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Thursday, April 03, 2014

Quick Double Digit Gains in a Few Hours

This is a post from our members' site, 

Wolf on Wall Street

Just a quick trade using the right tool for the job when there's a strong signal, but not a lot of profit potential, just making the trade work by using the right tool for the job...

SPY April $190 Put Position Follow Up...
Posted by: Brandt, Thursday April 3rd, 2014

Yesterday we entered SPY April $190 Puts... Trade Idea: SPY PUTS with the understanding that it would be a short duration trade, thus the need for leverage and the reason I used April options when I'd normally go further out.

"I'm going to enter what I think for the moment, will be a short term trade, however the longer term set up I don't think is far behind and I think you'll understand what I mean when I get out the next Broad Market Update I'm working on.

In the meantime, I'm looking for a quick move down in the market, I'm targeting the SPY April $190 PUTS, full position size."... 
Trade Idea: SPY PUTS yesterday.

Here's the P/L and the reason for the closure of the position and what I'm thinking as the next move.

This was the full size position from yesterday's opening of the SPY April $190 puts, 100 contracts at a cost basis of $2.10
 The fill was $2.49, putting the gain at +18.5% which is fine, I wasn't expecting a large move yet.

About those expectations, as you look at the charts try to keep in mind what out perspective was as of yesterday without hindsight of today's charts. This also ties in to my earlier post on the smaller cycle trend.

 SPY 1 min, note what the chart looked like as of the close yesterday, today we see a small 1 min positive divegrence forming, although it's in Leading Negative position, this is like a small intraday bounce, there's no where near enough objective evidence for mew to trade this long, even though I think the probabilities are for an intraday bounce...once again the difference between probabilities and a high probability/low risk trade as well as dealing with emotional issues, in this case GREED or fear of missing a move.

 Looking at the exact same 1 min chart a bit closer, you can see yesterday's 1 min negative, although there were many more charts than just a 1 min and today you see a move in price JUST BELOW yesterday's afternoon intraday lows (typical shakeout of short term traders) and a positive divegrence intraday today at those lows.

This is the same chart looking at the SPY 1 min ion an intraday basis, my gaol with options is to get out BEFORE there's any slow down in momentum. We "should" see a small rounding/reversal process even intraday, but by the time that comes, the probabilities are high that the loss of downside momentum and time decay start eating away at the gains, thus I want to be out before that happens and if I have the chance, I can always re-enter the position at better levels in to some price strength/3C weakness.


I said that I expected this to be a short duration trade, the reason why is yesterday we were making our first leading negative 3C low as you can see the first lower 3C low, thus we don't have a large or mature leading negative divegrence. Today we have added to that leading negative low with a second one so the next SPY PUT position (if it sets up), will likely be a longer expiration position, likely May depending on how deep the signal is and what the rest of the market, VIX futures, HYG, etc look like.

Other indications that would have given me more objective evidence to take the gains on what was expected to be a short duration trade would include VXX which usually trades opposite the market and its 3C signal intraday.
 VXX's intraday 1 min was going negative so that tells me it's likely to move down and the market up, thus I want to plan my trade and trade my plan and take the gains before that happens.

If you're not using 3C, there are a lot of other ways from MACD, Stochastics, RSI, etc, but  the intraday NYSE TICK and a few trendlines is a great indicator for early warning of trend changes intraday.
 Here's the channel of the 1 min NYSE TICK data which everyone should have, I don't want to wait until it's trending up, but note the small area where a lower low isn't made while we are still in the downtrend channel... that's early warning.

Or conventional indicators like a 50 bar moving average wghich I prefer on a 5 min chart as that's what a lot of day traders use, but that's too long for this kind of trade so a 50 bar on a 1 min chart does the job...
 I want to get out just as there's evidence of a turn in the m.a.

