Trade Triangles: The Greenback

I am buying Dollar Calls here! Bernanke just announced lower inflation from this point on. Combine that with the Weekly Up Trade Triangle that we received over the weekend in the Greenback, I am taking the trade. (I am not sure about how wide a stop I will use yet.)

Martin Weiss TERRIFIES me...yet again.

Martin has been predicting, with a lot of confidence I might add, this nice rise we have had in Gold for at least 2 years now.

The following is something he also wrote (the other day,) which is really scary, really realistic, and, if things keep going the way they are going...really PROBABLE!

The Biggest Rip-oof of All Time

In the scenario I'm about to paint for you, the dialog is fictional, but all the facts and figures are real.

The time: 1 AM, November 23, 2011, exactly two years from now.

The place: the White House, suddenly and unexpectedly under siege as a new financial crisis erupts.

The economic booms of 2010 have morphed into super booms ... the super booms into bubbles ... and the bubbles into busts.

Large banks are again on the brink. Financial markets are again in turmoil.

Wall Street giants like Goldman Sachs, JPMorgan Chase, and Morgan Stanley - the outstanding survivors of an off-again-on-again debt crisis - are now its primary victims.

Investments like long-term U.S. Treasury bonds - long sought as safe harbors - are now collapsing in price, turning into torpedoes that can sink even the sturdiest of portfolios.

But most important, the government's too-big-to-fail bailouts, shotgun mergers, and mad money printing - previously hailed as cures that killed the contagion of 2008 - are now widely viewed as far worse than any disease.

President Obama and Treasury Secretary Geithner have huddled in the Oval Office for hours, struggling to find new solutions to old problems: Wall Street meltdowns, renewed threats of a great depression, millions more thrown out of work.

After a long and heated debate, the president slumps back into his armchair, signaling it's time to talk more frankly - to reminisce about past policies and rethink what might have gone wrong.

"With 20-20 hindsight," he remarks after an introspective pause, "it's clear we were overly focused on the intended consequences of our efforts - the economic recovery, the bounce back in markets, the jobs saved. Meanwhile, we were blindsided by the unintended consequences, many of which have proven to be bigger, more durable and, ultimately, more impactful than the benefits we did achieve."

The Treasury Secretary, weary from marathon meetings on precisely the same subject, nods in silent agreement.

"So, perhaps one of our tasks," continues the president, "should be to document two basic issues: What precisely are the unintended consequences? And what exactly did we do to cause them?"

"We don't have to," says Geithner sheepishly.

"Why not?"

"Because it's already been done. Those issues have already been thoroughly documented."

"Since when?"

"Since the fall of 2009. That's when SIGTARP - the Special Inspector General for the Troubled Asset Relief Program - revealed the mistakes we made with the giant AIG bailout. And that's also around the time the public began to react to the enormous contradiction between massive unemployment on Main Street and the monster we helped to create on Wall Street."

Monster Bonuses

"Monster?" queries Obama. "You mean the giant bonuses?"

"Exactly. We already knew Wall Street execs had been giving themselves mega bonuses for most of the decade -
- $29 billion for Citigroup's Weill in 2003 ... $27 billion for Blankfein at Goldman Sachs in 2006 ... another $106 billion for Jon Winkelried and Gary Cohn, also at Goldman Sachs, in 2006-2007 ... and many more. We already knew how the money from these obscenely large bonuses alone could have been enough to save millions of jobs."

"Yes."

"But what we did not know is how soon after the bailouts Wall Street would be at it again - first, dishing out mega bonuses to heavy hitters in their trading rooms ... then to sluggers in their sales departments ... and later, as soon as the public tired of protesting, to themselves."

"Exactly how soon?"

Geithner answers with questions of his own. "When was Wall Street on the verge of a total meltdown? In September of 2008! When were the record bonuses paid out? In December of 2009! So that's 14 months. It was just 14 months later that the employee bonuses at the three big Wall Street survivors - Goldman Sachs, JPMorgan Chase, and Morgan Stanley - exceeded all prior records."

"Even the record bonuses they paid out before the crisis?" the president asks with a mix of disbelief and disdain.

"Yes, even bigger than their record bonuses paid out before the crisis."

"But why do we blame ourselves for all this?" the president wonders out loud.

The Bungled AIG Bailout

"In public, we don't ... and hopefully never will," responds Geithner furtively. "But in private, we must admit that we screwed up - particularly with the AIG bailout."

"Why?"

"For the simple reason that we - the Treasury and FRBNY, the Federal Reserve Bank of New York - didn't just bail out AIG. Indirectly, we also bailed out all of AIG's major counterparties, the biggest of which were Soci?t? G?n?rale and Goldman Sachs."

"Said who?"

"Said SIGTARP, the Special Inspector General for the Troubled Asset Relief Program, in its special report of November 2009. I have a copy of the report right here."

"What precisely did SIGTARP find?" asks the president.

"In essence, they found that AIG's counterparties - 16 major global banks - should have lost money in their trades with AIG, just like most investors lost money when other companies failed. But instead, AIG's counterparties did not lose money. We made those creditors whole, practically to the penny."

"How much did we pay 'em?"

Before responding, the Treasury secretary flips to page 20 of the SIGTARP report and glances down at Table 2 - Total Payments to AIG Default Swap Counterparties.

"Soci?t? G?n?rale," he says, "got $9.6 billion in collateral payments from the money we had loaned earlier to AIG. Plus, we paid Soci?t? G?n?rale another $6.9 billion through a special purpose vehicle we created, called Maiden Lane III. In total, the French bank walked off with $16.5 billion.

"Goldman Sachs," continues Geithner, "got $8.4 billion in collateral payments, plus another $5.6 billion from Maiden Lane, adding up to $14 billion. "Deutsche Bank got a total of $8.5 billion ... Merrill Lynch - $6.2 billion ... UBS - $3.8 billion ... plus ..."

"Please cut to the chase," says the president impatiently. "How much overall?"

"They got $62.1 billion, plus another $2.5 billion we agreed to pay to compensate them for shortfalls in their collateral. Grand total - $64.6 billion."

"Wait a minute!" interjects the president. "A lot of these big banks, notably Goldman Sachs, have forever insisted that they never wanted a bailout, never needed one, and never got one."

Geithner picks up the report and waves it for emphasis. "And SIGTARP has forever disagreed."

"What's their conclusion?"

"In effect, SIGTARP concluded that, via this back door, the 16 banks not only got big bailouts ... they never had to pay back a dime of the money."

The Sad Saga of How Taxpayers Were Sold Out

"What do you think really happened?" asks the president.

"I don't think; I know. Remember, I was not only there, I was mostly in charge. So I can tell you flatly: We had our backs to the wall. Sure, we asked 12 of the biggest AIG counterparties to take haircuts, to accept some losses. But 11 out of the 12 refused. So we had no choice but to give them everything they wanted."

"Why didn't you press harder?"

"We had no negotiating leverage. Later, with GM and Chrysler, we forced creditors to make concessions by threatening to let the automakers fail. But with AIG, we had already declared, in effect, that we'd never let it fail."

"When?"

"Several weeks earlier - when we loaned $86 billion to AIG, the biggest bailout in history. The end result was that, when it came time to negotiate with AIG's creditors, we could no longer function as unbiased regulators. We were already in deep - as the company's biggest stakeholder. The creditors knew they had us over a barrel. There was no way we could twist their arms.

"If that wasn't bad enough," Geithner continues, "I then compounded the problem by adhering too strictly to one of FRBNY's core values - the concept of treating all counterparties equally. That doomed the negotiations because it gave each party effective veto power over any possible concession from any other party. The way I set things up, either all the banks had to agree to concessions ... or none of the banks would agree to concessions. So, needless to say, none agreed to concessions. They got everything."

