In zero velocity the human brain will scan endlessly, like a computer, in the attempt to impose order on chaos.
The body is just a glass around a light bulb. You’ll hear more on this as I learn about it. I am being taught.
The goal of trading is managing risk. We will have wild swings most possibly continue through all of 2010, and we believe the real profits will be in “holding on to your own”.
We are all aware of May 6th, and the 1000 point drop, and the “flash crash”.
We suggest this was not the only wild trading day, and May 6th thru May 25th, and now ongoing, we have seen enormous opportunities for sales or profits.
Remember, low volatility will always lead to high volatility. For months we have been experiencing no volatility. We were bored. And volatility came back.
During low volume March I wondered if traders were spending or were waiting for volatility. We were.
The 1000 points may not be a “glitch”, but a true Fib retracement.
We experienced true FEAR in the market. And, it will come again. The end of the fear is not over, and the greed will come back.
Many chartists follow a 20-year cycle. This is much like those that follow the 200-day moving average. Using a cycle like this we would go back 20 years to 1990, when prices rallied in January, fell in late February, rallied again, had a higher low in April, a significant high in July, and then collapsed in October.
From a Fib level: The market 3/09 to 4/10 retraced almost exactly 61.8% of the decline of October 2007 to March 2009 (from www.keyturndates.com).
So some might say we have see the high of the year in April.
Key turning dates notes, using Fib, “the low of the 1929 crash to the high of 1930 took a Fibonacci 5 months to complete.
The Fib numbers near 9774 are key to watch, says Key Turning Dates, and they concur with our use of Fib to provide Dow projections for weeks now using what I think are the “scary bottoms” that could occur. Going below this number would not brood well, just as we saw 10,746 as a key resistance area, as the market moved into the 11,000’s.
So Friday last week we see futures negative by 181 points and a market that opens right at 10,050 with in two minutes.
More instant volatility.
There is a mathematical term called fractals. Using 9774, which was the May 25th low, and near the low of the first and major recessionary drop.
This was not a lower low, so there are positives chartists will see that the 9774 low will hold for a while. If we see more it will be concerning.
An oversold market that cannot rally will often crash. Crashes will occur from very oversold levels.
Subscribers should note that we provide a great number of option recommendations. Our instructions for stop loss and sale of the option are clearly noted within our opening instructions, and we often then stop "discussing" the trade, as it is in process.
Because we have so many options open at this time, here's a quick update on the last few we've picked:
1. GLD Sept 18 2010 90.00 Put
This position we bought in at an average of .23, and continue to hold.
No stop loss, as it’s far OTM, and returns begin watching for sale at 1199 to 1140, where we see strong Gold Support lines
2. GS July 17 2010 160.00 Call
This position we bought in at an average of 2.50 to 3.50. Use a stop loss at 1.00, and look for profits at up to 4.40.
3. AMR Aug 21 7.00 Call
This is a NEW recommendation today. This call closed at 4.00 on Friday.
Best buy at 3.50 to 4.50. Stop loss at 1.75. Sell to 10.50
4. USO July 17 2010 33.00 Call
This position are also newly recommending today for those that think oil will see an upsurge. It’s higher risk. It closed at 1.75 Friday. Best buy at 1.50 to 2.10, sell to 3.90. Stop loss at 1.00
5. AMZN Oct 16 2010 120.00 Call
We think AMZN bottomed and has a long way to go back up and newly recommend this October call. This one closed Friday at 14.90. Best buy at 13.40 to 15.90, sell to 24.90. Stop loss at 9.00
With all options we recommend selling in partials, in 1/3 increments.
That’s why you’ll see “open” options on our website portfolio area to show what could have already been fully sold for profits, but traders may still hold the final third. We have taken no option stop losses with any open positions, and are profitable on all, excepting our new trades listed above.
Any interpretation can change reality. Here's an example.
1. I bought IBM a year ago and have greatly profited.
2. There is gossip that IBM will come out with "great earnings" tomorrow
3. Based on cycles, the stock will either go up or down.
4. If tomorrow is a cycle low, and IBM shows great results, the stock will go up.
All the news services will write: "Results for IBM were good and the market liked it and bought IBM
5. But, if the cycle is high, the stock will go down, even on positive results
The news will then say: Investors took profits with good earnings, as they see IBM waning over the next year.
Again, on cycles:
*The perception of a rate hike will affect the market".
*Cyclists feel that predicting market behavior before economic news comes out-by studying the past effects of the numbers and the reactions to them-is more important than predicting the number itself".
*Cyclists, for example, from historical numbers, don't see a lessening of unemployment numbers until year-end. We believe unemployment has TOPPED, but have at least 6 months before we can begin to really track if unemployment is truly improving.
This is because there are many false facts that begin around unemployment numbers, and the tendency of the news to "rate the numbers".
These are journalists, please remember, not economists that you read and "see" the news on.
We count on this with our OEX Option trading:
OEX trading is around moments to days, following cycles and patterns around support and resistance lines. Within it we utilize the Dow (which runs in correlation to the OEX well) for tops and bottoms to look for.
Cycles in which one trades, however, are much longer as we analyze the series of events that create longer-term triggers. Charles Nenner of Nenner Research states: " A period of 250 years is the minimum for the student of the business cycle. Only detailed historic knowledge can answer most questions. Without it, theoretical analysis is inconclusive. Looking at the facts of the prior quarter or even the half of a century is, in our opinion, quite inadequate."
We use cycles in our Blue Chip Option trading, and the longer historical events to help us see what will trigger movement.
Comparisons, for example, to the 1930's crash, are interesting, but don't take it far enough back, NOR include current events that have changed from the 1930's. As examples:
1. Our greed of oil was just beginning then.
2. China was not a factor then. China is now a factor, because investors concentrate on it.
3. Deflation/Inflation was less, as the world was less, in people, in manufacturing, and in money. We still had a Gold Standard.
Lastly, there was not any form of media that instantized news. We now deal with 1000's of "instant" facts and opinions.
USE FACTS AS CIRCUMSTANCES, AND THE EMOTIONS OF THE MARKET AS FACTS, AND YOU’LL TRADE BETTER.