Or even better... Everyone wants to use the hottest new indicator or Holy Grail, but you can increase the accuracy and lead time on signals by using that boring old standby, ROC (Rate of Change) and apply it to some of your favorite conventional indicators.
 ROC of the 50-bar 1 min ma shows a divegrence and that's early warning that the trend is changing or at least the character or the trend.

Or... For Worden users since you can't apply ROC directly to price, apply it to a 1 bar moving average of price which is the same as price and make the m.a. invisible, apply RPOC to that and you are using the ROC of price.
Again a divergence showing the character of the trend is changing and changes in character lead to changes in trends...

I hope some of you made a nice little double digit return for barely any market exposure.

Brandt Uses Worden's TeleChart and StockFinder 5 Exclusively

Friday, March 14, 2014

Daily Wrap and Options Tracking Portfolio Performance

From our member's site...

Wolf on Wall Street...

Daily Wrap...

Despite the main event this weekend, the referendum in Crimea, the US markets seemed fairly well pinned on an op-ex Friday and managed to stay in the last day's range while European stocks have seen the biggest fall in 9 months and Russian stocks are down -22% since Feb 18 and are in a bear market, the market hates uncertainty, all markets.

Kerry failed today at last ditch diplomacy while a US drone operating in Crimea was the victim of electronic warfare and crash landed right in to Russian hands.

Meanwhile, Russia is taking the referendum seriously which is and has been a done deal as they send in or pour in more and more forces, like this picture from today... one of many
Russia is clearly ready to enforce the referendum results, but in my view the prize is Eastern Ukraine as they made threats today based on what they thought was a pro-Moscow protestor being killed, which they used as a podium for pre-emptive action when it was actually an anti-Moscow protestor, it really doesn't matter, they are just waiting for the reason to invade the East , they don't need all of this equipment to hold Crimea when Crimean rebel forces are doing it on their own.

Where's the US and Europe? Making silly threats about costs that mean nothing to Putin, anything less than an aircraft carrier battle group and amphibious assault ships gathering in the region, Putin is ignoring everything as he can, he caught the US and EU off balance and moved quickly.

In any case, this is the weekend wild card event and I don't expect much resistance from anyone against Russia.

The US markets held up well considering the weekend events, they sold off in to the afternoon following the VIX, but strangely the VIX has a strong 5 min negative suggesting it moves down and the market up, not up enough for me to take long positions beyond some very small , speculative ones and that has nothing to do with Russia.

We also found out after last month's TIC data in which China sold the second largest amount of US treasuries ever, this week we saw foreigners selling the largest amount in the F_E_D's history, $104.5 billion on the week, just who is sanctioning who?

This may be a reason for the F_E_D to halt or slow down their exit from QE, which may be why the market is holding up better than other markets or than you'd expect.

As for other indications, Yields are intermediate disconnected negatively but perfectly in line with the SPX today, the VIX futures were leading the market by the nose...

VXX intraday vs inverted SPX...

And the VXX saw some late day distribution as did the 5 min VIX futures, you'd expect the opposite going in to the weekend.

HYG (High Yield Credit) , that market manipulating lever is still on deck and in position to ramp the market even though it has seen some deterioration over the week.
HYG 10 min positive and what looks like a head fake move that has already gone through the reversal process suggesting that the market makes a move to the upside very soon, say early next week/Monday (you know I hate dates).

It may work out if Crimea is annexed peacefully as I think the market has already discounted the fact that it's not up for grabs, it's Russia's already and the US obviously has no assets other than 1 guided missile destroyer in the area. However, if the Eastern border is threatened as there's a huge Russian build up, ALL BETS ARE OFF.

AUD/JPY VS ES  today, there was a little more Es weakness in to the close, likely last minute profit taking on the Russian situation over the weekend.

AUD has found some support as long as it is leading and the Yen ...some distribution.
 Yen intraday distribution in to the closing hours and

the larger 5 min distribution.

It seems everything is in place for the market to bounce, it may do that on relief that Crimea didn't start world war 3 no matter how bad the outcome.

