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Flying Dragon Grounded for a Day 10/14/20

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The bears fought,

A beachhead to gain,

But in the end,

Could not sustain. 

Now once more,

They try again. 

Hourly bars-
tvc_9ecd367538c65d4296304c1a613a796d.png

 

Zooming in a bit
tvc_106b922cd3f12cad19134cf10fa39537.png

 

Here at 6 AM in New York as the first US traders sleepily arrive at their trading screens, the face a make or break moment. Bears need to take out that trendline at 3512. Otherwise, they go back up to 3525. And way beyond if they clear that. 

Half hour bars
tvc_1158734d3cf1ed635b9c3fa98f5328e9.png


Yesterday's news:

The Fed’s balance sheet has now grown by over $2.8 trillion since March. That’s when the pandemic panic was at its extreme and the Fed went into high gear.  Lately that growth has slowed drastically, to around $51 billion per month on average since July. But that is decidedly not the whole story.

Subscribers, click here to download the report.`

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days!

Act on real-time reality!

 

 

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The Futility and Stupidity of Permabearism

by Lee Adler •  • 0 Comments

Now that I’ve written this headline, the contrarian in me recognizes that this is probably a sure sign that we’re in a major top. But I need to get this off my chest. If you know me, there’s nothing new here. You’ve heard me moan about this for years. But if you don’t know me, here’s my beef. Again. 

Look, I’m a born bear, ok? You all know that. But these permabear analcysts who fight the trend every step of the way, constantly complaining, are missing the point.

Don’t fight the Fed!  Don’t fight the tape! Aka, “The trend is your friend.”

We all learned that shit in third grade. Rule Numbers 1 and 1A.

I mean WTF people! There’s money to be made. Who cares what direction!

And don’t give me this shit that TA doesn’t work.

I saw somebody write yesterday that traditional TA no longer works.

BULLSHIT.

There are many methods of TA, but the oldest and best known is trend following. How fucking hard has it been to follow this trend? OK, maybe not in March at the bottom, but the bigness of the turn was patently obvious within a few weeks, once the trillions in QE kicked in.

In TA, we always need to be aware of context. In this case, context means what the Fed wants. Because what the Fed wants, it gets. The Fed tells us what direction to go. The charts are the roadmaps.

The point is that THERE’S MONEY TO BE MADE. Maybe not long term investing wise. But swing trading? Day trading? ABSOFUCKINGlutely. My swing trade chart picks in Technical Trader using my brand of TA are doing just fine, thank you. Picks that go both ways, by the way, although there have been far more longs than shorts for months and especially in recent weeks.

Meanwhile, as I semi self quarantine here in Croatia (where I decided to stay last Spring when the US Government panicked and told all travelers to get the hell home), I’ve had a lot of time on my hands. So I’ve been building a personal day trading model.

Simply by watching intraday technical indicators using common technical rules and some semi esoteric indicators that I like, yesterday I set up 9 long trades in the afternoon between 2:33 and 3:00 PM. I set both the buy and sell side triggers based on a TA trend following technique using a type of moving average, adjusted to my taste in timing. I won’t go into the details for obvious reasons.

About 40 minutes later those sell triggers started to get hit. One after another. Kaching, kaching, kaching. By using TA I made enough coin in 45 minutes to take the rest of the week off.

OK. I’m living in Croatia, and it’s cheap here. 😄

But my point is simply this. To all you bear side analcysts, cut the shit that TA doesn’t work. Quit making excuses. Rules Number 1 and and 1A still apply for the long term. TA still works in any time frame. Being a permabear and complaining about how unfair it is all the time, do not work.

There are guys who have missed the entire secular bull market since 2009. You know who they are. If you know the Fed’s rules, and we all do, then what possible sense is there to fight them? It’s fucking moronic.

That said, I hope the market breaks today and stays broken. It’s much more fun making money on the short side. Those were joyless profits I took yesterday. It feels dirty to play on the side of the scumbags running this shitshow. But it’s just dumb to fight it. If you can’t beat em, join em, right?

