Super Tuesday-Goldman Sachs to Report Earnings-Is this a game changer?

***Update at the bottom

Goldman Sachs, the flagship of Wall Street investment banking is widely expected to post blowout earnings above analysts expectations this Tuesday. While the economy still continues to slide and unemployment rise, GS may very well post an anomaly that Wall Street will find tasty, although difficult to digest. What would it mean if they did post a blowout? Are they taking excessive risks? How will main street react to a TARP funded institution (which they have paid back) distributing lavish bonuses while unemployment hits new highs?

The earnings season phenomena is an enigma itself. In the recent past the trend has been for the market to sell off very hard on fears of extremely horrible numbers and then to rally when the numbers come in only "Horrible", sans the "extremely". However this season's prelude has been a monster rally that I call a bear trap, but many feel may be a bottom. The March Rally from March 9th to today has seen the SPY gain 29.14% and GS has gained 91.85% in the same period. Initial reactions to blowout numbers may not be as reliable as they look. I have some charts of GS to show you that stir another Wall Street behavior, "Sell the News". Certainly you can't say that GS hasn't rallied in anticipation of a bounce back as it has nearly doubled and outperformed the market by nearly a 3:1 margin. The small fries may very well drive GS up in an astronomical push, but what are the BIG FISH doing, that's where our attention should be, not a short term trial at testing the prevailing winds, but looking to the horizon for the bigger picture. With all of that said, here are some thoughts on the market.

#1 In my opinion we have witnessed a bear market rally-look to the 1930's decline and you'll see 5 very convincing rallies that all led to new lows.

#2 The market is in a very reliable topping formation called a Head and Shoulders top. The top is actually a complex top and a second right shoulder or another rally, is not completely out of the question, although we have seen penetrate the neckline the last week, it seems to be lingering and the GS earnings may be part of the reason why. This is where you need to determine if you are a short term trader or a position trader as your reactions to the following days will be very different.

Lets look at the charts, in no particular order. These are the pieces of the puzzle, so order doesn't matter, finding the most probable outcome does.


This is my Trend Channel, a custom indicator I wrote using TeleChart's very user friendly Custom Indicators option. This channel is different from an envelope channel and a set of Bollinger bands, it is very reliable and self adjusts to each stock without having to change settings according to a stock's volatility, that's because the channel is based on each stock's recent volatility and a standard deviation is added to its width. In this manner, a stock in an uptrend is acting in a certain way, when a penetration of the lower channel occurs (on a closing basis) then we know something very significant has changed. I use this as a stop in many cases for trending stocks because it takes out subjectivity and replaced it with objectivity. It also gives you a rule, a place to stop out at rather then guessing when the rally is over. Remember, we live at the right edge of the chart, the unknown. Clearly GS has stopped out of the long position, but the channel allowed you to catch the bulk of the gains-nearly a double! Also notice the channel's direction is no longer up-it is lateral like we see in tops.



Here we are looking at a 9 day version of the channel-notice how it kept you long GS throughout the uptrend of 2006 and part of 2007. Also note the volume in the most recent rally-it is declining. Compare that to the volume experienced during 2006-it was advancing as a healthy rally should.



This is my Crossover signal system-although you can't see it, the first crossover that ran into the new year was not valid, the second crossover was and gained about 12%. The March lows bear market rally was a true buy signal using this system (email me for more information on how to use this system which eliminates many of the false signals moving average crossovers are plagued with). The signal was given on March 17 @ $98.99 and the buy would have occurred on the first pullback to the yellow 10 day moving average at $94.50 on March 20th. Additional buys or add to positions would have occurred at pullbacks to the blue moving average (22 days). Now we have a confirmed sell signal in all 3 criteria have been fulfilled. Again, if you sign up for TeleChart (PLEASE USE MY LINKS AS I'M AN AFFILIATE), email me and I'll set you up with this system.



This is my MACD Heat Map. Basically when MACD is above the middle line and blue, you buy, green=buy, yellow=hold and when it is declining and mostly red you start to tighten stops. When it is all red above the middle line, you want to be out of the trade. Now we have a blue MACD under the middle line which=Sell Short.



This is StockFinder by Worden-I'm an affiliate for Worden/TeleChart/StockFinder-so again, please USE MY LINKS. This shows institutional sponsorship in yellow-the trend is down, but you can see clearly where they were accumulating shares.



This is my Fast version of my custom indicator, "3C" which shows accumulation and distribution. We are in a clear stage of distribution as the indicator failed to make new highs with price. Remember, what is happening is the institutions that bought in big time in the former chart, are selling into the rally-into demand, which =higher prices.