However as I mentioned in positions and positioning, other than taking time sensitive and fairly high profitable positions off the table for a potential bounce, I'm not ready to take much long risk at all, in fact I added no hedges/longs to the trading portfolio, just took gains in UVXY today.

We can't forget where we are...
 SPY 60 min off the last accumulation and now distribution cycle...

 DOW 1929 TOP...


As for the P/L on positions closed today...

You can see why I wanted to protect the gains in PCLN which expires next week with over +128%

NFLX was about protecting gains at +25.5%

XLF at a nearly +46% gain

UVXY long equity at a nearly 13% gain

 March QQQ Puts expiring next week which were down about 90% at one point, I didn't think I'd get much better so I took the  31% loss

Overall or Options Tracking Portfolio (just tracking all ideas, not even run like a real portfolio as I'd never have so many positions diluting performance has come in with a 22.63% weekly gain ranking #7 of 720 competing portfolios, monthly at +11.89% and #30 of 1022 competing portfolios and over the lifetime at 289% and #39 of 1864 competing portfolios.

In any case I'm going to take a little day trip this weekend, the first in quite a LONG time, but I'll be monitoring events in Crimea Sunday and will have the Week ahead, but I expect we likely see a bounce and that should (as we have been looking for) give us a clear pivot signal to the downside via VXX and the signals there going positive short term on a pullback.

Have a great weekend!

Brandt Uses Worden's TeleChart and StockFinder 5 Exclusively

Thursday, March 13, 2014

One Step... Five Steps AHEAD of the MARKET... Just Know Their Secret

Posted at our member's site,

Wolf on Wall Street

just this morning...

A.M. Update
Posted by: Brandt Thursday a.m. March 13, 2014

Good morning...

As I said, we're right on schedule.

 The SPY reversal process and HREAD FAKE MOVE, always RIGHT before a reversal...
 (This was [premarket before the open, the bid/ask hash marks are light blue on the right side of the chart).

This is the head fake down yesterday in AUD/JPY and back up as you'll see we knew about a full 24 hours in advance.

And ES is perfectly in line , exactly with our expectations.

However, it is interesting that even some of the smarter websites that cover the market would explain overnight futures and this morning's gap up after yesterday morning's gap down like this...

"It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter. Which is precisely what the "bad news is good news" algos needs and why futures levitated overnight: only this time instead of latching on to the USDJPY correlation pair, it was the AUDJPY which surged after Australia - that Chinese economic derivative - posted its third best monthly full-time jobs surge in history!"

But how can that be true if we already knew these things were true in advance? Just from yesterday, forget about the bigger picture for this week...

Risk Off? 9:32 a.m. Wednesday

"China seems to be the real concern as evidenced by the AUD/JPY, but is this truly risk off and divergences run over? With HYG still positive... 1 min AUD/JPY (is positive/accumulation), but more importantly...The China sensitive carry trade (AUD/JPY) looks like there's a 5 min positive divegrence..."

So we already knew that the pair leading Index futures overnight was being accumulated yesterday morning well before this post at 9:32 a.m. as a 5 min divergence was nearly 16 hours old at that point.


I'm Guessing Bounce... 9:51 a.m. Wednesday

"AUD looks like it has a substantial positive divegrence which would send the pair higher and the Index futures/market with it, could this morning's move be a nice head fake? I'd say there's a 70% chance that it is, we need to see accumulation in the averages over the next hour or two to confirm.... And the other half of the pair, the Yen or JPY,substantial negative 5 min chart, confirming what we see on the AUD as well as the Carry Trade pairs and ES 5 min.

This might be a decent time to take some "QUCIK" short gains, I mean short term trades that were intentionally set up that way, not core short positions."

This was posted at 9:51 a.m. yesterday. What we see this morning in the market, we already expected a full 24 hours in advance and as such moved to take advantage of what I called a "Head fake" downside move yesterday with actions such as... 

Taking Gains in IWM $120 Puts and BIDU April $185 Puts at 10:45 a.m. Wednesday

In which we took +44% and 85% gains off the table in puts and not only that, increased our long hedge...

