Guess What I Found When I Woke Up Today?

Deer poop! I guess the Santa Claus Rally is on.

WARNING: Trading futures involves risk. Watch where you step.

Santa Claus Rally?

With 4 trading days left in December we're popping out of a sideways channel that's been squeezing since November 12th. There is all kinds of sentiment out there about equities and none of it matters. Some say the 'rally is over' while others say we're headed for the October 2007 all time highs. Either way we will wait, watch and execute. And we'll profit everyday.

From Our Home To Yours, Merry Christmas!

Having said "Merry Christmas" ( and I meant it sincerely) I must say that it's one of the saddest -- no THE saddest time of year for me.

Why?

Because the delusion and deception of our culture is at it's highest level during the Christmas season.

Historically December 25th doesn't have anything to do with Jesus Christ's birth. It's more likely he was born in spring. Be that as it may the holiday has been hijacked. It's big business.

Decemebr 25th is just another example of government manipulation of the masses. It was just a pagan holiday to entertain the serfs.

The Babylonians celebrated their "Victory of the Sun God" Festival on Dec 25th.

Saturnalia (the Festival of Saturn) was celebrated from Dec 17th - 23rd in the Roman Empire. The Roman Emperor, Aurelian, blended Satunalia with a number of birth celebrations of savior gods from other religions, into a single holy day: Dec 25th.

The people of the Roman Empire were accustomed to celebrating the birth of A god on that day. So it was easy for the Roman Catholic Church to divert people's attention and call it Jesus' birth.

Christmas is about recovering liberty for mankind and his authority over the creation.

The Creator gave 'first man' that authority. First man gave it away. He lost dominion over the creation. Since Creator is a judicial creator.... and it was man who gave away his liberty... Creator knew it had to be a man who would legally take that liberty and authority back. So Creator created another man (let's call him second man) who did exactly that.

I hope I've helped you understand why I am disappointed watching mankind running around at Christmas, spending furiously, often going into binding debt, when it's a time for man to realize he has true liberty and dominion over all the creation. Mankind, for the most part misses the message and goes on living life as a slave to a thousand different masters.

Gettin' Messy

This 240 Minute chart above gives us a real sense of the tight range we've been in for a month.

If we spread it out a little we can see it's trying to give us a sell signal.

But looking up at the 60 Minute above we see a high peak in the FRO. Marked in blue, it is a potential warning that this market may break to the upside when it does break.

Looking again at the cleaned up 240, we see a sell signal that started to slowly play out today in the morning. It didn't go down very far so I suspect we're going to see a move to the upside.

Friday we have options expiration which has never been a big deal to manage in my five years of trading. But all the 'experts' warn against "increased volatility" and this week is quadruple witching day. Meaning a day when contracts for 1) stock index futures, 2) stock index options, 3) stock options, 4) and singles stock futures all expire.

Expiration is the third Friday, of the third month, of each quarter.

But it doesn't matter to us because we trade what's called the continuous S&P e-mini, index, futures contract. We don't have to move out of the expiring contract and into the next. We just worry about one thing...you guessed it... buying and selling pressure. That's all that matters during each day.

WARNING: Trading futures involves risk. You can lose all of your margin money and more. Do not attempt to trade futures unless you consult your government certified, financial adviser to determine if futures trading is suitable for you.

Oh and check with your spouse too.

Profit No Matter What

Friday Dec 11 was a slow day. I want to illustrate that you can still have gains on a quiet day. Let's look at the 240 Minute chart above. At 9AM we had a sell signal that developed overnight. We knew that the 1105 level would act as resistance going into the open.

Now looking at the 240 Minute at the end of the day we see that it did just what we thought it would. The resistance at 1105 kept a lid on things all day.

On the Daily chart above we see our buy signal holding up for a third day. The blue upward trendline is holding and we're poised for our Santa rally -- if we ever get some volume and Obama doesn't blow the country up we may slice through that 1128 level before year end.

This 4000 tick chart is fully articulated to help you identify each pivot.
Where we had unclear peaks or valley's in the FRO I labeled that area "NO TRADE" because we didn't have clarity. In spite of the day being slow we still had good opportunities to profit no matter what. This one chart alone can last you a month of study time combined with live chart watching and paper trading. It's all about building your sight vocabulary and formation recognition.

Now I suggest you print this chart out and finish the picture by drawing lines on the FRO and candle formations. Test yourself to see how your recognition skills and sight vocabulary are coming along. Don't peak until you're done. Count up the points in each move and multiply that number by $50 per point.

