The Art of the Entry

Here's an example of how I like to enter trades.  This example uses the Eur/Usd.  I went long the Euro yesterday and added a piece to the trade today.  Here's a screen shot of the 1 Hour, 15 Minute and the 5 Minute charts for the pair, with my TLT Trender v2 signals:

I initially went long with the buy signal, the green bars, on the one hour chart (the chart to the left).  Because a buy signal is in place, I then will look at smaller time frames for another entry signal in the same direction.  I got one this afternoon.  The 15m chart (upper right) gave some yellow bars.  That is the equivalent of the hammer on the gun being pulled back..just needed a signal to pull the trigger.  The signal will be the next buy signal on the 5 minute chart (bottom right).  As you can see, it came about 45 minutes after the first yellow bar on the 15m chart. 

Now the positions are on and they will be trailed with stops on the hourly chart.  Notice that I didn't go into the mechanics of what the green, red, yellow and blue bars are and how they work.  It's enough just to know that Green is buy and Yellow and Red are sell signals.  The concept that I want to get across in this post is the idea of using the Buy/Sell/Buy pattern with different time frames.  Have a buy on the higher time frame, with a sell signal on the intermediate time frame and then buy on the next buy signal within the short time frame.  You can use whatever type of indicator that you like, as long as you're familiar with it and have a good grasp on how to use it.  The Buy/Sell/Buy pattern can allow you to enter long or short (Sell/Buy/Sell) positions in spots where risk can easily be managed...and that is half the battle.

Hope everyone has a Happy New Year!

TLT

Eur/Usd Update

The Euro has continued to rally..the only question now is how long will it last? I don't know and will look to price action to get me out of my current long position. Here's the current daily chart:

One thing that I find interesting about the Euro right now is that the correlation between the Dollar rising when the stock market declines seems to have been decoupled.  For example, this morning when stocks slid more than 1%, the Euro rallied.  What does this mean?  It could mean that the currency market has merely changed it's relationship with stocks.  It could also mean that the currency market is not worried about Europe anymore..the worry is with the US.  Not a far fetched theory.

It's too early to tell, but it will be interesting to see how this plays out.  The only thing that I can say is that according to my system, the right trade is to continue to hold the long Euro position. 

TLT

Buy Signal On the Euro/Usd

I don't really like it, but I'm in it. The Euro rally that occurred last week on July 1st triggered a buy signal in the Euro/Usd. Personally, whipsaw comes to mind when I look at the chart but, only time will tell...you never know which signal is going to be the beginning of a huge move. Here's the daily chart:As for the stock market, I'm in cash right now and waiting for a fresh short signal or a buy signal. I can tell you that the path of least resistance is still down, so a new short signal will most likely be next..but you have to stay open to different scenarios playing out.

Hope everyone's having a great week so far.

TLT

Indicator Update: TLT Trender and TLT Oscillator

After another down day, lets see where my indicators stand. The TLT Trender v2 is still giving a sell signal on the Daily S&P 500 chart. Here's the chart with some comments:
And here's the TLT Oscillator, which is still very bearish down in extreme negative territory. This indicator ranges from 60 to -60 with below 60 being bearish. I plot a 5 day average over the bars to smooth out the data. Here's the chart:Well, both indicators are still very bearish and there is some evidence that the selling will likely continue. Even Trader Mike today pointed out that his Trend Table that he keeps up with is the worst that its been in over a year in this post. What's the take away? Expect more selling and hold onto the shorts.

TLT

Markets are Moving Today: Check Out the Eur/Usd

If I could only watch one thing to make all of my market decisions right now, it would be the Eur/Usd pair. This should not be surprising to anyone that follows the markets on a regular basis as everything has been following the dollar..and the euro. This pair represents a gauge on the overall fear involving Greece, Spain, and Portugal and it also gives you a heads up on what the risk appetite of the market is...dollar still rallies as a safe haven currency when the equity markets tumble.

Today the Eur/Usd has made new lows and the stock market is falling which is confirmation to continue to hold shorts. Here's a daily chart of the Eur/Usd:
I've made a few notes on the chart relating some of the more important things that I'm taking from it. The 2 most important things that I see, things that give me conviction to hold positions, are the fresh lows and the leveling out of the BB Width. I've found that the BB Width indicator is one of the best tools for determining continuation of a trend. When volatility kicks up, the short term BB Width rises above the 5 period average and more times than not we see follow through in the direction of the trend. When the BB Width is declining and below the 5 period average, we generally get consolidation with the potential for a short term reversal, which is what we've had lately.