Profound Impacts

My fictional scenario ends here. But the impacts of those fateful decisions of late 2008 and early 2009 do not.

The AIG rescue was the biggest taxpayer rip-off of all time. Worse, it was the master seed that sprouted a whole series of similar taxpayer rip-offs on Wall Street.

Just connect a few of the dots, and you'll see what I mean:

1. The U.S. Treasury rushes to bail out AIG. That alone helps protect AIG's counterparties from the direct losses they'd otherwise suffer in an AIG failure.

2. The Federal Reserve Bank of New York creates a special entity to pay off AIG's creditors in full. While ordinary U.S. investors lose fortunes even in companies that are financially viable, 16 major banks don't lose a penny even in a company that would otherwise be bankrupt - all thanks to the Fed's largesse.

3. Prominent among these government-blessed banks is Goldman Sachs, Wall Street's most extravagant giver of executive bonuses in 2006 and 2007 ... and also Wall Street's most lavish payer of employee bonuses in 2009.

The money flow is clear:

* From taxpayers to AIG ...
* From AIG and the Fed to big Wall Street investment banks like Goldman Sachs, and then ...
* From Goldman Sachs to its employees in the form of lavish bonuses.

It is, by far, the greatest taxpayer rip-off off all time!

Don't get sucked up into this madness.

By, Martin D. Weiss, Ph.D.

A Dollar Update...

Is the Dollar index ready for the big reversal? Market Club does a short video here on the subject...but just looking at the charts, you can see that we are at very long term support here. In this short video, they outline the key areas to watch for and one important component that you may not have seen (and I hadn't thought of.)

(Could this factor be a short term game changer?)

The Great Recovery Hoax of 2009-2010

I love this article, despite how terrifying it is:

By Marin D. Weiss, Ph.D.

There can be no debate that, in each of these episodes, things did go up: The Nasdaq soared before it crashed. The median price of U.S. homes skyrocketed before it collapsed. And now, the U.S. economy has reversed course - from four consecutive quarters of contraction to at least one quarter of expansion.

There also can be no doubt that these trends do not end overnight. They can continue for months - often plowing over skeptics and even exceeding the expectations of believers.

Most important, however, there can be no question that all three of these episodes have had one key element in common that ultimately self-destructs: Massive intervention, support, and free money from Washington.

To get a solid sense of how that's unfolding this time around, pay close attention to these three independent economists:

Jim Grant, Founder and Editor,
Grant's Interest Rate Observer

Jim Grant, originator of the "Current Yield" column in Barron's and founder of Grant's Interest Rate Observer, demonstrates not only that today's recovery is bought and paid for by Washington ... but also that the relative size of Washington's intervention is even larger than you might think.

In the ten prior U.S. postwar recessions, the government responded, on average, with fiscal stimulus of 2.6 percent of GDP plus monetary stimulus of another 0.3 percent of GDP.
Combined stimulus: only 2.9 percent of GDP.

In contrast, during the current recession, the government has counter-attacked with fiscal stimulus amounting to an estimated 18 percent of GDP ... plus monetary stimulus of an estimated 11.9 percent of GDP.
Combined stimulus: a whopping 29.9 percent of GDP.
That's an unprecedented - and unimaginable - ten times more than the average stimulus of prior recessions.

Grant's comparison of today's government stimulus with that of the Great Depression is even more striking:

He points out that, in the early 1930s, GDP fell 27 percent, while the government responded with monetary and fiscal stimulus adding up to 8.3 percent of GDP.
Thus, using Grant's numbers, I calculate that, for each percentage point our economy contracted, the U.S. government came forward with 0.31 percentage points of stimulus.

In contrast, in the current recession, U.S. GDP contracted 1.8 percent (at the time of Grant's study) ... while, as we just noted, the government's stimulus has amounted to 29.9 percent of GDP.
Thus, for each percentage point that our economy contracted, the U.S. government has jumped in with 16.61 percentage points of stimulus.

Conclusion:

Relative to the disease, the government's "cure" for the Great Recession today packs 54 times more firepower than the government's response to the Great Depression of the early 1930s. And this does not even include trillions more in U.S. government guarantees to shore up the financial system.

Proponents of the government's intervention may try to convince you "this is what it takes to avoid another depression: We've got to attack the contagion with big guns!"

However, Grant worries, rightfully so, that the cure may be far worse than the disease:

"If it's taking this much to revive today's economy," he asks, "what kind of jolt might be necessary to succor tomorrow's? An even bigger shock, we surmise, if tomorrow's economy is no less encumbered than today's. But it's almost certain to be more encumbered, since the active ingredient of the Bush-Obama palliative is credit formation, the very hair of the dog that bit us. Skipping down to the bottom line, we renew our doubts as to the staying power of the paper currencies and to the creditworthiness of the governments that print them."1

John Williams, Founder and Editor,
Shadow Government Statistics

John Williams is the economist who has single-handedly and repeatedly poked big holes in the government's data that tracks price inflation, unemployment, money supply and the economy as a whole.

In his Shadow Government Statistics alert of October 29, he pokes an equally large hole in Washington's pitch that the third-quarter rise in GDP announced last week is "sustainable." His main points:

All U.S. recessions in the last four decades have had at least one positive quarter-to-quarter GDP reading, followed by a renewed downturn. This one could turn out to be no different.
The estimate of 3.5 percent annualized real growth for third-quarter GDP included a 1.7 percent gain from auto sales, a 0.6 percent gain from new residential construction, and a 0.9 percent gain from a largely-involuntary inventory buildup (caused by sales declines which are deeper than corporate planners expect).
In sum, these one-time stimulus or inventory items represented 92 percent of the reported quarterly growth.2 Chris Edwards, Director of Tax Policy Studies Cato Institute

Chris Edwards - formerly a senior economist on the congressional Joint Economic Committee examining tax issues and currently a Director at the Cato Institute - exposes another gaping hole in the 3.5 percent growth reported by the government last week:

While the government's share of the economy has grown steadily ... the contribution from private investment has fallen through the floor.

He writes:

"The third quarter GDP numbers show that the economy is only starting to 'recover' because of growing government and expanding consumption, which has been artificially inflated by large government transfers.

"Business investment continues to be in a deep recession. Companies are simply not building factories or buying new machines and equipment.

"Why not? I suspect that many firms are scared to death of higher taxes, inflation, health care mandates, increased labor regulation, and other profit-killers coming down the road from Washington."3

Edwards goes on to say that it's too soon to speculate on underlying causes. But I would add that an equally bloody killer of private investment is the diversion of scarce credit from small and medium-sized businesses to wild-and-wooly Wall Street speculation, as Mike Larson has pointed out here week after week.

It's all part and parcel of the Great Recovery Hoax of 2009-2010.

Like the great bubbles of recent memory, it could continue. But it will ultimately end in disaster.

Will we ever learn?

0% interest rates...it's no wonder the markets are doing so well...

But I still am not buying (unless it's a Manny Backus or Flag Trader short term long.)

Larry Levin edited this Wall St. Journal article for us...and, all I can say is, I might consider buying some way OTM, cheap puts. This is worth reading, especially since this is supposed to be a Forex blog:

For many investors, in fact, the cost of money is effectively less than zero, as economist Nouriel Roubini likes to point out. If you borrow dollars at near zero percent interest in the United States, exchange the dollars for Thai bhat, and invest the bhat in government bonds paying 4 or 5 percent, you not only get the benefit of the interest rate arbitrage but you also gain when you sell the bond and exchange the bhat back into dollars that have since depreciated. Roubini calls it "the mother of all carry trades," and in recent months he calculates that it has been generating annualized returns for investors of 50 to 70 percent.

