TSLA triggered short (with market support) and worked great:
From the Messenger, Rich's GMCR triggered short (with market support) and worked:
AAPL triggered short (with market support) and worked huge:
AMZN triggered short (with market support) and worked great:
FSLR triggered short (with market support) and worked great:
DECK triggered short (with market support) and worked:
We had several calls for the afternoon and none of them triggered.
In total, that's 9 trades triggering with market support, all 9 of them worked.