Maybe I’ll be late by a week or 3 in recognizing a major turn, I don’t know. But it does not matter if we’re a couple days or weeks late. Good trade management rules will limit losses, and also help us recognize when conditions are, in fact, changing. If good bullish setups start failing in droves, that tells us something.

In due time, the indicators will turn, when “in God’s good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old!” 😁

And I can promise you this. When they do, I will be there to shout it from the mountaintop.

Go bears!

But play to win. Take what the fucking goddamn Fed driven market gives you.

And now, an ad from our sponsor.

Scheduled liquidity data has told us for a couple of months that October would be bullish. That played out like a charm in terms of the technical analysis last week. We also know that liquidity only gets more bullish this week. The technical picture confirms that outlook. We must give the bullish factors the benefit of the doubt.

My stock pick screens confirm that. I’m adding 7 picks from those screens this week, 5 long and 2 short. That will leave 13 open picks, including 11 longs, and the 2 new shorts.

Four chart picks were stopped out last week. Needless to say, all were shorts. The two older picks had nice gains, partly offset by small losses in the short side picks from last week.

The list performance improved sharply last week as the average holding time increased a bit. Gains doubled from an average 3.2% to an average of 6.4%. The average holding period last week was 20 calendar days, up from 17 days the previous week. The average holding period has ranged from 16 to 22 days, or just over two to three weeks.

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Well said, Doc.  TA always works, it's just a matter of getting one's own personal system together and FOLLOWING IT.  Too often in the past I've second guessed my system and then ended up with a big loss instead of a small loss or small profit.  I've been pretty good at bullshitting to myself at times but I've learned the hard way to be disciplined and trade what I see. 😊

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I have found that by taking numerous smaller positions setting automatic triggers for both buy and sells, I don't need to worry and second guess. The system works more often than not. Since I started this day trading experiment about 3 weeks ago, I have had losses on 3 days. They were small. Gains on the rest. At this point, I am only using nominal amounts of money for a reason. No panic.  Just let the rules do their work.  

One thing I have discovered in the process of testing this, is that it is futile to trade after 11 AM until around 2 PM. I was losing money every day during those hours due to constant whipsaws as the market goes into a kind of randomized trance. Then in the final 90 minutes I had to work like hell just to reduce the losses or get to a tiny gain. 

In the past several days, I completely stopped trading after closing out morning trades. I did not restart until I started seeing setups around 2 PM. Even that's a bit early. 2:30 turn time is a real thing. It works on most days.  So I've developed rules. Keep it small. Diversify. And don't trade in the middle of the day. Yesterday I had my best profit so far by following all those rules.

9 positions in the late afternoon. I never could have imagined being able to do that, but I guess good day traders are used to it. I set the triggers earlier when I saw potential setups developing. A few developed right as I was surveying the charts, so I bought them at market. But most I preset. As for the sell side triggers, at first I set alerts because the trades need a few minutes to develop to move away from the trigger lines. I come back to them every couple minutes and once they've created some space, I set the sell trigger. 

In cases where the alerts went off, I watched momentarily and decided to either flatten, or reset the alert. I think I flattened two and reentered one a few moments later. Commissionless trading is a godsend. You need not think about that friction cost. Just get out, watch for a minute and reset if still good. 

Reading the charts is the same as for weekly swings, just minute by minute. 

Anyway, these are my observations from a newbie day trader.

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As for selecting that day's trade candidates, I run screens on daily charts using a universe of about 1000 stocks. That gives me about 50-100 charts to eyeball. I pick a up to a dozen on each side to add to my daily list. 

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I'm long on golds, biotechs and energy, all speculative stocks.  They've been consolidating and look like doing another leg up which means the general market will probably sink.

Two stocks I have are in voluntary suspension sorting out financing and another is in a trading halt pending an announcement.  That's one of the problems with speculative stocks .. they are always issuing more shares to raise capital which dilutes value.

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