So, right now, it's looking like the sell off of the Euro will continue and we'll also see the stock market sell off with it. Note that the BB Width hasn't risen above the 5 period average yet..but it has leveled and looks like it will likely cross. For now I'll be holding my long dollar and short equity positions and if the continuation is confirmed, I'll add a bit to the positions.

Anticipating what will happen and then having plans and contingency plans is the name of the game. If you make the proper plan, then it's likely that market action will not surprise you. Then if you add the ability to cut losses to the equation, you've got what it takes to trade successfully. Simple, yes. Easy to do, not exactly!

I hope everyone has a great weekend.

TLT

Eur/Usd: Heading to New Lows or a Double Bottom?

Here's the daily chart of the Eur/Usd:I'm long the dollar (actually UUP via call options) so I believe that the pair's heading lower and that there's still room to go. We'll see.

TLT

Trender Nailed the Short

What a crazy week. We saw history in the making on Thursday and now it will be interesting to see the effects of that sell off...attacking the algos etc. I haven't posted about my TLT Trender v2 in a while but I still follow it. Check out it's recent chart of the S&P 500:As you can see, the Trender nailed the exit on this one...sometimes it's a little early or late but every now and then it's spot on. So, obviously, short is the way to be for the time being but the big question is how much follow through will we see? Every sell short signal I've seen over the past year has been a very short momentum trade at best. One thing that I noted on the chart is that the Fisher Transform MA is still positive...until it gets negative, I am skeptical of the follow through to the downside.

We'll see, maybe Greece and Europe is a big enough catalyst to send the market down some more. As always, time and price action will tell.

TLT

Big Bets Against the Euro

This Wall Street Journal article, states that Soros, Eihnhorn and several other big hedge fund managers are betting against the euro. Some claim that the Euro/Usd could see parity (1:1) by the time the euro stops falling. Another manager stated that the outcome of the EU's problem with Greece will be bearish for the euro no matter what happens. These are some big claims.
Well, as you can see from the above daily chart of the Euro/Usd, the currency pair is in a significant downtrend and the only question now is: Where does it find support?

TLT

The Rally Continues

Stocks gapped up this morning and then kind of petered out a little in afternoon trading, but the rally is still going. We all know that the weak dollar is influencing stock prices, in fact, the two markets are correlated pretty tightly right now. Stocks are trending to the point where I'm long and holding overnight positions again, even though everyone is suspect of this rally. The key is to trade the signals...not the opinions of others.

Here's an hourly chart of the S&P 500 index with the TLT Trender v2 and some annotations:Personally, I think that we'll see new highs by the end of the week and then probably a quick pop up as shorts have to cover, but take that for what it's worth as it's only an opinion that can change on a dime. Next up, here's the Eur/Usd hourly chart also with the TLT v2 indicator (green, red, blue bars) and some annotations:As always, the goal is to watch price action and let that dictate what the next move will be. I must admit, I've gotten quite bullish after seeing the market shrug off the unemployment numbers last Friday and then rally and hold those gains this week...smells like strength to me.

Happy Veteran's Day and I want to give a big THANK YOU to all those that have served and currently serve our country in the armed forces.

TLT

Quick Look at the S&P 500

It's no secret that I've been bearish lately and today didn't provide much for me to change my stance. My TLT Trender v2 is still in buy mode, as indicated by the green bar on the chart below, but it is dangerously close to giving a sell signal. I'm currently in cash and only putting on some small day trades and this will continue until the market provides an indication of which way it's gonna go.

Here's a looks at the daily chart of the S&P 500 with some annotations:We'll need to see a stong up move, like a 2% move, in order for me to get bullish again, and conversly, some fresh lows will keep me bearish. Those non-farm payroll numbers on Friday may provide the catalyst we need in order to move one way or the other.

Good luck trading.

