U.S. Standard of Living Unsustainable

Wednesday, March 31st, 2010

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Silver Manipulation Could Cause Huge Short Squeeze

Wednesday, March 31st, 2010

Take this with a grain of salt and realize that this is something to be aware of and not necessarily traded upon immediately. Watch the silver  market and if it sets up then take a position. Do not blindly buy on this information.

I don’t know how big a deal this is going to turn out to be but it sounds like it could be huge if it’s true. I have listened to the King World News interview of whistleblowers Andrew Maguire and Adrian Douglas and it is mind blowing. Its hard to imagine how far reaching the implications of this fraud and manipulation go. I won’t speculate but the talk is it reaches the top levels of several major governments…

The accusation is that there has been a suppression of the gold and silver market, specifically silver to support fiat currency. This is not easy to understand so I’ll try to explain it…

Basically, for every 100 ounces of paper silver traded on the COMEX, there is only one ounce of physical silver backing it. What this means is that there is a huge shortage of physical silver and many holders, that think they own physical silver, do not actually own silver, they own paper silver instead. This means that the clearing firms, banks, exchanges, and anyone that guarantees this paper is actually short because they will not be able to produce the physical for the client. This is why they are saying that price is being suppressed.

Again, this is not necessarily the easiest situation to understand but trust me keep an eye on silver and SLV, the silver ETF, for a massive short squeeze. The conspiracy theorist are going to go crazy with this one…

Here is a link to the audio interview:

Silver Manipulation Audio

Toby Connor answers the skeptics with good analysis, you can read his post here: Manipulation Rebuttal

I’ll let the market do the talking and trade it accordingly…

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Quarter End and the Employment #

Tuesday, March 30th, 2010

The 1st quarter of 2010 ends Wednesday and I think we may see 11,000 on the Dow and 1200 on the S&P by then. From what I am hearing many managers have underperformed and may need to push the markets higher in the next 2 days to try to make up whatever performance they can. The way they do this is to leverage to the hilt and try to move the markets up 2-3% in the hopes of making double that, 4-6%, from leverage.

In addition, almost every newsletter writer, myself included, has been looking for a pullback and its just not happening. Look for the shorts to capitulate if we make new highs today driving us to 11,000 on the Dow. I think we could see 11,200 and 1200 in the S&P on a short squeeze by Thursday.

The market needs a catalyst to break this uptrend or a blow off to the upside before any significant downside can occur. I was thinking that a break down in commodities may trigger a sell off in equities, but they reversed hard to the upside yesterday, only adding more fuel to the rally. Copper seems to be leading the charge and came within a few ticks of new high for 2010 yesterday. It would not surprise me to see commodities rally into quarter end and lead equities higher because they have lagged severely this quarter.

Also, the always market moving employment number comes out on Friday. It is slated to show job gains for the first time in nearly 2 years which is also providing support for equities. Look for more retail investors to come in on that news that the economy is turning around. I can already see the headlines and hear the evening news saying the economy is finally showing signs of strength…blah…blah…blah…

Right now even bad news is good news. Russia had a terrorist attack yesterday and the equity markets didn’t even flinch. Even the Russian markets closed higher…

Yesterday we gapped higher on the S&P and held the gap into the close. That is an extremely bullish sign, short term. As much as I’d love to see equities get killed here, they just want to go higher…

Anything can happen, but I’m just calling it as I see it…

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Commodities Update

Monday, March 29th, 2010

This morning I posted a chart of the CRB Index which was right at its lower channel line. Look at the bounce it had today:

Let’s take a look at the commodity landscape and see how mixed it really is…let’s start with copper which is on the verge of a breakout:

Next, let’s look at Platinum which is strong as well:

Cotton is also strong and consolidating near its recent highs:

Now, let’s take a look at gold which is stuck right in the middle of a range:

How about the losers that can’t seem to get out of their own way? Starting with sugar:

How about wheat:

And, maybe the worst of them all natural gas. This thing couldn’t even bounce today:

Lastly, a little commodity fun…Lean hogs with a gap, dot shot, limit up day after a four hard down days in a row:

As you can see by the charts, the commodity sector is really mixed at them moment. Copper looks great and ripe for a breakout and platinum and cotton are holding strong and may have more upside left. Natural gas on the other hand goes down every single day. It kinda reminds me of the movie Groundhog Day…

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Breakdown in the CRB Index?