IWM / QQQ Hedge Add to at 1:44 p.m. yesterday which is at a beautiful gain this morning doing what it was meant to do.

Everything we had known since Friday was coming together yesterday on a head fake move lower even though we expected it to move higher and took all of the actions in preparation for that eventuality that we expected this week, as of 1:28 p.m. yesterday everything we knew was laid out in...

Full Update from yesterday afternoon

From the positive divergences in the averages to the HYG positive divegrence to be used as a lever of upside market manipulation to the AUD/JPY accumulation on the move lower and the individual $AUD accumulation and Yen distribution which has moved overnight as we expected, to the short term signals in VIX futures confirming and GLUING all of this together, but as I said at the start of the post...

"Nothing in this analysis contradicts what we expected for this week as of the close Friday afternoon"

Even our Leading Indicators... post confirmed everything we were looking for ...

"As far as what we expect for this week, what we expect to see and what comes next, Leading indicators are spot on."

Again the point is, how can the simple fundamental truth of the market through overnight economic events (unless they are known and acted on in advance) explain something that we already knew was coming not just 24 hours in advance, but since last Friday afternoon, the AUD/JPY was something we knew 24 hours in advance as it was hit hard yesterday, but we knew before this time yesterday morning it would not only come back, but lead the market.

This is what market cycles are all about, it's not just the stages, it's the deliberate, set up cycle that Wall St. sets up and sees through, like I often say, "Very little in the market is random", how else could we know day , days or nearly a week in advance based on accumulation and distribution of various assets?

So even some of the smartest guys are still missing that one essential truth, just how manipulated this market really is, it's going where Wall Street set it up to go and that started Friday afternoon.

Brandt Uses Worden's TeleChart and StockFinder 5 Exclusively

Tuesday, March 11, 2014

BIDU 70% 3-day gain

From our member's site...

Wolf on Wall Street

Click the link above for more information

BIDU Follow Up...
posted by: Brandt Tuesday, March 11th,  2014

I just had to take the gain or at least a portion of it, which I took half off the table. This was a VERY small move and it is nothing like what BIDU should bring as both a put position (which half is still open) and as a core short position which is open for me as well.

BIDU April $185 puts were opened last Thursday as a trade idea which included BIDU as an equity short, here's the link, it was only because I have a full position in BIDU (and I don't want to violate maximum size risk management rules) that I chose a put instead...

From Thursday's Trade Idea...

"If I could add to my equity short in BIDU I would, but I have a rule about max position sizes, instead I'm going with about a 1/2 size BIDU April $185 Put which is discounted by about a third today.

I'm leaving a little room on the position because it's just above that resistance level, if it adds a bit more to clear it cleanly tomorrow, I'll add the rest of the full position."

This is why I had to take something off the table considering this trade is only 3.5 days old and I think I can get better positioning on the add to or replacement of the contracts closed today...


That's a +70% gain for a very short period and given the divergences in the Q's and IWM (no matter how insignificant) even BIDU holding a consolidation may result in time decay eating away at the gain. This way I have the best of both worlds, I've locked in some of the gains (hedged the rest) and still have a position in case the divergences get run over, otherwise I can likely add to BIDU on a small bounce as long as I get in place at the right time while the bounce is still moving up and the 3C divergences are screaming short term negative.

As for the charts... again nothing that is impressive, but it is enough to get the job we need the market to do, done.
 This is the 1 min intraday small positive in BIDU, I can't think of a better place to take gains than in to a downtrend.

There were some slight volume anomalies as well that would reinforce a very short term bottom, actually that's not a good visual, say a short term bounce area which is perfectly normal in any downtrend.

 Here you can see EXACTLY where we entered BIDU on Thursday the 6th at a -30% discount. There was a little better entry on the gap up Friday the 7th which was useful as an add to area (leaving a little room in risk management for an add-to or phased entry, not typical Dollar Cost Averaging which I despise), you may recall we had immediate market wide distribution of Friday's a.m. gap.