TLT

Follow up on the Eur/Gpb

Last week I pointed out a potential trade in the Eur/Gbp pair and asked if the recent dip should be bought. The time has come for the trade as the pair has pulled back to the 50 day exponential moving average and the TLT Trender v2 has maintained a green buy/uptrend signal. To top everything off, the Stoch hit oversold levels and is now turning up...a bullish indication. Here's the updated chart:Remember, this is just a trade idea, not a forcast of the future. This setup tells me that the Eur/Gbp is likely to move up from here but there is always the possiblity that the pair will keep falling and for that reason it is important to use proper position sizing and a hard stop loss.

I'll post an update soon.

TLT

Eur/Gbp: Buy the Dip?

Some interesting action going on with the Eur/Gbp. The pair pulled back sharply this week and now the question is: Do we buy this dip? The pair is still in an uptrend as far as my system is concerned...the green bars are my TLT Trender v2 indicator and green means uptrend. We're gonna have to watch price action closely on the intraday charts next week to get a read on this situation. For starters, I'll be looking to enter the pair as it nears the 90.00 level...gotta watch those round numbers. Here's a daily chart with the TLT Trender v2 indicator:Buying pullbacks can be a very rewarding strategy, the only catch is that you have to be disciplined in setting and sticking to a hard stop level...as the pullback might turn into a reversal and you should be out of the position long before a reversal is confirmed.

Have a great weekend.

TLT

And the Rally Continues...

Equities continued to move higher today and I pared back a little by unloading some long positions. Did I sell too early? Maybe, but I've still got some exposure, just not confident in the current risk/reward in the market right now (a combination of earnings release risk and being short term overbought is creating my uncertainty). Here's a daily chart of the S&P 500 with my TLT Trender v2 indicator (the indicator that paints the candles green for uptrend and red for downtrend):As you can see from the above chart and comments, the Stoch is overbought and the fisher MA is positive but failed to make new highs. One thing to remember is that the fisher ma is lagging, given that it's a moving average, so it might just be gearing up for a move higher...the important thing is that it's positive because a dip below zero is a good indication that the trend is likely over.

Happy trading.

TLT

S&P Rallying After Earnings

The market is liking earnings right now...some notable movers are AA, GS and FCX. Goldman is an important stock to keep an eye on because it is definitely a market leader who's price action tends to dictate the tone for the market as a whole.

The S&P has been rallying in the futures market since today's close...good for longs. Here's a 30 minute chart with today's action with the TLT Trender v2 and a nifty short term volatility indicator:We'll see what the follow through looks like for tomorrow and we'll have to keep an eye on the 1078 gap level that is quickly approaching.

TLT

I Bought the Market Today...

Went long with a leveraged ETF today as the S&P began pulling out of oversold levels. Will it continue going up? I don't know, but you have to be willing to step up and buy during times of uncertainty when you see a tradeable setup. For me, the setup is a pullback to oversold levels on the stochastic while an uptrend stays intact...the uptrend is indicated by the green bars painted by the TLT Trender v2. Here's the daily chart that shows the oversold level and the green bars:The daily chart gave me the signal to start looking for a long entry and a specific stop loss level. To determine this, I use the TLT Trender v2 on the 15 minute chart along with a volatility indicator to pinpoint the entry. The volatility indicator looks for rising short term volatility, which confirms a breakout. I'll post later on in the week about the volatility indicator and how I use it...don't really have time to right now.

Hope everyone's week is going well so far.

TLT

Bearish on the GBP/USD

The Pound recently attempted to rally against the dollar--a rally that could have provided a tremendous break out but it failed. Now the Pound is looking rather bearish and I present these two charts to illustrate my opinion. The first is a daily chart of the GBP/USD with the TLT Trender v2 indicator (an indicator that paints the candles green and red) applied to the chart. As you can see, the TLT Trender v2 has given a fresh sell short signal which indicates that the trend is down for the time being (note that the TLT Trender v2 is a trend following incidator and as such, it can give many false signals when the market action is choppy because trend following systems take lots of losses while waiting for a big trend to emerge). As noted on the chart, I'll be looking for some new short term lows to confirm the bearish trend on the daily time frame.

Next, lets take a look at the 4 hour chart.The most important thing to take away from the above 4 hour chart (besides the red TLT Trender reading) is that the prior 3 rallies have sold off rather quickly. This indicates that the market does not have faith in the pound and traders have been fading the rallies. So how am I going to play this? I will look to short the pound whenever the stoch on the 4 hour chart hits the overbought level as long as the general trend of the currency is bearish as indicated by the TLT Trender v2, however, I will use hard stops to prevent losses in the event that the rally continues upward...always a danger when fading rallies.