Monday, March 29th, 2010

The CRB Index, the Commodity Research Bureau Index, is on the verge of breaking down. Check out the chart:

The CRB index has been trading in a sideways pattern for the past 6 months. We are now at the lower bound of the channel that represents 90% of the price action during that time. Do we bounce or break down? From the looks of the Dollar Index, it sure looks like we are going to break down. Until that happens there isn’t much to do but be on the look out for the break. Commodities have been drifting lower for the most part this year and demand seems to be waning. RBOB gasoline supplies are at 19 year highs. Grains are extremely weak and metals are treading water.

Watch for a break out of this channel for a decent trend move. Energy and metals seem to be losing momentum fast but have yet to completely break down. Those are the two sectors I would look to short if the lower bound fails to hold.

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Flexibility…No I’m Not Talking About Stretching

Sunday, March 28th, 2010

Successful trading is very much a counter intuitive game. It often requires you to be extremely mentally flexible and rigid in that flexibility. Yes, I did just use the words flexible and rigid in the same sentence. On top of that, I said you need to be rigidly flexible to be successful in trading.

The markets ebb and flow and are constantly changing and evolving. In order to be successful you must learn to move with the markets, rather than resist them. Traders that try to fight the markets or impose their will on them lose, lose quickly, and badly.

Being flexible is often much easier said than done and the reason is because most of us are mentally inflexible. This mental inflexibility often stems from our ego’s need to be right and defend itself. If you haven’t already experienced this, you will and it won’t end well. Think about stubborn people you know, do they live with ease or resistance?

So, the question becomes, how do we become more flexible? While I could go into all kinds of trading semantics about how to do this or that, the real answer is to surrender your ego. How do you do that? By reading Eckhart Tolle’s The Power of Now and A New Earth among other eastern spiritual books. Why eastern spiritual books? Because most of them all have to do with the ego and the mind. They have to do with embracing and accepting life as it is rather than resisting it. This is not about religion, its about human functioning. Humans make up markets and last time I checked we are all human.

These books will teach you so much more about the organic nature of life and the markets than the lame western psychology books and teachings. Western psychology is largely based on how to coddle, repair, and trick the ego rather than to move beyond it. I am not interested in playing with the ego at all, been there done that…

The concept that most of us have yet to grasp is that “CHAOS IS THE NORM,” not the other way around. Once you really understand what that means only then will the markets begin to make sense to you. That still doesn’t mean that you’ll understand what is happening you’ll just resist it less.

While a lot of this may sound esoteric to many people, I can assure it is not. Trade for as many years as I have and go through the ups and downs in life and in the market as I have and you’ll understand. I am not putting myself on a pedestal, I am trying to wake you up and show you how to succeed in life and in trading. My point is that I have already had to learn the hard way, so why should you try to reinvent the wheel?

You probably won’t hear what I am saying from many people. In fact, I have read about and heard a few market psychologists that say many of the best traders are often egoic, totally out of control, over emotional, and that gives them their edge. Don’t waste your time with this non-sense!

I would counter their argument by saying, I was once one of those traders and while it worked for a while, it doesn’t work long term. I have lived it and experienced it firsthand and I can tell you definitively, that personality type will crash and burn. There are so many great traders that have crashed and burned because of exactly this type of personality.

I am not afraid to say I was once one of them and after riding the roller coaster one too many times…I said enough is enough. Einstein once said, doing the same thing over and over and expecting different results is the definition of insanity. While, I learned that one the hard way…

Now, my trading is better than its ever been and its because I am not fighting with myself, the markets, my strategy, or any goals or expectations. I am mostly, completely free of all that mental noise and I just let the markets, in their great wisdom, lead me and show me what to do rather than let my ego try to prove to them who is right or wrong.