This carry trade is now so widespread that it has become a major factor driving down the value of the dollar against many other currencies and driving up the flow of hot money into a number of developing countries. Not only has it spawned stock, bond, or real estate bubbles in those countries, but it's also driven up the value of their currencies to the point that their exports are less competitive relative to countries, including China, that peg their currencies to the U.S. dollar. To counteract these trends, central banks in Thailand, South Korea, Russia and the Philippines have intervened in currency markets, buying up dollars and selling their own currencies. Hong Kong has tightened up on lending rules, while Brazil has put a 2 percent tax on capital inflows. Taiwan has banned foreigners from making certain types of bank deposits.

There's no way to know how long all this can continue before one of these bubbles finally bursts, the dollar spikes upward and investors all rush to unwind their trades at the same time. But it is a good guess that it will last as long as the Fed and other central banks indicate there is no end in sight for the current cheap-money regime. The longer they wait, the bigger the bubbles, and the bigger the mess to clean up.

All of which is why the recent statements by policymakers were so disappointing -- and so dangerous.

Despite the junk-bond and real estate bubbles of the late 1980s, the tech bubble and Asian financial crises of the 1990s and the credit bubble of recent years, the Fed stubbornly clings to an outmoded way of thinking and talking about the economy and monetary policy. Fed officials tend to give little weight to such "extraneous" factors such as asset prices, currency movements and capital flow, at least in public, and fear that focusing on them will cause them to lose sight of their core inflation-fighting mission. Moreover, like his predecessor, Fed Chairman Ben Bernanke still believes central bankers aren't smart enough to tell when a bubble has developed -- and even if they could, it would probably cause more harm than good to try to do something about it.

New possible trades

9:28 a.m. Looking to short sell SPWRA at or close to $23, and to buy MRVL at or close to $16

Real Trading techniques

I keep telling all my readers how great the accounts in this blog are doing in large part to Adam Hewison and Market Club...AND I'M EXHAUSTED!

So, I decided to let Adam do the talking about something that is near and dear to my heart:

First of all I want to thank you for having me as a guest today!

My name is Adam Hewison. You might want to Google Me to confirm what I am about to share with you.

There are plenty of people out there that create “exclusive email courses” with little or no credentials to actually backup their teachings. So, I think it’s right that I share a little bit about myself with you before we even start.

I was a former floor trader on the IMM, IOM, NYFE and LIFFE as well as a risk manager of a large, multinational corporation in Geneva, Switzerland. I also have written books on forex trading and trend following. In 1995, I founded INO.com and later co-founded MarketClub. I’ve been in the trading biz for over three decades and have seen it all. I created this course as a way to give back and share trading tips and techniques that I still use in my trading today.

In my Free Mini Email Course, I will show and explain the tools and strategies you need to increase your success rate in the marketplace.

(1) The importance of psychology in price movement

(2) How to spot mega trends

(3) Understanding of technical price objectives

(4) How to picture price objectives

(5) How to trade with moving averages

(6) How to use point and figure trading techniques

(7) How to use the RSI indicator

(8) How to correctly use stochastics in your trading

(9) How to use the ADX indicator to capture trends

(10) How to capitalize on natural market cycles.

Plus, you will you will learn all about fibonacci retracements, MACD, Bollinger Bands and much more.

Just fill out the form and we’ll get you started right away.

Every success,
Adam Hewison
President, INO.com & Co-Creator, MarketClub

Is the Party Over in Oil?

Fundamentally...all I ever hear on CNBC is how much inventory there is in oil. It's stored 'here' and 'there'...and then you hear stories about how a huge part of the Chinese coastline is dotted with tankers full of oil.

Then today Market Club came out with a new DOWN arrow in oil on the weekly. Weekly indicators are much more valuable. Guys...it's free for 30 days...try it. This blog's accounts are doing great, and a lot of that is due to Market Club.

This is the kind of email I get every few hours....

MarketClub Smart Scan Alert for CL.Z09.E Weekly Trade Triangles CRUDE OIL Dec 2009 (E) (NYMEX_CL.Z09.E) is trading at 76.94 +0.59 (+0.77%) and has triggered a new LOW for a Red Weekly Trade Triangle.

CL.Z09.E Streaming Chart
http://www.ino.com/info/191/CD3603/&dp=0&l=0&campaignid=8
CL.Z09.E Chart Analysis Details
http://www.ino.com/info/191/CD3603/&dp=0&l=0&campaignid=8

This guy is amazing...works really well too

Does anybody know who Guy Cohen is? Google his name, and then come back to see what I just bought. I am amazed at myself...because it's not like me to do such an insane thing!!

(But it made total sense...)

What we don't know won't hurt us, right?

I don't like politics or politicians too much, and I don't want to get started here. However, on very rare occasions, there will be one who knows a little. In this case, Senator Kaufman of Delaware. I hereby show you his address the other day (which is somewhat directed at our president.)

The best part about this speech is the way it goes into MOST of the problems that did, and still do affect our world economy (problems that are being exacerbated by the same people we have trusted to get us through them:)

Mr. President, I rise today because I am deeply concerned that just over one year since the collapse of Lehman Brothers, a failure that helped send us to the brink of depression, Wall Street is essentially unchanged.

Congress and the SEC have not enacted any reforms. And the American people remain at risk of another financial debacle - not just because the same practices that led to the crisis 14 months ago are continuing, but from new practices which are leading to new problems and new systemic risks.

Mr. President, last year, the financial world almost came to an end. And yet most of Wall Street then believed that no government review or additional regulation was necessary - right up until the moment government had to step in to save it.

We had been assured that the system was sound. We were assured that a host of checks and balances were in place and would suffice. We were assured that:

- companies have to report their financial holdings with full disclosure and transparency;

- accountants have to verify those financial assets and statements;

- markets price stocks on the basis of all available information;

- due diligence is conducted on every deal and transaction;

- boards of directors have a fiduciary duty to undertake prudent risk management;

- management want their companies to thrive over the long-term;

- and, most importantly, regulatory bodies and law enforcement agencies are in place to police the system.

But those safeguards did not prevent us from disaster, because in the past 10 years or more, one of the most important safeguards, the regulators, had simply given up on the importance of regulation.

We believed the markets could police themselves, that they would self-regulate. And so, in effect, we pulled the regulators off the field.

We now know the confluence of events that led to disaster. And there is blame enough to go around:

- We failed to regulate the derivatives market;

- government-backed agencies like Fannie Mae and Freddie Mac pushed to make housing affordable for greater numbers of people;

- unscrupulous mortgage brokers pushed sub-prime mortgages at every opportunity;

- investment bankers pooled and securitized those sub-prime mortgages by the trillions of dollars and sold them like hot cakes;

- rating agencies - left unmonitored by the SEC - incredibly stamped these pools with Triple A ratings;

- the SEC, which changed the capital-to-leverage ratio for investment banks to 30-and-50-to-1, allowed these banks to buy up huge pools of these soon-to-be-toxic assets; and

- investment banks wrote credit default swaps and then hedged those risks without any central clearinghouse, without any understanding of who was writing how much or what it all meant - all this without any regulation or oversight.

So as the chart so straightforwardly conveys: Banks were involved in high-risk, high-return investments that were unregulated.

Then - CRASH. The housing bubble burst and a disaster of truly monumental proportions struck.

Americans lost $20 trillion in housing and equity value during the ensuing financial meltdown. The economy lurched into freefall and Gross Domestic Product shrunk by a staggering percentage not seen since the 1950s.