The Orange indicator is my medium length 3C and it too is showing distribution, not what you'd expect to see if GS were about to take off on a new rally. The middle indicator is much like my 3C, it is Worden's Time Segmented Volume and works in the same manner as 3C. You ca see it too is registering distribution.



And here are my two long term 3C indicators-both showing significant distribution into the rally and top.



This is StockFinder and the red and green indicators are showing you new 20 day highs and lows for GS's industry group, a sign of the vitality of the sector. The volume bars are for the sector, not the stock and there too we see diminishing volume into the rally.



Here's another very useful StockFinder indicator showing Goldman's industry groups vs. all industry groups. Recently we see a significant selloff in the industry group as it plunges to rank in the bottom 20th percentile of all industry groups. This is yet another sign of the vitality of the sector.



Here we have a few good crossover systems and a really horrible looking MACD-momentum is all but gone.



This StockFinder chart is similar to one above except now we see new lows and new highs for a 50 bar period and we see Goldman's ranking within it's own sector.




This is a very reliable pattern called an Ascending Wedge and it is bearish. There was one in oil too right before it plunged from it's multi-year rally. The rule of thumb is an Ascending Wedge will retrace it's base. Also note the diminishing volume I've mentioned before into the rally. This sort of volume helps to confirm the validity of the pattern. It's not uncommon to have a false upside breakout from an Ascending Wedge before the plunge begins, perhaps the earnings will provide such an event?



Finally, this 7-day chart of GS provides a great perspective of the Head and Shoulders pattern it is sitting right below-it's also known as overhead volume or resistance. Also the measuring implications of the pattern were played out almost to the dollar. Again, a significant detail of this rally is the diminishing volume.



With all of this taken into account, I have a hard time buying into any potential GS rally and instead would consider using any event as an opportunity to get good short sale positioning.

Tuesday will tell us more.

Don't forget to email me for a free trial of my private trading system site-Wolf on Wall Street.

**Update Meredith Whitney has upgraded GS to a buy calling it a "Bull Stock for a Bear market".

First of all, Ms. Whitney has been spot on as far as calling a lot of this market since 2007, she's got a good track record. However, calling market's and establishing credibility vs specific research investment calls is 2 different things in my mind. Just ask yourself why a research analyst paid what she is paid, plus all of the extra money that goes into that research would be freely distributed to the general public-so I never trust such calls, but that's not to say it doesn't matter. My feeling about this is it may very well lead to that second shoulder being formed and who can be blamed a week or two later when GS tanks with the entire market? There's a club on Wall Street that you aren't a part of, remember that. Also remember those charts and where the buying was occurring and the fact that you need strong demand to distribute those kind of shares or in short, remember the concept of "Sell the News". My best guess at this point is a right shoulder rally led by the GS earnings, but not to last long. It's not about what you did in a market full of easy money, it's about what you will do going forward as compared to what you did-two very different things. It's hard to put your trust in a chart when things are going in the opposite direction, but just realize that the chart is nothing magical, it's the footprints in the sand and although a wave may wash a few away, if you follow them and they are strong, you'll be led to the proper path.

Why I Won't Short Oil

I've been getting signals on the trade system, which is a long term trending system, price based.

Understand that oil and other commodities like metals, etc have an inverse relationship with the dollar. Forgetting the technicals for a moment-how can the dollar not be diluted with these massive budget deficits? They must print more money-period. The dollar has put in two bearflags and as with all continuation patterns, there's always the chance/opportunity for a bounce back up to resistance-that is what is happening in the dollar right now.

Here we see my stop (Trend Channel) in yellow and I've drawn trendlines at the stops that it is signaling, the dollar is still below that stop.



This chart is a little complicated to read-look at one indicator at a time. My 3C in orange has shown, despite higher prices, the indicator is not making higher highs, it is showing a little distribution in the dollar. The blue indicator is an underused-under appreciated indicator called ROC (Rate of Change) and it is a reliable momentum indicator-again, the dollar makes higher highs and the indicator fails to follow price. Finally in the lower window is long term TSV (Worden's proprietary Time-Segmented Volume) and you can see it has failed to do much at all. There's no long term accumulation behind this simple technical bounce-but oil has been punished badly for the recent move in the dollar.



Here we see the bearflag trendlines and my crossover system-the system has failed to register even 1 of the 3 triggers needed to validate a true crossover. This system performs much better than a simple crossover system which is plagued by false signals.



These are the bearflags and this is the pullback that I mentioned to resistance, which is the lower trendline.