If you want proof…just refer to my track records page…

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Euro Currency in Trouble??

Friday, March 26th, 2010

Back on March 11th we spoke about the possibility of one more leg down in the Euro. It looks like that move has begun and it should take it down to the 127-130 area. The longer term chart looks even more ominous, especially if the 127 area does not hold.

Structurally and fundamentally the Euro faces a lot of challenges with the PIIGS, all of which are in trouble. Greece and Portugal are in the headlines now, who’s next? And, how does the Euro hold up when the next shoe drops?

Let’s take a look at the charts:

This first graph is a daily chart showing the consolidation break down:

Next, let’s look at the down trend channel that the Euro has been in since the top:

Lastly, let’s look a long term monthly chart where you can clearly see the trend line support around the 127 level. You may also notice the head and shoulder pattern forming. A break of 127 could suggest that the Euro drops back to the 80-85 level. For now its just something to keep on your radar as a possibility:

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Higher Rates?? Pay Attention…

Thursday, March 25th, 2010

Interest rates are on the brink of a move higher in yields that could be significant. Remember that low rates are good for the stock market and the economy and high rates are bad for the stock market and the economy. If rates break out, as you will see in the next two charts, we could be in for a real rough second half of the year in the economy and in the stock market. Put these charts on your radar and pay attention to their implications:

10 Year Yields

30 Year Yields

There has been a lot of chatter about this but now its about to become reality…consider yourself warned!

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Signs of a Top??? Color Me Bearish on Equities!

Wednesday, March 24th, 2010

I am going to make the case that this rally is on fumes, and mostly like over. While picking a top is a losers game, I cannot ignore the evidence that is literally SCREAMING at me…

I am going to post chart after chart that tells me we are at a top. That being said, I am wrong often and the market can do anything, including continue to rally…If you initiate a short position make sure you have a stop!

The first chart I am going to post is the TICK, which recorded the highest reading I can ever remember at 1501 today. YES, that is correct 1501!!!  This signals that the shorts got blown out and a MAJOR BUYING CLIMAX has occurred!

Here is a chart of the Dow Jones Industrial Average:

Next, I am going to post a chart of the Transports which did not make a new high today, thus not confirming the move:

The Bank Index did not confirm the move today either:

Now, let’s look at the Emerging Markets…they have not even come close to confirming this whole move higher, let alone today’s rally. The point is the rest of the world is weakening not strengthening and confirming our breakouts:

How about Europe? Is that confirming? No way…

How about the BRIC’s? They have to be confirming the move higher, don’t they?? Take a look…

Here is Brazil:

How about Russia? See for yourself:

What about India?? Well, lookie here…

China?? China has to be breaking out….NOPE!! Not even close:

Lastly, I am going to end with the Euro Currency because that seems to be the problem, at least in my opinion…but then again, who asked me???

If the Euro cannot hold that support at 13433, then we are done rallying and a sell-off in equities is imminent. I see nothing confirming this rally in the US equity indices and from where I stand we are at the top or within a few days of the top. Buckle your seat belts…this bucking bronco is about to be let loose…

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5 Uncommon Rules of Wealthy Traders

Tuesday, March 23rd, 2010

I came across a great article from TradingMarkets.com today and I wanted to share it with you. Pay special attention to point number 5, I think it is by far the most important point and often overlooked by traders.

5 Uncommon Rules of Wealthy Traders

By Tim Bourquin

March 12, 2010

Over the past year I’ve spoken to hundreds of traders, many of which were recorded and posted at TraderInterviews.com. If you had asked me a few years ago how the best traders approached the markets, I would have said that they all had similar strategies. But after talking with traders of every market imaginable, I’ve found they all have very different methods.

However, while they each may use wildly different techniques (I spoke with one very wealthy trader who confirmed his chart patterns by looking at planetary movement and moon phases), all of them follow five rules without exception. Some of them make hundreds of thousands – even millions – of dollars each trading their own account. These aren’t your typical “always use a hard stop loss” type of rules . These are actual guidelines successful traders follow religiously.