What happened next? The American taxpayer, the deep pocket and lender of last resort, had to ride to the rescue.

Mr. President, we can barely even count the trillions of dollars of taxpayer money that have gone into bailing out the banks, bailing out AIG, bailing out a number of financial institutions.

And that's not including the billions of taxpayer dollars we have had to spend to stimulate the economy.

Mr. President, we must never let this happen again.

Yet here we are. One year later. With no immediate crisis at hand, we are falling back into complacency.

The credit default swap market remains unregulated. The credit rating agencies have not yet been reformed.

And the banks are back to their old habits: paying out billions of dollars in bonuses for employees who are still engaged in high-risk, high-reward practices.

What is the great lesson we should have learned from the Financial Debacle of 2008?

When markets develop rapidly and change dramatically, when they are not regulated, and when they are not fully transparent - it can lead to financial disaster.

That is what happened in the credit default swap market.

Mr. President, we must never let this happen again.

And so I look forward to working with my colleagues to regulate the derivatives markets - to ensure that credit default swaps are traded on an exchange or at least cleared through a central clearinghouse with appropriate safeguards enforced.

And to enact meaningful financial regulatory reforms.

Mr. President, at the same time, we need to be looking carefully to see if these three deadly ingredients - rapid technological development, lack of transparency, and a lack of regulation - are appearing again in other markets.

Mr. President, there is no question in my mind that in today's stock markets, those three ingredients do exist.

Due to rapid technological advances in computerized trading, the stock markets have changed dramatically in recent years.

They have become so highly fragmented that they are opaque -- beyond the scope of effective surveillance. And our regulators have failed to keep pace.

The facts speak for themselves. We've gone from an era dominated by a duopoly of the New York Stock Exchange and Nasdaq to a highly fragmented market of more than 60 trading centers.

Dark pools, which allow confidential trading away from the public eye, have flourished, growing from 1.5 percent to 12 percent of market trades in under five years.

Competition for orders is intense and increasingly problematic.

Flash orders, liquidity rebates, direct access granted to hedge funds by the exchanges, dark pools, indications of interest, and payment for order flow are each a consequence of these 60 centers all competing for market share.

Moreover, in just a few short years, high frequency trading - which feeds everywhere on small price differences in the many fragmented trading venues - has skyrocketed from 30 to 70 percent of the daily volume.

Indeed, the chief executive of one of the country's biggest block trading dark pools was quoted two weeks ago as saying that the amount of money devoted to high-frequency trading could "quintuple between this year and next."

Mr. President, we have no effective regulation in these markets.

Last week, Rick Ketchum, the Chairman & CEO of the Financial Industry Regulatory Authority - the self-regulatory body governing broker-dealers - gave a very thoughtful and candid speech, which I applaud.

In it, Mr. Ketchum admitted that we have inadequate regulatory market surveillance.

His candor was refreshing but also ominous: "There is much more to be done in the areas of front-running, manipulation, abusive short selling, and just having a better understanding of who is moving the markets and why."

Mr. Ketchum went on to say: "[T]here are impediments to regulatory effectiveness that are not terribly well understood and potentially damaging to the integrity of the markets...The decline of the primary market concept, where there was a single price discovery market whose on-site regulator saw 90-plus percent of the trading activity, has obviously become a reality. In its place are now two or three or maybe four regulators all looking at an incomplete picture of the market and knowing full well that this fractured approach does not work."

Mr. President, at the same time that we have no effective regulatory surveillance, we have also learned about potential manipulation by high frequency traders.

Last week, the Senate Banking Subcommittee for Securities, Insurance, and Investment held a hearing on a wide range of important market structure issues.

At the hearing, Mr. James Brigagliano, Co-Acting Director of the Division of Trading and Markets, testified that the Commission intends to take a "deep dive" into high frequency trading issues, due to concerns that some high frequency programs may enable possible front-running and manipulation.

Mr. Brigagliano's testimony about his concerns were troubling:

"...if there are traders taking positions and then generating momentum through high frequency trading that would benefit those positions, that could be manipulation, which would concern us. If there was momentum trading designed - or that actually exacerbated intra-day volatility - that might concern us because it could cause investors to get a worse price. And the other item I mentioned was if there were liquidity detection strategies that enabled high-frequency traders to front-run pension funds and mutual funds that would also concern us."

Reinforcing the case for quick action, several panelists acknowledged that it is a daily occurrence for dark pools to exclude certain possible high frequency manipulators.

For example, Robert Gasser, President and CEO of Investment Technology Group, asserted that surveillance is a "big challenge" and that improving market surveillance must be a regulatory priority:

"I can tell you that there are some frictional trades going on out there that clearly look as if they are testing the boundaries of liquidity provision versus market manipulation."

But none of the panelists, when asked, felt a responsibility to report any of their suspicions of manipulative activity to the SEC. That is up to the regulators and their surveillance to stop, they apparently believe.

Finally, at the end of the hearing, Subcommittee Chairman Reed asked about the reported arrest of a Goldman Sachs employee who had allegedly stolen code from Goldman used for their high frequency trading programs.

A Federal prosecutor, arguing that the judge should set a high bail, said he had been told that with this software there was the danger that a knowledgeable person could manipulate the markets in unfair ways.

The SEC has said it intends to issue a concept release to launch a study of high frequency trading. According to news reports, this will happen next year.

Mr. President, I don't believe next year is soon enough. We need the SEC to being its study immediately.

Where is the sense of urgency?

Mr. President, our stock markets are also opaque. Again, I refer to Chairman Ketchum's speech: "There are impediments to regulatory effectiveness that are not terribly well understood and potentially damaging to the integrity of the markets."

He went on to say:

"We need more information on the entities that move markets - the high frequency traders and hedge funds that are not registered. Right now, we are looking through a translucent veil, and only seeing the registered firms, and that gives us an incomplete - if not inaccurate - picture of the markets."

Senator Schumer echoed this theme at last week's hearing: "Market surveillance should be consolidated across all trading venues to eliminate the information gaps and coordination problems that make surveillance across all the markets virtually impossible today."

Let me repeat: market surveillance across all the markets is "virtually impossible today."

And none of the industry witnesses disagreed with Senator Schumer.

That is why the SEC must not let months go by without taking meaningful action. We need the Commission to report now on what it should be doing sooner to discover and stop any such high frequency manipulation.

Mr. President, where is the sense of urgency?

Mr. President, we must also act urgently because high frequency trading poses a systemic risk. Both industry experts and SEC Commissioners have recognized this threat.

One industry expert has warned about high-frequency malfunctions: "The next Long Term Capital meltdown would happen in a five-minute time period . . . . At 1,000 shares per order and an average price of $20 per share, $2.4 billion of improper trades could be executed in [a] short time frame."

This is a real problem, Mr. President. We have unregulated entities -- hedge funds - using high frequency trading programs interacting directly with the exchanges.

As Chairman Reed said at last week's hearing, nothing requires that these people even be located within the United States. Known as "sponsored access," hedge funds use the name of a broker-dealer to gain direct trading access to the exchange - but do not have to comply with any of the broker-dealer rules or risk checks.

SEC Commissioner Elisse Walter has recognized this threat: "[Sponsored access] presents a variety of unique risks and concerns, particularly when trading firms have unfiltered access to the markets. These risks could affect several market participants and potentially threaten the stability of the markets."

Let me repeat that: "These risks could affect several market participants and potentially threaten the stability of the markets."

Even those on Wall Street responsible for overseeing their firms' high frequency programs are not up to speed on the risks involved, according to a recent study conducted by 7city Learning. In a survey of quantitative analysts, who design and implement high frequency trading algorithms, two-thirds asserted their supervisors "do not understand the work they do."