I'll post another update on the pound within the next week or two.

TLT

Stocks Sold Off A Bit This Week

I've been slammed with my lawyer work this week and haven't had much time to follow the markets. Today, I pulled up an hourly chart of the S&P 500 to get a feel for what the price action has been and selling has been the name of the game this week. My TLT Trender v2 registered a "sell short" signal at the beginning of the week on the hourly chart and here it is:As you can see, the TLT Trender had a good sell signal for this week...wish I'd of been around to trade it...oh well. I did manage to trim my long positions a little because one stock that I was holding (OMN) hit a stop loss and now I'm waiting to see what the market will do.

The daily chart of the S&P shows that we're still in buy mode according to my system and the stochastics is heading towards an oversold level...maybe a good point to buy little. Here's the chart:The market was probably due for a little pullback and now we'll have to be patient and look for clues as to what will likely come from the pullback. Will the dip buyers step up and buy or will the overall market panic and keep selling? Who knows. One level to watch is the $975-980 support in the S&P...longs do not want that level to be taken out.

Hope everyone's having a good week and I'll be back with something tomorrow.

TLT

The Weekly S&P 500 Chart

I hope everyone is off to a good start this week. I had to take a little hiatus last week, hence the lack of posting, because I had to prepare for a criminal jury trial that was supposed to start this morning. After spending most of last week preparing, I found out just yesterday that the government's key and also necessary, witness was not going to testify and hence, the charges were dropped against my client. This is great because now I get to get back in touch with the market.

I thought that looking at a weekly chart of the S&P 500 would be in order because the longer time frame chart helps us stay in touch with where the market is within the grander scheme of things. Personally, I think the equities markets will continue to rally for 3-6 months, with a few dips along the way and then they will hit some resistance and fall hard...very hard. Here's the weekly chart of the S&P with my TLT Trender v2, a stochastics and the fisher ma indicators. As you can see, the S&P is in buy mode according to the TLT Trender, but it is overbought according to the stochastics. Overbought readings on the stochastics are not uncommon during rallies, especially when the rallies are achieving new short term highs. I would not allow the stochastics alone to keep me out of the market, I would just take it as a word of caution. Now, if the stoch pulls back into neutral and maybe even into slightly oversold territory, then I will use it to determine when to buy the dip.

Also, I drew a box around some of the price action and posed the question of whether this area will be the new range. I would not be surprised if it does indeed turn out to be the range. The market will likely test the upper end of that range within the next 4-6 months, and the reaction to that test will be what is important to watch.

One other observation right now is that the Pound has pulled back a little from it's massive rally and this pullback may provide a good opporntunity to jump on board this trade if you're not alreay in it. Just make sure to set a hard stop and stick with it!

Have a great day.

TLT

Another Look at the Pound and Other Ramblings

The Pound is creepin' back up after a brief sell off and this time it might just break out of 1.66 resistance area that has held it back. I have previously posted that I think the pound will see 1.75 if it breaks out of the 1.66-1.67 range. Here's a daily chart of the GBP/USD with the TLT Trender v2 indicator applied and some annotations:The Pound break-out theory fits in with my overall outlook for the markets right now. For the next several months, I believe that the dollar will fall against the euro and the pound, oil will rise, and U.S. equities will continue to rise. This has been the pattern lately and I believe it will continue for a little while, unless some major change takes place (i.e. a major shock to the markets). We're probably still in a secular bear market and this move is most likely just a big bear rally that will crash hard later when things get ugly again (maybe if/or when China melts down).

For now though, there is a lot of optimism in the markets and I'll stay with my opinions stated above as long as the markets keep shruggin off bad news. Just my 2 cents.

Have a great weekend.

TLT

Another Good Week For Stocks

We saw a great run this week with the equities as the S&P broke out into new highs and the Dow crossed the 9,000 mark. Will it keep up this pace? Who knows, but for now I'm in it. My TLT Trender v2 system is still giving a green buy signal so I'm staying long. We are in overbought territory on the stoch, so be careful entering new longs.

Here's a daily chart of the S&P with the TLT Trender v2 indicator applied and some annotations:
Have a great weekend!

TLT