And remember, the best way to use this blog is to start with the February '09 post and work forward.

WARNING: Trading futures involves risk. You can lose all of your capital and more. Do not trade futures with real money until you have mastered paper trading and consulted with your financial adviser to see if trading is suitable for you. Past results are no guarantee of future performance.

Perspective

Please RIGHT click on this link to get some mood music going while you read this.
http://www.youtube.com/watch?v=OnlTrq6wLf0&feature=related

Watch this magnificent predator in action. One of the fundamental behaviors of the bald eagle that makes it the most magnificent predator is it's ability to capitalize on optimum perspective -- looking from a higher vantage point -- seeing better than it's competitors and it's prey.

As traders we all have the same sub-second execution capacity. But not all -- not many have the ability to 'see' the way we are being trained to see.

As you go back and forth through this blog you will develop and enhance your perspective. You'll learn how to leave your mind out of it and just respond to the formations. No analysis. No paralysis. Just like the eagle, you will strike with precision and apprehend what you are after.

So...How's That Megaphone Workin' Out For Ya'?

Remember the 'flat top triangle' rule we saw on Nov 26th? Didn't work out did it? Well it looks like we have another "Rules are for fools" lesson here.
The FRO is signalling "HMH" or that price will exceed the 1112 level soon.
While these formations are somewhat useful, they are not as reliable as the FRO when it comes to risking your capital.

On the 60 minute chart above, we clearly developed a bottom after an attempt to plunge price down Friday afternoon. And I'm sure a lot of traders, aka loser's, lost money when buying mysteriously came in at 1095.50. And that's why I call this "Forensic" trading. This kind of buying causes panic, reaction buying to cover those short positions.

So now we know the difference between "Technical" trading and "Forensic" trading. Technical relies on formations in the candles/bars, support and resistance levels, trendlines and a whole bunch of other analysis tools. Forensic Trading is strictly watching buying and selling pressure which is expressed in the FRO. Buying and selling pressure can't lie.

WARNING: Futures trading involves risk. You can lose all of your money. Consult your government licensed financial adviser to determine if trading is suitable for you.

Friday's Numbers

Starting at 8:30, we had the Non-Farm payroll report. Look at the buy signal at
8:20. It was already set-up to go verticle. Amazing. So was it about the jobs report?

We topped out just above yesterday's high and headed south.

The afternoon gave us some nice back and forth. Plenty of volume and spread.

As you can see, we're back to more normal trading. We've been trapped in squeeze points for weeks. The Thanksgiving day breakdown opened things up for us. Now we're trading in a taller vertical playing field. That's how we make the big money.

WARNING: Trading futures involves alot of risk. You can lose massive amounts of money. Consult with your financial adviser to see if futures trading is suitable for you. This information is for educational and entertainment purposes only.

Dec 3 PT 2 - Simply Beautiful

Some days you just can't screw this thing up. Here we had a strong "Sell" signal on the 240 Minute chart well before the open. On this chart above we never got any indication that it would end. But it took so long I had to take a nap for a couple of hours before it finished its descent. Relaxing.....

We zoom in a little with the 15,000 tick chart above.

Zoom in a little tighter with the 12,000 tick chart....

And finally on the 8000 tick chart we can see the profits potential on this very easy-to-read day.

How can you trade any other way with any other indicator?

WARNING: Trading futures involves risk. You should not trade futures without a thorough evaluation between you and your government licensed financial adviser. It may not be suitable for you.

Dec 3 PT 1 - We Popped It And Dropped It

Wednesday we broke through a level we've been hitting since November 16th. No we didn't close above it and there's a good chance we might see a correction, but our indicator got us this far. I will post charts later today.

Update: Well we saw the megaphone play out today. It took all day but price finally broke down.

Megaphone

I have never seen a megaphone formation live. It was something I came across it in 2006.
I don't know how long such a formation takes to play out. All I know is they are bearish.

Still Squeezing

Even though today was not a spectacular trading day, there was still some good meat to eat.

I want to point out the typical advance warning the FRO gives you before a pivot takes shape.

On the 3000 tick above we had a 30 minute warning. OK, try sitting quietly for 30 minutes without falling asleep, turning on the TV, picking up a book, going to the bathroom or whatever. Thirty minutes is a lot of time to know what is going to happen next. That's more notice than my bladder gives me!

Next question; Is $500, $5,000, $50,000 or $500,000 in an hour a lot of money to make (in your bathrobe)?

Looking at the 240 Minute above it looks like we are going to breakout to the upside and have our Santa Claus rally. I said that for the worry warts who just have to know. Like I always say, We will know what to do when tomorrow comes.