And though quants and risk managers played a central role exacerbating last year's financial crisis, 86% of those surveyed indicated their supervisors' "level of understanding of the job of a quant is the same or worse than it was a year ago," and 70% said the same about their institutions as a whole.

I agree with market expert and 7city Director Paul Wilmott, who said: "These numbers are alarming. They indicate that even with the events of the past year, financial institutions are still not taking the importance of financial education seriously."

Mr. President, where is the sense of urgency?

Time is of the essence.

We must act now.

The Decoupling of Gold

Yesterday Gold finally broke free from the dollar and other indicators. I have long been out of Gold...but it still flies. Adam has been pegging Gold since it was at $867...what is his newest call on the yellow metal?

Genius Trader that you need to Google

Any of you know me, and have been following this blog, know that I am always serious. Which is why I can't explain this: I have traded equities, Forex and numerous other instruments for many years and yet, it's only been seven months since I first heard about Guy Cohen.

Do yourself a huge favor and Google a guy with the name of Guy Cohen. He is a best-selling author of trading books worldwide (millions of copies.) Take a look at his resume...and you will see what he has done with his life. You will then understand why the following software program of his is just downright amazing!

If you’ve ever sweat blood over a trading system, or failed miserably because it was too difficult, complicated or time consuming, then this is your answer, because he does work for the NYSE and has hundreds of other clients.

Guy Cohen has been burning the midnight oil on something astonishing for the past 6 months now. I was one of the first to get it, and I love it. I made money the first time I traded with it. (Just don't forget your stops.)

It’s so simple that, just like they describe it; a 12-year-old could follow it …and yes, it's so easy that it just takes just 20 minutes a day…and so devastatingly effective that £7,000 a month profit from home is well within your grasp.

If nothing else, check out the testimonials of people who’ve been given a privileged secret opportunity to be guinea pigs on this. The other day I did a blog entry titled," £20,000 in 30 Days...110% Profit in 6 days...30% in Two Days."
Those are real numbers...

Brad

P.S. This just became available. Be one of the first to hear about it.

Has the Gold Market Topped Out?

One of the best trading tools I have is Market Club. Here is their newest prediction on the yellow metal...

Is Gold topped out? That is the big question on many traders’ minds as gold fell from a high around $1,070 to the lows seen earlier today.

In their new video that was shot at noon on Tuesday 10/27, they go into detail on what they think is going to happen to this market. I think you will see a refreshing view of the gold market and also the strategies that they’re employing to take advantage of the next big move in gold. Take a look at this video and I'll have my gold statement up in a few days (which I also based on the last Gold video that Market Club did.)

These guys are responsible for a lot of the great returns of this blog.

Bob Iaccino - Part 2

I said it before...Bob Iaccino is a good trader. He knows his stuff. He taught me a lot about the psychology of trading Forex.

BUT...there are alternatives, because I think his monthly program of $150/month is a little pricy for what you get.

So...as an alternative...Google "Guy Cohen" and see who he is and what he has done with his life...then take a look at this amazing software that he invented.

While his techniques are sound, I have blown away Bob Iaccino's trading firm's results sinced leaving them (they make all the trades that they discuss) because, plain and simple, Cohen's methods are much better. Since January, this blog has built an excellent following becauseI don't mess around...this is really serious stuff.

If nothing else, check out the testimonials.

£20,000 in 30 Days...110% Profit in 6 days...30% in Two Days

That heading is not BS...

Any of you know me, and have been following this blog, know that I am always serious. Google a guy by the name of Guy Cohen, his resume...Google what he has done with his life, and then you'll see why this program of his is just downright amazing.

If you’ve ever sweat blood over a trading system, or failed miserably because it was too difficult, complicated or time consuming, then take a look at this…

Guy Cohen, a famous market maverick, has been burning the midnight oil on something astonishing for the past 6 months now. Personally, I love it. I was also one of the first to get it. It’s so simple that, just like they say it, a 12-year-old could follow it …and yes, it's so easy that it just takes just 20 minutes a day…and so devastatingly effective that £7,000 a month profit from home is well within your grasp.

If nothing else, check out the testimonials of people who’ve been given a privileged secret opportunity to be guinea pigs on this.

Brad

P.S This is recently available now. Be one of the first to hear about it.

Interesting article from Jack Steiman...

I would pay millions to sit next to this guy as he trades. I quote Steiman often, and today's article is interesting if you are still bullish on equities.

Now, I recently covered my short on Gold and sold my Gold calls at a significantly higher price then I bought them (as protection for the short and tomorrow, I'll publish the updated statements.) Why? Because there is way too much elation out there AND I believe in Elliot Waves, if you get my drift...

By Jack Steiman, SwingTradeOnline.com

That's how the bears will have to do this. There is no straight down free fall into oblivion coming to a bear market near you. Step by step as we take on each level of support. We get there and get oversold. We bounce. We fall again and we bounce Usually on the third try we get through, but we have so many levels of support close by it's hard for the bears to gain any real momentum. 1080/1074/1060/1047. An average of approximately 1% between levels of strong support. Not exactly what the bears want to deal with but that's the game we're playing here. What's truly amazing is that each level puts up such a strong fight. Not a single one just goes away on the first try. That's how strong this bull market is.

By the way, it is a bull market, even if you are a dooms day person thinking we're testing S&P 500 666 again. Don't tell me 50% is not a bull market. Don't tell me how much we fell prior to that move. Waste of time. This has been a fabulous bull but there are troubling flags out there as we start to move lower here off the top at S&P 500 1101. So, yes, it is painfully slow as we move down step by step, but for the bears, at the least the trend is now somewhat lower.

We started the day higher though Baidu, Inc. (BIDU) gapped down an incredible $80. The Nasdaq quietly lagged and the Dow led, normally not what you want to see. Safety first. High beta last. Healthy markets to the other way. Buy the high beta and forego the safety. The market gave up its gains as the day went on although the Dow held gains the best with the biggest losses seen on the Nasdaq. The Nasdaq held the 2116 gap while the S&P 500 held the 1060 gap. Both threatened to go away, but when you get oversold 60 minute time frame charts at the same time you get to big support, you don't usually continue lower. That's where we closed. At support and oversold thus you can probably expect another bounce here. It shouldn't last long at all but you can expect it. 1074 S&P 500 is now very difficult resistance thus a bounce up is where you want to short some.

We started the day higher though Baidu, Inc. (BIDU) gapped down an incredible $80. The Nasdaq quietly lagged and the Dow led, normally not what you want to see. Safety first. High beta last. Healthy markets to the other way. Buy the high beta and forego the safety. The market gave up its gains as the day went on although the Dow held gains the best with the biggest losses seen on the Nasdaq. The Nasdaq held the 2116 gap while the S&P 500 held the 1060 gap. Both threatened to go away, but when you get oversold 60 minute time frame charts at the same time you get to big support, you don't usually continue lower. That's where we closed. At support and oversold thus you can probably expect another bounce here. It shouldn't last long at all but you can expect it. 1074 S&P 500 is now very difficult resistance thus a bounce up is where you want to short some.

We have some big breakdowns today and over the past few days actually. You will see tonight in the charts (WLSH, COMPX, SPY, TRAN, DJUSRR, DJUSGC) exactly what I am talking about. The railroads are broken. The banks are broken. They are oversold and could back test but those wedges were big and long lasting and now they're gone. Bad news for those sectors and thus the stocks in them and in them we have some big time leaders such as CSX Corp. (CSX), Burlington Northern Santa Fe Corp. (BNI), and Union Pacific Corp. (UNP). The banking sector has also broken down out its wedge. Another leading sector which means other than bounces, these are broken vehicles. Even stocks like Apple Inc. (AAPL) proved they can actually sell hard along with Google, Inc. (GOOG), Priceline.com Inc. (PCLN). and others every now and then. Less stocks are participating on the up side now and more stocks and sectors are breaking down. It looks as if the next few weeks at least are going to be tough for the bulls.