 On the 2 min chart there's some migration of the divergence as you can see Thursday/Friday's distribution event which made a great entry, these are difficult to enter emotionally as BIDU is at recent highs, but 3C's distribution signal is telling us that's a low risk entry at the best price.  

 Again distribution late last week on the 3 min chart, however we have more migration of the positive to the 3 min chart, this is about as far as we go which is in line with the market averages.

As far as BIDU's larger cycle, you can see stage 1 accumulation with a leading 3C divergence at the Cup/Handle formation (yellow arrows), despite the C&H formation, the main point is the actual reversal process for a stage 1 base, the size of the base and accumulation, stage 2 mark up and stage 3 distribution which is incredibly heavy as it leads negative to a new low on the chart which is 60 mins. So BIDU is still a VERY strong core position, it is on the list for entries for new or add to positions and you know what we are looking for, when we get there I can virtually guarantee BIDU will be showing short term distribution along with intermediate and long term already in place.

This is a great example of the reversal process on a fractal timeframe, we have been watching the same intraday, but here we have it on a 60 min chart so the concept is the same no matter the timeframe, which is great to be able to apply to your own personal trading.

Brandt Uses Worden's TeleChart and StockFinder 5 Exclusively

Friday, February 14, 2014

3C Calls The Market's Head Fake Move & Rally Days in Advance

This post shows you how 3C called this rally in the market right down to exactly what it would look like, how it would occur and did it more than a week in advance. A Look at the QQQ through 3C from...

Wolf on Wall Street
Click the link above to learn more about Wolf on Wall Street member's program

Instead of putting up 50 charts, I'm going to use the QQQ as an example.

First understand that with a head fake move, it's truly what is sounds like, it's a move to fool people and it wasn't a week and a half ago that the motto was "Short the rip" or Sell the Rip", replacing, "Buy the dip", investors got too bearish too quick. 

January 24th  we had quite a few posts that made it seem reasonable that the following week (starting with Monday Jan 27th) we'd see a range start early in the week.

"That's the gist of it, unless there's a fundamental surprise, I don't see any "V" shaped bounce, the most likely thing would be lateral trade early next week "Jan 24th...

That lateral range looked like this...

The market (most of it) traded laterally (sideways) for the entire week.

Our Friday afternoon post on Jan 31st, "Come Monday" which was the last day in the range made a prediction for the following Monday based on 3C's closing and mass psychology or market behavior...

"Ultimately though it came down to the 3C concept of "3C signals picking up where they left off on the next trading day" whether that be the very next day or over a 3-day weekend. 

The other concept that has very high probabilities is that of a head fake move before a reversal  or in this case, before a breakout from the week's lateral range which is normally at 80% of the time. The longer the defined range is,  the more probable a head fake move is to occur and we had a week long defined range.

The Bellwether stocks were in agreement, which makes long entries in them very enticing on a head fake move, that's actually the best entry we can get as far as price and profit , risk and timing since a head fake move occurs just before a move.

Since the major concept and most probable concept that will likely define the start of trade next week and the move that comes after is almost solely the head fake move, I think it is of utmost importance that you understand what this move is, why it occurs, what the signs of it are, what the effects of it are... "

That move, the next Monday, looked like this...
To the left is the defined range of the week before, the red arrow is Monday, the head fake move we called for. The reason it is a head fake move is because it did NOT continue lower, it was enough to hit stops and draw in new shorts, but after that they were caught in a bear trap as we made a "W" base the next couple of days.

 I described what the following Head Fake move would look like several times... See if this sounds familiar and note the dates, both BEFORE ANY UPSIDE MOVE.

Market Update January 31st.
" And of course the 60 min charts leading positive for Index futures suggests we see a strong bounce and there's no other reason to set up a bounce unless it's going to be strong, it is there for a specific purpose and to fulfill that purpose it needs to be strong, convincing, it needs to get dumb money bullish and buying. Should things go the way we expect, I'd expect the following week's insider selling to be even higher."