Finally-look at the BIG picture, there's nothing hereto suggest a meaningful change in trend. Also-one of my little secrets-think for yourself. I say Wall Street is full of Sheep, Be the Wolf. Look at my settings for the MACD-not the 12/26/9 that everyone uses, where's the edge in looking at the same thing every other chart reader is looking at. I look at the longer term picture and try to avoid getting worked up about every market gyration.




The Blue channel you are looking at is the main component in my Trend System-two consecutive days under the channel produces a short signal like we see here on DBO, the indicator in the bottom is custom and it is my version of MACD. Note that the decline is seeing fading momentum in my indicator.



This is a 2-day chart of my Trend Indictor-why two days-because DBO is an Ultra-or double. Look at the incredible gains on the red colored short signal and decent gains on the blue long. You must remember, if you are on Wolf on Wall Street (email for two weeks free access to the trade signals) this is a long term trending system-it's not about 10% pops in two days which everyone is impressed by, it's about patience and huge gains over time. You'll also see currently, there is no short signal in DXO-it is still a trending long-despite the drawdown. The middle window is 3C-still above its moving average.




Here we are looking at new 50 bar highs and new 50 bar lows for the industry-still very bullish. The bottom red indicator is the symbol rank vs the industry group-still very bullish near the very top of the group.



This is the Elder Impulse system on a 5 day chart, there's nothing even remotely bearish here on DBO (Double Long Oil)



This is a Detrend Indicator showing a bullish positive divergence in DBO.



This is a 30 min chart of DBO with Demark buy and sell indications which have been very accurate-we have a buy signal now. RSI is turning up and Stochastics is turning up-again note the long settings I use even on Stochastics.



The next 3 chart are intraday 3C charts all showing a positive divergence-someone is accumulating at these lows.





This chart is showing a reversal pattern the last two days-some call it an inside day, but it's also known as a Harami in CandleStick charting and it is a reversal signal-I'm guessing tomorrow DBO is up. The last Harami was in mid April at the bottom of the decline.



Here's the same Crossover system we looked at on the dollar, except a two day chart for the Ultra-again, we are still in long mode.



This is the same chart just zoomed out-note the extreme gains captured using a system that is not plagued by false signals at every little bounce or decline-a great short was realized and a good long thus far.




These are the reasons I will not short oil at this time. It's one of my most difficult calls because it has the potential to be wrong big time, but I do think we are on the verge of a major bounce and will see the uptrend in il resume.

As for business-don't forget to check out Wolf on Wall Street, it is a private site by invitation only and is based solely on my trading system-the charts on the sidebar to the right show the results of backtesting the system. Email me for two weeks free access-right now I've extended that time because I want people to see what this system is capable of and we are close to that point.

As for all the indicators you saw that I have created-I'm an affiliate for Worden/TeleChart and StockFinder. If you use my links and tell them that you heard about them from Trade-Guild, you just email me and I'll set you up with any of the custom indicators you see hear-except the Trading System which we have bigger plans for as it is being audited right now.

StockFinder-Videos

You know I use both TeleChart and StockFinder for different reasons. Every once in awhile, I want to show you what these platforms can do. Right now, I'm interested in Sector Rotation so I thought you might enjoy these videos.

Stock Ranking vs. Industry

Rank by Stock and Industry Performance

INO TV is at it again.

I've mentioned INO TV FREE were you can Click on THIS LINK and pick four free seminars to watch, typically about 90 mins. each and many with a PDF workbook. Those four seminars could be worth $100.

So I think it is an amazing deal to have complete, on demand access to every seminar in their library. Every title you can ever want, right there at your fingertips 24 hours a day for only $99 a year and they're always adding more. Like I said, the four free seminars are well worth the $99. So why don't you check out the free seminars, pick out something you are interested in and see if it makes sense to you. You'll get 500 hours with over 150 experts for the price of a couple of decent TA books.

I've got an account, trust me, there's some great stuff in there, but see for yourself.

And when you are ready, click this Link and get unlimited access for a year for only $99 bucks.

Knowledge is power and the more you have, the better edge you'll have in this market.

Speaking of free, here's Adam's latest video analysis of the DOW

Technical Analysis Still Works!

The verdict is in-TA still works and it is proven with one of the oldest and most trusted top patterns ever-the Head and Shoulders. If you read this site, you know I'm no Jonny-come-lately to calling this rally a bear market rally. However, because my crystal ball is broken and I didnt call the exact date, I got a few emails saying TA doesn't work anymore. Patience! The market is not on my schedule-it does what it wants, but all of the indications suggested today would come.

You can see a small head and shoulders top that consummated today-you can see the downside target I have-that's initial. I have every reason to believe we will set new lows for the year before October. If you are into Candlestick charting-note where the stars/dojis appear.