The dollar has begin to rally and many will feel as if it's not for real and who knows for sure but it looks as if the worst is over for the dollar near term and this fits in nicely with the concept of a market more in sell mode than anything else. There are some very divergences on the daily PowerShares DB US Dollar Index Bullish (UUP) chart and from lower MACD and stochastic levels, which makes the odds higher that the positive divergences will play out overall. Not every day, of course, but overall. We need to watch the set up of the dollar to get a good feel for things.

The market has changed here folks from bull to correction. Will it become bull to bear? That's very unclear for now and not something we need to focus on or even spend a moment thinking about. It doesn't matter. We'll let the market tell us and whether the odds are increasing or not as things move along. We only know that the near trend is clearly lower with rallies every time we get oversold on the short term charts due to the high number of support levels close together. Day by day.

This guy is amazing...works really well too

Does anybody know who Guy Cohen is? Google his name, and then come back to see what I just bought. I am amazed at myself...because it's not like me to do such an insane thing!!

(But it made total sense...)

Is the Party Over?

Of the three major indexes I track (with FOREX): DOW, NASDAQ and the S&P 500, only the NASDAQ is in thin air.

What do I mean by thin air? So far the NASDAQ is the only index to make it past the 50% Fibonacci retracement levels as measured from the highs seen in 2007 and the lows that were made in March of this year.

Both the Dow and the S&P 500 have rallied strongly from their March lows but have not made it over the 50% retracement level.

Here's a video that Market Club put out on this very subject.

Many professional traders - myself included - are looking at the NASDAQ’s Fibonacci retracement as it represents a potentially key turning point for this year’s market.

While not all the pieces are in place to go short or get out of long positions, one of the first clues is being put in place today by the Japanese candlestick charts.

In this video, they talk about the NASDAQ retracement levels, as well as one of the key components that could lead to a potential reversal to the downside.

Are we going to pay $4 a gallon for gas soon?

What is interesting about crude oil is the fact that seasonally, it should be going down. However, the market appears to be doing just the opposite. Maket Club did a video on it when it was down to $64. When something is supposed to happen and the opposite occurs, it’s time to pay attention.

What is also interesting in crude oil is the fact that all of the “Trade Triangles” are all green giving a perfect 100% Chart Analysis score. This indicates that there are some strong trends in place and the odds are that the market should go higher. (However, you can never guarantee that and all trades should be managed with stops.)

But NOW, you might want to watch this short video for the answer!

GREAT PROFITS using the Trade Triangles

If you want to trade profitably, you may want to consider something that is just as good (in my opinion) as most things out there...Market Club and Trade Triangles...

...It is much less expensive then anything I have seen of this quality, and the accounts in this blog are flying since January. Market Club and Adam Hewison are responsible for most of it.

I consolidated my main Forex account into cash at the beginning of June, but you will see a 72% profit since the beginning of January in that account. Then there is my intermediate Forex account, which is up 24% since January (Zip file.) Both these accounts are a product of my analysis and research BUT they come from the Trade Triangles.

Then we have my options and equity accounts, which are also a product of Market Club (titled in my children's names, so I can only recreate the trades:)

Here are the account particulars:

--My Sprint trade (which I closed at around 13% profit)

--My Zion Bank trade. (26% profit)

--The Gold puts purchased to protect my long term gold position have expired with a $3000 loss.

--The Puts I bought (and sold) to protect my gold, the first time around. ($11,000 profit)

---My S+P puts which expired worthless with a loss of $3,100. I am considering buying them again.

---And most recently the HUGE profits I have made in my November Gold calls (which I rolled over from October)...also due to Market Club (I still am short 1 Lot, which is why I bought the calls in the first place.) These are now worth a little over $82.

So, you can either try a 30 day risk free trial OR just as good...sign up for their free email course, which will show you why it works so well. They have a technology that is simple, but genius.

Here's why I make a lot of money in this blog.

Here is a great mini course that Market Club published on the (trusty)Trade Triangles...

My accounts are doing very well (up over 175%) since January...and one third of that is because of these guys! They have a technology that is simple, but genius...and it is very inexpensive! The above mentioned mini course explains this amazing trading tool so much better then I ever could...and it's short sweet and FREE.

You can see by the length of the blog that I write a lot...but these guys INVENTED the thing!

Gold…Game On!

I've been telling you guys for months that Adam and Market Club have been a huge influence on the account's in this blog...MONTHS!

I'll do an update on the gold calls that I have (which I bought somewhere around $960/0z) in a couple of hours, but I also happen to be short 1 Lot at around that same price too...which is why I bought the calls as protection in the first place.

Now, as you have seen, the gold market finally moved into new high ground and confirmed that a major up-move is now underway. In this new short video that Market Club does on gold, you'll see some upside target levels...and also some time frames where gold is probably heading.

At the end of the video they offer a special bonus to everyone who views it. I believe the bonus will allow any trader to become better...and also catch this move in gold...REMEMBER all my combined accounts are up 160%, in large part due to these guys.

Jack Steiman...A person that I read every day

Eveything I know about trading started with Jack Steiman. He uses moving averages in a lot of his analysis...but his charting is better then everybody's (and he doesn't pay me to say that!) Anyway, here's a little piece of a piece that he wrote about equities that you can take a look at:

There are many who are already declaring the bull market off the March lows dead. That may very well be true, but don't fool yourselves in to thinking it's a done deal either. It is normal and expected for markets to test down to those 50-day exponential moving averages from time to time. That allows for the oscillators to unwind and for any negative divergences that formed to be wiped out. The higher you go in a bull, meaning the higher those MCAD's go, the odds increase that, at some point, they won't be able to keep up with price thus creating the negative divergences. You can't have those hold on forever thus the selling that takes place.

It does not mean that all is lost despite the increasing bad news on the economic front. The battle will now rage between the 20-day and 50-day exponential moving averages for a while and how that is resolved will tell us if the bull is truly dead or if its just taking some well deserved time off to continue and unwind things to the oversold level on the daily's.

If we get oversold on the daily charts and we hold on to the 50's then you have to think things aren't nearly as bad as they looked this week, especially the past few days. On the other hand, if the move up is weak and labored, we have to consider the fact that the bull is about to end. It is totally unclear which way it'll break because if you study the daily charts, they are almost oversold now.

We are truly at a crossroads here. It'll be no fun for folks if we lose those 50's because that opens the door for another leg down in the bear market and this would have been nothing more than a rally in that bear market. It won't take long to get our answer folks. The battle between the 20's and 50's is not a wide and lose one. It's tight. The S&P 500 20 is at 1043 with the S&P 500 50 at 1017. There is also gap at 1017. This is an additional buffer for the bulls, but a death knell for this market should it get taken out with force. Patience as we learn the truth.

Is a divergence building in Apple?

The other day we discussed how to trade divergences in the S&P 500.

Today, our Trade Triangle gurus did a video about a divergence they see developing in one of the biggest tech stocks in the world, Apple (NASDAQ_AAPL).

Divergences that are building for this market. Divergences do not mean that Apple is going to collapse, as the major trend in the stock remains firmly in the positive camp. However, it could indicate that Apple is at a highpoint for the time being.

Do You Understand How Divergences Work in the Market?