Tuesday February 4th
" When I said we expected a head fake move in my Friday post, "Come Monday", it was a head fake move to the downside, they need to be real, they need to be convincing, just as a bounce to the upside, I wouldn't expect a 1 or 2% move, I'd expect something that will fill my inbox with emails asking, "Are you sure the market is still bearish Brandt, this looks awfully bullish"."

I think you know what I expect next, but to give you some idea of how we closed, take a look at the QQQ (NASDAQ 100)...
 This is the 1 min chart from Feb. 12th (Wednesday, note how it ended on a negative divegrence and the next morning (Thursday) we gapped down hard and just after the open a positive divegrence formed.

This is the 1 min chart as of today's close leading negative.

This is the 2 min chart for the QQQ, also leading negative, distribution has picked up substantially, more than I'd even expect.

This is the 2 min chart's trend, #1 is the distribution that took us lower and swung sentiment toward the bearish side, #2 is the range area described above and #3 is the head fake move down, #4 is the base with accumulation confirming the head fake move and if you read the, "Understanding the Head Fake Move" articles on the members' site or even my description,  this move is very impressive, but you understand why it's there and why there's no accumulation or even an in line 3C signal on the move up.

 QQQ 3 min saw sharp distribution today.

This is the trend of the 3 min chart, the numbers correspond to the ones described above, again no confirmation of the move up and no accumulation, this was described before the move even started, that there would be no accumulation. This is a hollow move with no underlying fund support, just a short squeeze as a result of a bear trap head fake move.

 The 5 min chart...

The trend of the 5 min chart, note how consistent all of these timeframes are.

QQQ 15 min showing the initial negative divegrence taking the Q's down by -6% from top to bottom. 


The up move or what we were identifying before hand as the expected sub-intermediate trend (which this is) was represented in the Q's on the 10 min chart, as I showed early this morning in the SPY, that timeframe is falling apart as it has here.

Initially I had thought the sub-intermediate timeframe would hold its positive divegrence right through a downside reversal and a break below the SPX's 200 day moving average, that's obviously not going to happen as the long timeframes are quickly falling apart. Here are the SPY and IWM versions which had been either leading positive or perfectly in line with the trend.
 SPY 30 min negative divegrence from a formerly leading positive just days ago.

IWM 30 min negative divegrence, also not holding up and falling apart quickly.

And remember what came after the Sub-Intermediate Trend, the one we have just been going through...THE PRIMARY TREND SHOULD REASSERT ITSELF... 

 This is a 4 hour version of the QQQ's with an enormous leading negative divegrence and even worse...

I compared this QQQ daily chart to the 2000 Dot.Com Bubble which I'll repost at the bottom.
QQQ daily leading negative as sharp as it gets, this is on the same scale as the Dow 1929 chart I have posted.

QQQ 1999-20000 Dot.Com Bubble.
1999-2000 QQQ Dot.Com negative divergence. Which looks worse to you?

Now you know why I felt it prudent to spend some time cleaning up Core / Trend positions and establishing new ones.

As for the P/L on closed positions today...


I felt like I needed to just clean up core positions and take the gains here and open up a new keg of dry powder for new positions that need to be entered quickly and at the right spot. The P/L with a fill of $93.69 came to a gain of +16.7%


These I could have closed earlier for much smaller loss, but I was busy catching up with the market, the P/L came to -23.8%

UNG I took partial profits in...

 UNG's P/L came to a gain of +20%


I didn't like the looks of GDX and needed to free up resources for new positions so I figured take the small loss and put the resources to work in a better looking asset.
NUGT's P/L came out to -4.6% 

I'm sure I'll have more for you after I go through the nitty gritty, but I'm liking the idea of filling out core / Trending positions ASAP.

Brandt Uses Worden's TeleChart and StockFinder 5 Exclusively

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