In fact, I’d bet that deep down you know you should be following these rules as well but you aren’t – yet. Today is the day you can commit to doing what works for other wealthy traders and get on that same path.

Let’s get started.

1. They plan every single trade. EVERY SINGLE ONE.

Every trader I’ve talked with that makes money consistently knows the following about every single trade they take before they even begin entering a limit order into their trading platform:

a) the highest price they are willing to pay (if they are going long) or the lowest price at which they are willing to sell (if they are going short)
b) their profit target where they will exit if they are “right”
c) their stop loss where they will exit if they are “wrong”
d) the risk/reward ratio of the trade
e) the exact percentage of their account they are risking

Lots of traders do one or two of these things. Few do all of them. In simple terms they know exactly what they want to pay, how much money they anticipate making (or losing) and a very clear idea on the probability of the trade working out.

Although you might think that every great trader uses hard stops that are pre-programmed in, many don’t . However, they are highly disciplined and when their stop loss number comes up they are out. Most traders don’t have that type of hard-core discipline and so a hard stop loss is still their best option.

2. They stopped trying to pick tops and bottoms years ago

Nearly all of the classes, courses and webinars you’ll find on the Internet talk about using support and resistance of some type to find where a market is turning and how to get in before or while it does.

The funny thing is that only a very few successful traders I have ever talked to trade that way. Simply put, 95% of the traders out there that make money are buying higher highs and selling lower lows. They do the exact opposite of nearly everyone out there because they found out long ago that picking tops and bottoms is a sucker’s bet. One trader described it to me by saying that it’s much easier to just participate in what a market is already doing than trying to guess when that behavior will change. Flip-flop your strategy to agree with what the market is doing rather than guessing on when it will change its mind, and you’ll be in a much better position to make money trading.

3. They are patient with winners – and ridiculously impatient with losers.

Dennis Gartman is famous for boiling down great trading to one thing: “Do more of what is working and less of what isn’t.” Sure makes a lot of sense to me.

Most traders have a great deal of patience with their losers but get nervous about locking in gains and sell them to quickly – the exact opposite of what wealthy traders do. Wealthy traders realize that they may actually have more losing trades than winning trades so they quickly get out when they are wrong. It is the only way to ensure that they can give their winners the attention they deserve.

They coddle their winners and kick their losers to the curb without a second thought.

4. They trade one market. ONE

I’ve talked with great traders who can trade futures, forex and stocks at the same time. They are a gifted tiny minority.

The vast majority of successful traders concentrate on one market and become so comfortable with it that they begin to “know” the behavior of that market just watching price and volume. Test yourself – if you aren’t able to get rid of all your charts and simply look at price and volume to trade, you’re probably not concentrating enough on one market in order to know its moods. What we’re really talking about here, of course, is not the mood of the market itself but the moods of the market participants!

Focus on trading one market exceptionally well rather than try to trade whatever’s hot – that’s how wealthy traders do it.

5. Their benchmark for success is anything but money

Money changes everything. It sure does. We’re all in this to make money. The trouble is, when traders use the amount of money they make to judge their own success, something happens to them – to all of us, really – that clouds our decision-making ability.

Wealthy traders have realized this and instead focus on other things to determine if they’ve had a successful day. Whether it be how well they were able to execute on their trading plan (see rule #1), or their overall ability to predict short-term movements in whatever they are trading, they know that if they do those things correctly, the money will follow.

Yes of course the money is important. Any trader who says otherwise is a fool. Why else would we put ourselves through this daily ride. But there is something about making it a secondary focus that allows the best traders to make better decisions. The growing trading account simply becomes a nice result – a side benefit if you will – of making good decisions and reading the market well.

I agree with all the points with exception of point number 4. While I know a few successful single market traders, I know more successful diversified traders. With that being said I think the best way to learn is by trading only one market and becoming an expert at that market first before branching out to other markets.

Source: http://www.tradingmarkets.com/.site/stocks/how_to/articles/5-Uncommon-Rules-of-Wealthy-Traders-82245.cfm

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