A different perspective on the 12,000 tick chart above reveals that today was a sideways day. The spring is winding tighter. This sideways price action will give us a nice profitable pop.

And finally the answers to Friday's quiz question. Once again the FRO gave us hours of advance warning that price would go higher in answer #1.

Answer #2 is the classic buy signal at 9:30 am. It's that simple. Advanced warning and the exact execution point.

WARNING: Trading futures is extremely risky. You can lose all of your money doing it. In fact you should never attempt to trade futures without consulting your Federally licensed, government approved, financial consultant to see if trading futures is suitable for you. The information posted on this blog is strictly for entertainment and informational purposes only. Do not attempt this on your own.

Holding Our Breath

I'm going to jump around a little. Are you ready? OK, Here we go.
First a little quiz. Looking at the 5000 tick chart above, How did you know price was going to go higher after the open? CLUE: There are two indications. I'll post the answer Monday.


Looking at the 12,000 T, 10,000 T, 240 Minute and Daily charts we could be in for a significant correction to the downside. No point in worrying about it now. We'll know come Monday and we'll trade accordingly. Besides, a good correction would help alleviate the narrow trading ranges we've been dealing with lately. And a good dose of fear right now would give us some very profitable days with higher volume and volatility.

Rules Are for Fools

Do I need to say anything else?
To be fair sometimes these 'rules' appear to work.
But so does Voo Doo... sometimes.
And I count on the fact that other traders are following rules while I read buying and selling pressure.

Google around for "chart formations" "flat top triangles" " bull pennants" "bear flags" "candlestick reading" and any other technical trading formations. You find a whole religion out there. This is one time when I'm OK with the 'masses' being asleep.
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WARNING: Nothing on this site is telling you that you can make a lot of money trading. I'm telling you you can lose a lot of money trading. Everthing stated on this site is for entertainment purposes only. And as this demonstration above illustrates it's also for humor. Before trading you should consult a government licensed financial adviser to see if trading is suitable for you.

The Case for "Mental" Stops

Most traders (I'm beginning to wonder if I should keep referring to them as traders or losers.)

use stop loss orders to protect them from a move against them when they enter a trade. As you can see above, if you 'protected yourself with a stop above your sell entry, you could have gotten stopped out and taken a small loss -- then missed a great sell-off.

I use a 'mental' stop loss meaning I don't enter it in the executioners platform. I just watch to see if there is some level (in this case) above my entry where price could pop up to. Then if I don't like the trade I can exit manually with a small loss.

But I don't want to be 'spooked' out of a good trade.
Your broker can educate you on the use of market orders, stop loss orders and limit orders.

WARNING: Trading futures involves risk of capital. You can lose all of your money. Before you try this you should consult a government liecensed financial adviser to determine if futures trading is suitable for you.

Zoom - Zoom - Zoom

Things look pretty bad on this Thanksgiving Day.
Almost 30 points off of recent highs in just one day.


But are they really that bad?

Were we due for a little pullback on the Daily chart?

Doesn't look so bad from here on the Weekly chart.

And looking at the Monthly chart, we're still on a push to the upside.

Wow, what a difference "zooming in and out" makes.

This thing could develop into a bigger correction. I don't know. But I do know that on a day-to-day basis, I will know what to do.

Happy Thanksgiving!

Reading The Details PART2

Here we have a close up of each little pivot in price activity.

Today was one of those days that really started it's move at 6PM the night before from the 1089 level. These days can be frustrating in terms of having missed a significant piece of the move-up during the overnight session. The range went from 1089 to the high of 1111 -- 22 points.

But the 9:30 open saw us at 1103 which was only 8 points from the high of 1111.

I took the time to put up an exagerated view of the FRO to illustrate how the indicator expresses changes in buying and selling pressure that dictates future movements.

I suggest that you print these out and memorize these formations. Ask yourself, "What happened?" after each formation.

What happened after the "LML" and "HMH" peaks and valley's?

Remember, you are building up your "sight vocabulary" of formation recognition.

Most -- almost all -- of the traders in the world have no clue how this indicator so precisely forecasts coming moves. And it does so in a way that allows you to pull cash out of the market.

Today was about 8 points up and 8 points down -- 16 points @ $50 per point = $800 per contract. Multiplied times whatever number of contracts you trade.

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WARNING: Trading futures involves risk and you can lose alot of money. The information contained in this entire blog is not intended as financial advice. It is posted at no charge, strictly for information and education and entertainment purposes. Past performance is not a guarantee of future results.