I am always writing about negative divergences...Gold, Oil, equities, whatever. I also write a lot about Market Club and their Trade Triangles being one of the people responsible for the 150% return this blog's accounts have had (obviously, Bob Iaccino and others have also been crucial too.)

So, for those of you who want to understand why MACD's and negative divergences work so well, take a look at this new short video they did on the subject.

Demo Vs. Real Trading

Terrific piece done by Brad Gareiss of FX360 on the difference between real vs. demo trading (pdf).

I get a lot of emails from the readers of the blog wondering why I'm so calm about taking losses. Because I am so matter of fact about my losses, half of the comments are asking me if I'm on quaaludes or something!

But, you see, that's the point, isn't it? If you use stop losses, and know ahead of time what your exit points will be, YOU CAN BE CALM. You've accepted the risk BEFORE you make the trade. So when you are trading real money...there is no reason to worry because losses are normal. Remember...it's cumulative pips that are the goal here, not individual trades. You are trying to win the war, not always the battle.

Out of trade

Stopped out with $100 loss...and then the pair went in my direction for what would have been a $300 gain! That's trading!

New Trade

I am short the Kiwi/USD...a half lot. I only did a half position because the markets are acting very irrational. Bob Iaccino only made the trade because we hadn't had any trades in a few days. We didn't have any trades for a few days because the markets are acting irrational!

Short at 0.7177 with a stop of 0.7199.

Don't be Shy!

The Bank of England is being absolutely blunt about what's going on out there...they are the first "big" or "official" entity that is admitting that there are still big problems. Just look at the pounding (no pun intended) the Sterling has taken the past week. The Larry Levin post I did the other day was about how the Fed continues to act as if everything is roses. Meanwhile, our wonderfully talented and knowledgeable legislative is behind the scenes acting anything but!

Straight Lines Lead Straight to Profits in Crude Oil

In this new short video that Market Club did...they describe why the Trade Triangles work so amazingly well. It's simple, powerful, and a neat technical tool. You don’t have to be a rocket scientist to do this and you don’t have to have a PhD in mathematics either.

If you’re not already using this tool, I highly recommend that you watch this video, because they are one of the factors that is responsible for these account's successes.

Scary...BUT TRUE

I am a Larry Levin subscriber. Sometimes he does go over the top a little...BUT everything he says is very true. It's just that most people, including the all-knowing markets, don't know or want to acknowledge what is REALLY happening.

Here is his latest piece and, frankly, you would have a hard time arguing with what he says here (at least, I would.)

The market was once again trading in a very tight range this morning...and it was VERY choppy. A few hours before the FOMC announcement, however, the S&P was very quiet - waiting in anticipation.

In a nutshell, the FOMC said "We're gonna keep interest rates at zero, giving mega-banks free money, so that they can more easily rape the public to earn massive interest and fees. After all, the mega-banks are still in big trouble even though we're not going to tell you all the details. These fees and free/zero interest for the mega-banks are bringing them back to life, and even though your 401k's are now 201k's - we don't care. The mega-banks are more important than everything else under the sun."

"Speaking of the importance of the mega-banks, we will continue to monetize US debt without admitting it of course. How we do it is through the primary dealers: Government Sachs and the boys buy up all the IOUs and then we, the Fed, buy it a few days later. Since there is a middle-man holding this new debt for a few days, we can deny monetizing it and the dolts in Congress leave us alone."

"Oh, oh - and the massive $18-trillion of loans and guarantees that we have made will not be stopped any time soon. That would lift the curtain on the bank asset sheet problems and we can't have that. And according to our records and those of the Wall Street Journal, about 50% of the current bank profits are coming from their trading desks. Since we are guaranteeing everything under the sun there is no fear of loss and the banks can jam the market as high as they like. Oh yeah, and the high frequency trading scandal that is currently being discussed, we're gonna stop that. Allowing the mega-banks to cheat and steal billions of dollars from their best suckers...clients...is OK with us at the Fed so we're gonna put and end to a few Congressional outcry's of manipulation. So what if they're right; the mega-banks need the money.

"To hell with 'what's right' and legal; we're the Fed and you can't stop us."

This is why you can't trade the news...

Market Club (Trade Triangles) just did a short video on why Gold is not sky-rocketing yet, even though we've closed above $1000 a few times now.

Now, here's a blurb from a piece that Reuters did today on the FED meeting:

...Policy makers said inflation would remain subdued for some time with substantial slack in the economy dampening cost pressures, and with long-term inflation expectations stable...

Does this mean I am going to sell my Gold calls now, and take more profit (thus leaving my short naked?) NOPE. But, there is definitely a question as to how much inflation we're actually going to have.

On the other hand, I do the food shopping for the house, and when a 12 oz. box of Frosted Flakes is selling for almost $5, you have to wonder if we already are having inflation! Postage stamps, milk, pickles etc. are all very pricey...so it really does make you raise your eyebrows as to what the FED considers to be non-inflationary.

The Reason Why Gold Hasn't Skyrocketed

I still have half my Gold calls. Can't think of anything dumber then maintaining a short without protecting yourself. I made a huge profit on the first half (see previous posts.) I am also significantly up in the other half of the calls...however, according to Market Club...this might be temporary.

Take a look at Adam's newest Gold prediction.

I forgot to include some images...

I forgot to include some images from Adam's new "BE CAREFUL" video. These are two charts in his video that backup his very cautious tone. If you are in equities, just be careful. (clicking on the charts give you clearer views):

AND

He is one of the reasons my blog accounts are up 150%...(statement update Friday.)

Site issues

I just found out that the wonderful host (of this blog) is doing an upgrade to their servers and I am being prevented from uploading an updated statement until Friday.

I have been getting emails from some of the blog's followers wondering what was happening...really frustrating...it is ridiculous that it takes them over a week to allow me to upload files...

A couple more reasons to be cautious

I discuss how Market Club (and Adam Hewison) has been very instrumental in all my account's successes (not just the Bob Iaccino account below.) The Trade Triangles you see discussed in the post from the other day (where we talk about buying and holding) have been extremely profitable.

Now...in addition to these recent "be careful" posts I did here and here, Adam just came out with this "be careful" video.

Learning to trade like a Pro

I am saving up to join Keystone Trading's program, which lets you trade their capital. They charge you about $5,000 for a very comprehensive program (equities,) and it teaches me to trade their way, which I am pretty sure that, in order to keep using their capital, you have to continue implementing.

I have researched their background and I think it's worth the risk, given what I will learn. Over the past nine months (when I started trading currencies), I have discovered that the connection between equities and Forex is stronger then I first realized. So, in order to continue being successful trading Forex, being taught the other side will be important.

Here is an interesting list of things that is the premise of their teachings (which, obviously, they expound on:)

Some questions you should be running through your head all day long:

Is there an obvious edge to the market?
Are the market internals telling a story?
Is there obvious insitutional order flow in my list of stocks?
If I have no edge what do I need to see for me to want to get involved? What levels would make me sit up in my seat?
What price makes the most sense based on risk reward?
What do I want to see on the tape AFTER I get filled?
What don’t I want to see after I get filled? What is my plan if it moves in my favor/against me?
Where will I add to the position? Where will I scale out?
Is today a trend day or range bound?
Am I trading the type of day unfolding or am I trading what I want to see happen?

Why buying and holding is dead

Buying and holding is dead...I talk to many people in a given week who have IRA's or other assorted accounts from the early 90's and most of them have those same accounts...but the balances are the same or lower here in 2009!

Now take a look at Market Club. If you have been following this blog since January, you'll know we are up close to 150% on all combined accounts...much of that is due to my Trusted Trade Triangles. Watch this short video for proof.