Here's the bigger picture-a huge inverse head and shoulders bottom? This had the Bulls running wild with enthusiasm, but we've never left the down primary trend so every rally falls under suspicion and this one was no different. 3C has been warning about this for months. What is significant about today is the notion of a bullflag pullback was eviscerated today with a trend of lower highs/lower lows. And breadth? Out of 100 NASDAQ stocks only 5 closed up today! Impressive! When $80 gets taken out here, watchout below. I'll bet there are hundreds of thousands of stops piled up right under that level-volume should be huge.



The great thing about TeleChart and StockFinder is your ability to easily write custom indicators, like 3C. This is my MACD Heat Map. When the histogram is above the middle line, you are in long mode. When MACD is Blue and Green, its time to accumulate, yellow you stop buying and hold, when the red turns down, time to start distributing. When red crosses down, you must be out of the position and ready to go short. This is an easy way to help you buy and not chase stocks, to hold them and not sell too early and to know when it's time to start exiting stage left.



Here we are looking at my mid-length 3C indicator that shows a perfect positive divergence at the start of the March rally. It also is showing you a beautiful negative divergence right at the June top. This is one of the few leading indicators out there. Use my links to TeleChart and StockFinder, let them know you heard about them from Trade Guild and I'll set you up with all of them, just email me. They'll even give you free trials.


This is my fastest 3C and it is giving a great negative divergent sell signal right at the June top-the signal is clear as day light.


Here's the same for the QQQQ-beautiful signals. You could have literally caught the exact top and it works on all timeframes from 1-minute to 1 month. Whether you are a day trader or long term investor, this indicator works! I don't mean to tooot my own horn, but I have not seen any indicator that performs with this accuracy. Again-SIGN UP and I'll let you in on the code I used to create them.



OK-the really sticky question-What is the dollar doing. Right now, it is still under a broken bear flag and as such, I don't want to be short any of the stocks that trade inversely to the dollar such as gold and commodities-oil, etc. even though they have been decimated lately, they could take off any day and big time. However, if this dollar index crosses above the $81.50 area, we have to change our entire way of looking at dozens of sectors.



Here's another reason I don't want to trade against commodities-this is a 15 minute chart of GOLD and that is a positive divergence-are we ready to see the bounce of bounces? Note how 3C also called the top on this chart!



Finally, this brings us to my private site Wolf on Wall Street that is based on the trading system I have put 9 years of work into creating. Almost every night I post a half dozen trades that gave signals that day to be bought the next day at makret open. Here is one of tonights candidates-AMZN. I'm not showing you the trading system in this chart, simply AMZN breaking down out of a trading channel and 3C's negative divergence-where? Of course, at the top. How much more evidence can I give you that Technical Analysis works, that 3C works. I truly believe this is one of the most useful indicators I have ever seen-MACD being another. You can try it too.



Don't forget to look at my trading results for the system: (Click on the 1 and 2 to see the performance at the bottom vs. the market for 1 year and 9 years-it'll blow you away if you remember that the system starts with $100)

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Also check out the post of FREE STUFF!

If you want to se the rest of the trades, email me and tell me you want a trial to Wolf on Wall Street and I'll give you at least 2 weeks free access to all of the ideas.

Some Great New Shorts are Posted at Wolf on Wall Street

Email me for two weeks free access.

The Bigger Picture-See It and Win a Month To WOWS!

I've been so busy watching this bearflag that I missed the bigger picture and for someone who always talks about the bigger picture, that's pretty humiliating.

Here it is:



The first person to email me this pattern is getting a month free access to Wolf on Wall Street.

WOLF ON WALL STREET

THERE ARE A LOT OF GREAT IDEAS ABOUT TO MAKE WHAT I THINK, WILL BE SIGNIFICANT MOVES. I'VE THROWN A FEW TRADES YOUR WAY FROM WOWS, BUT YOU NEED TO EMAIL ME AND ASK FOR 2 WEEKS FREE ACCESS TO SEE THE LIST. NOW IS THE TIME TO MAKE MONEY-DON'T MISS THIS OPPORTUNITY I'M GIVNG YOU.

S&P 500 Update July 1st

Here's a video from Adam on the S&P 500-click this link to view

Bear Flag

"No swimming" The bear flag is flying and unless we get a huge move up today, nothing about my analysis has shanged. Here's the charts. This is a time to be setting up those short positions and taking profits on any longs that are starting to roll-over with the market, which is most that I have seen.



The dollar has broken the bearflag and is about t take it on the chin as well, so oil/gold/metals, etc should see some decent gains. Ask for access to Wolf on Wall Street for 2 weeks free to see how we are taking advantage of the weak dollar.