Gold bearish, Facebook IPO was less that stellar for such a high profile IPO. Market in general consolidation at the moment with no large trends in sight.

Speculating and taking part in the markets can be an exciting activity. Making money doing it is the greatest feeling in the world. Losing money takes you to emotional lows. Over time this can take its toll. The stress in itself can be a distraction to making profitable decisions.

There is one thing that I know master traders do to avoid the emotional trap of trading. THEY NO LONGER TRADE.

You might be thinking I’m starting to talk in riddles. I assure you, I’m not. The master trader let’s go of what he “thinks” will happen as well as what “wants” to happen. Execution is taken over by a SYSTEM. Often this system is composed of RULES that increase the mathematical probability of a successful outcome- profit.

The beauty of a developing a systematic way of trading is YOU CAN ADJUST your system. Many traders make blind desicions about executing a trade. Maybe they heard some news, or a friend just bought a boat load of Apple stock, so you follow along. You might even know a great trader and follow his trades. While this might be profitable for some, when the market starts to turn against you, and you start losing money, how do you adjust?

A master trader has a rule that detects a market turn. For example, I start to notice that I have had a string of 10 losing trades in a row, and all the breakouts have failed miserably. I also notice that during those trades the indexes are showing that the 50ema is below the 200ema a bearish technical indication. So from now on, anytime the indexes moving averages are showing the 50 below the 200, I will not buy breakouts. I will sell short stocks.

It doesn’t matter if you’re a trend trader, a day trader, or a swing trader. YOU NEED A SYSTEM. Let the system take over and based of performance make adjustments and test these theories over a series of simulated trades. Back testing your rules for performance is the reality of the outcome. I recommend manually back testing by hand. You will be much more involved in the simulated trade and the mechanics of the entry and exit. Do this with several stocks and soon you’ll realize the RULES do the trading for you.   While computer backtesting is a powerful way to test strategies, this is a whole different specialty that requires rigorous study.

Some might argue that there are “discretionary” traders that don’t use computer black boxes. However, their trading is still SYSTEMATIC. They trade the same on every single trade. They risk is same for every single trade. Even for unusual circumstances, they have a system or technique to approach a trade.

Gold had a recent correction, that have caused most traders to speculate that the Gold may continue to go lower. The opposing view says it may go higher as geopolitical concerns in ALL MAJOR CURRENCIES cause Gold to be a safe haven in the eyes of investors.

Gold is breaking out to new highs after a period of consolidation over the end of September through mid October. Moving Averages are turning bullish with higher price action. Although this is  a technical breakout, it is has a lower probability of success. Breakouts into NEW HIGHS are the most robust and successful.

Taking this trade with this  probability can still be sucessful, risk and position size will be minimal as this breakout could follow through into a potential trend.

The volatility in the market has expanded in the last 2 months. Much new information has been revealed and the market is now digesting that information forming patterns that could unfold into a major trend whether it be up or down.

Below is some crucial events and fundamental information I have taken into account:

The Indexes have tested lows to rally in the past few weeks. As long as the moving averages are in a bullish state, we can expect prices to go higher and continue to be in a bullish mode. However, ALL TIME HIGHS are quite a distance. Considering the financial state of of the US Economy, reaching those bullish highs may be a rough ride.

Steve Jobs Dies- This is more serious than the markets perceive. The stock price remained stable despite his death. If history is an indication of future results……AAPL will crumble and have a slow death. Jobs was fired from Apple in the past, and the results were disastrous. Upon Jobs return to Apple, he was able to revive the company. Steve Jobs permanent exit will hurt Apple. —-Mr Jobs we will miss you. Thanks for everything.

Apple’s chart is stable for now. No heavy selling on the volume side. However, the price action is moving along the 200 EMA. The stock is starting to show signs of saturation as robust breakouts are harder to find. I would be very cautious if Apple stock breaks below the 200 day EMA. As soon as the averages go bearish, I will be looking for shorting opportunities at critical price levels. – Good luck.

Netflix (NFLX)   just got destroyed in the last few months, coming from an all time high of $300 a share down to $90. The companies restructuring of services and fees have caused users to cancel subscription. The business model is great, however increasing competition has brought down future growth prospects in the financial state of the company. Streaming content is the future, and I will be searching for companies that are an alternate choice.

Greek Bailout Chaos- Greece says they will get bailed out. Then the morning news says, that it may default and leave the EU. From the looks of things, nobody know what to do.  men in power lack the conviction to follow through on any solution. The markets will also be responding in uncertainty. I will just be watching the crucial price levels and trade from there.