Gold Update

Obviously, it was a smart move to hold on to some of my October Gold Calls. The Dollar's weakness is good for American companies...but it's causing prices to go up in Gold and, more importantly, crude oil...and I am still short 1 Lot of Gold
(-$8,500)

So now, I still own the other half of my Gold position, 5 contracts of October 975 Calls (remember I sold the first 5 @33.90 for a $16,950 profit.)...which I bought @ $9.70 along with the first 5 contracts, are now worth $46.80.

I'm very wary of equities, but, just like Gold, it keeps going up. I am glad I went out two months on these calls because it gives me more time too figure out this insane. market

Now we have this from Keystone Trading (who I am saving up for)

Fascinating little blurb based on trading psychology, and along the same theme of what I just discussed in the last post.

http://keystonetrading.wordpress.com/2009/09/16/the-fear-is-gone/

(Be afraid, be very, very afraid.)

The markets are never going down again...EVER!

I have been calling for a reversal for a while now...

I wish I had the time to link you to the all the posts I wrote on negative divergences and Elliot Waves. Now, you have all the CNBC shills coming out and telling us not to get in the way. And then this (from Elliot Waves Int.):

It's unanimous: The bear market is over, and a new bull market is back!
At least that's the conventional wisdom of the top 55 U.S. economists, who predict that the economy will grow in the fourth quarter through the first half of 2010. (All but one of them expect growth this quarter.)

Rewind to February-March of this year ...
... When those same economists reported that the economy was in "the worst recession since the Great Depression."

That's also precisely when stocks and commodities rallied. Now, six months later, even the Fed chairman has declared the worst is over.

What's changed?

In a word: psychology.

The natural flow of investor psychology has traced out a recognizable pattern. As optimism builds, so does the perception of a recovery. It's to be expected -- even predictable. After all, the simple truth is that investors, advisors and analysts alike herd. Positive price action -- in their minds -- begets other positive action. It's all-too similar to the optimism we observed in late 2007, when various markets stood at or near their all-time highs.

But today not even the so-called fundamentals support the notion of a recovery:

Large pockets of the U.S. real estate market, including metro Atlanta, are still racking up record monthly foreclosures.

The global shipping industry has slowed to a crawl; thousands of ships around the world sit empty and idle.

Bank credit and the M3 money supply have been contracting at rates comparable to the onset of the Great Depression.

And believe it or not, reports are surfacing of lending institutions returning to their old tricks from two years ago.

It's time to debunk the recovery hype. Robert Prechter anticipated the bear-market rally and the shift toward optimism that drove it. He even offered recommendations that helped nimble traders take advantage of it. But now the rally is waning. A downside reversal is imminent.

Out of trade

Out of trade with a $312 profit.

Finally a trade...

I am short the USD/YEN. This has been floating in positive and negative territory...as of now, it is positive. In our seminar today, Bob Iaccino was telling us that this is a much stronger setup then many other setups because it is in a wedge, and they tend to work at a higher percentage. (Clicking on the chart gives you a clearer view):



















I shorted at 91.04, with a stop of 91.94.

Out of trades

Out of trades with a $1000 loss...account is doing great, however...remember, it is impossible for every trade to work out.

Trade laid out graphically

Here are the original trade parameters. The bottom red line is the STOP. The top red line is T1. The two green lines are the first and second longs. The long wick is one of the things that inspired the second position. (clicking on the chart gives you a clearer view):

Building a position

I added another lot to my EURO/YEN position (2 total.) My accounts are a combination of different trading techniques.

The first long I did was a Bob Iaccino recommendation. I don't know if their traders ever add to their positions on a rotation (they make every trade that is recommended.)

The second long I did is a Keystone Trading technique where they teach you to add to a position if you have a lot of evidence that the direction you chose is getting stronger. (It's like doubling down when you get an eleven, for lack of a better analogy.)

Shoo, shoo!

In case you've been watching the EUR/USD, the 4 Hour chart is just shooing the Melody ADX away, like it's a flea...totally ignoring being overbought.

Trade details

So, I ended up getting just 1 Lot of the EUR/YEN @ 133.75.

T1= 134.95 (which is big for a T1, but I did have a fortuitous entry level at the lowest possible point.) I keep harkening back to that Iaccino lesson, where he stressed that a larger position is appropriate when the stop loss is very close to the entry (considering the profit potential.)

T2= 135.87
STOP= 132.74

Considering how I probably got in much lower then Iaccino's European clients, that is something I should have done i.e. 2 Lots.

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Did anybody notice the long wick on the daily Gold chart two days ago? (All I'm saying is to watch it if you're long, because it doesn't much look like $1000 is going to become support anytime soon. BUT, I only sold half my calls, because anything can happen, and I am still short.)

Interesting uses of the Melody ADX

Currently, my trading lessons are centered around a few things, including preserving profits, always using stops etc. but one of the things we are learning about is the Bob Iaccino propietary indicator...the Melody ADX.

The EUR/USD looks very appetizing here, but the Melody on the 4 Hour chart looks very overbought (60+). Since the 4 Hour chart is the chart for all of BI's recommended trade breakouts or breakdowns, we would need a little unwinding. Iaccino also said there may be a trade here if we do get the unwinding.

The Daily chart, on the other hand, has plenty of upside showing. The Melody is very low (clicking on the charts give you a clearer view):

Entered a "Risk Trade"

As per Bob Iaccino and Trader Outlook, I entered a trade going long 1 Lot the EUR/YEN after a retracement (because the trade hit while I was sleeping.) Ironically, had I been awake when the close of the 4 hour bar occurred, I would be down...now I am up, because I bought on consolidation. Details coming...

The term risk trade applies to any trade that is not long the Dollar or Yen, which are considered safe havens. As Bob likes to call it, "you're building a position."

Sold Half the Gold Calls

Today I sold half my contracts at $33.90 minus commissions.

I still don't believe that Gold is this strong. Sold 5 contracts (@33.90= $16,950) and still own 5 because my short is down $7,000.

Unbelievable!

Does anybody know who Guy Cohen is? Google his name, and then come back to see what I just bought. I am amazed at myself...because it's not like me to do such an insane thing!!

(But it made total sense...)

Selling half my Gold Calls

In my "Now what do I do?" post the other day, I needed to decide what I should do with this profitable call position. There are a lot of conflicting indicators...most of it anti-Gold here...a weekly and daily negative divergence (and also in the CRB index and equities.)

We did close on a new high dating back to May, but again, the volume is not what it should be for a rise like this (thus the divergence in the MACD.) I even remember someone on CNBC mentioning in passing last week that the big movement was a result of computer trading.

But, the markets have been trading so un-fundamentally, for lack of a better word, that maintaining my short in Gold, and selling my entire call position, would be too risky. So, my decision will be to sell 5 of my 10 contracts and take a handsome profit (when the options market opens on Tuesday.) At the same time I will be able to maintain the protection for my short position by keeping the other half.

It will be interesting to see what the Ozzie and Canadian Dollar do before Chicago opens Tuesday. (The other thing I could do is turn the rest of my calls into a long straddle position, because I think that whatever Gold decides to do, the move will be big. The only problem is that it would not be a delta neutral trade as I will be short more then long.)

New statement (including the Bob Iaccino account,) later today.

Whadya know?

Just as I was writing my last blog entry, I saw a response to Adam's Gold bullishness (from Steve of www.recordpricebreakout.com):

"I wouldn’t get so high on gold yet. We’ve been here twice before (since March 2008), and there’s a HUGE divergence on the MACD on the weekly chart."

So I decided to take a look...and by George...he's right! (Clicking on the chart gives you a clearer view):