I had a request, to review this chart for analysis. This deviates from typical stocks that I trade—stocks that have growth in it’s financials. Fundamentally, the stock is not doing too well. With everyone getting their music via itunes, internet radio, youtube, the market share of Satellite radio is dwindling fast. Why pay for satellite radio when there are so many other options out there? I view this stock as a high risk play on the long side.

Technically speaking, the price action is very bullish with all moving average pointing upward. It’s been going up since 2009. This is a great stock for those swing trading. We have reached two critical support levels. The upward trend is holding well (white) and the horizontal support level. I would wait for bullish price patterns on the intraday charts before going long at this point, with a target of $2.40.  Should the stock break below $2.00 I would go short.

Too many factors are affecting the markets recently causing choppy action and a sideways price action across all the indexes. Some of these factors include:

-Uncertainty in Greece. Debt issues coming to the surface again. Need more bailout. I’m watching the Eurodollar

-USA Debt ceiling is maxed, who will give us credit?

-The Middle East issues are causing havoc. Lybia, Syria, and Egypt

-Spain riots getting out of control due to government cutbacks

-Presidential Elections are coming up and economic policy is subject to change causing institutional investing to take a halt. Election season historically has a sideways market.

We can see in the Nasdaq chart below we are approaching the 2600 support level. What has me worried is how the price action has been gapping to the downside in an accelerated manner is we breach the support level, further downside and a major correction could be a possibility. The last few months breakouts have been failing after an 8%-10% run. The weakness is evident. Keep an eye on the 2600 level as well as how individual stocks behave when we reach that critical level. This will help you decide if we will bounce or not. Price and Volume are your best indicators. Good luck.

Research in Motion (RIMM) maker of the infamous Blackberry smartphones was crucified this week as investors and traders publicly crucified the stock price with no mercy. The stock dropped a whopping 21% in one day’s of trading. Since Mar 24th 2011, the stock has lost 57% of it’s value. I would say this is the first casualty of the smartphone war which Apple has started 3 years ago. Ever since the iphone was first released in 2007, Blackberry seemed to blow off that Apple would pose a threat to Blackberries market share. A war was started in the smartphone industry and Blackberry seemed to have a little too much confidence in loyalty of their customers. By the time Blackberry released their first touch interface phone, it was too late.

I would not start shorting RIMM at the point, as it has reached a selling climax. The selling climax is signaled by a 600% increase in volume from the average. The question now, is whether RIMM is a viable buyout opportunity, this I could not tell you. Buyouts are a whole different game in trading.

When trading one of the things that make for a good trader is knowing when to sell. Huge volume ususally signals a change in the direction of the trend. We can see that there was plenty of warning in SLV when there was a volume spike, back on 4/25.  There was a continuing churning action in the following days – when there is no significant upside to the price action as volume increases drastically. When this happens it’s usually a good time to get out while you can, or start to tighten stops.


The long term outlook for silver is still bullish. The moving average 50 ema is above the 200 ema, and I would wait patiently for the next breakout as it may continue to an even larger trend. Fundamentally speaking the Fed hasn’t raised interest rates and dollar value is continuing to sink while the Fed prints more money.

The entry for this trade is posted here.

The chart above is a daily bar chart of SPY etf. We can see a breakdown of the long term uptrend trend line, 10 ema has swinged to the down side and crossed the 50 ema, and price action has also breached the 50ema, all bearish indications that the intermediate uptrend has ended. A high volume spike has defined a critical price level that has shown support at the $125 level.


Below is a 1 minute intraday chart spanning 2 weeks, the gap area can define a possible critical price area that should define  a resistance area around the $131/132. Volume on the intraday shows significant selling, and would not have a bullish sentiment until we are clearly trading above the gap area for a few day. These are tradeable price levels whether you are going long or short. It the price levels that give minimum risk, as stops can be set tighter by understanding where the price levels are. In the next few weeks I believe we might go range bound between $125 and $132.

Precious metals have been hot over the last few months. It seems that Gold has taken a back seat to silver. Silver is now leading the sector into new high territory. Today Silver touched the resistance point, and as we approached the close, it broke into new high territory. A robust trend could develop at this point. The comex inventories are showing low supply and high demand which could be the catalyst to higher prices in silver. The easy money policy that the Fed has in place, has reduced the value of the dollar. Institutions may be hedging against the weaker dollar at the same time.