I don't think we can underestimate the news from the Fed on Wednesday. Chairman Bernanke has not been in the business of faking out investors, unless they are very scared. They ought to be scared. Even though we are fed a daily dose of everything is getting better by the Ministry of Truth (Main Stream Media) to keep everyone in the game, the Fed knows the real truth, and the market simply cannot absorb higher interest rates, and the market cannot maintain its rise without the banks leveraging in Bernanke bucks. It is as simple as that.
So that leaves us with no taper, ever, until energy and food prices absolutely require the end to the Fed. Until then we will get no taper announcements, with constant noise about potential tapers at the next meeting to keep the speculators from getting too far ahead.
For us trading will get fun again. The days of the numbingly boring overnight ramp and all day flat line, or overnight smackdown in metals and miners are over. Swing trading will be back in vogue.
A note on the Wednesday ramp and Friday takedown. I believe it was due to the market makers and large speculators being on the wrong side of the Fed two days before OPEX closing, and GDX rebalancing. We are going to see what early next week brings to get a better sense
My daily buy signals on GLD, UGL, SLV, and AGQ are all still intact. The miners signal flipped short as did FAS and SPY, and I need to see if the rebalancing is the reason, but I sold and shorted anyway. I had a great week as I went long with leverage going into the Fed, and I scaled out of my leverage on Wednesday and Thursday, and closed my core miners on Friday. There is a tendency for traders to hold after big gains in the hope of another 2011 ramp, especially those holding 2-3X positions. The days of the robots and overnight trading makes it difficult to be a buy and holder. You can still profitably participate in any trend scaling in and out
I humbly offer what I do.
When I get a buy signal I buy 1/2 of the total amount I will buy, and will buy on on every down day and sell on every up day until I am fully positioned. The amount I buy and sell is dependent on the percentage of the daily move. For leveraged ETF's I am buying and selling 10% for every 1%, for non leverage I am 25% for every 1%. I close my position completely when my sell signal hits. I will hold 6-10 positions max, with XIV being my largest when fully invested. Other than XIV, no other position is greater than 15% of my portfolio. I will buy long or short positions.
My signals are based on a proprietary signal looking at extreme moves and reversals in momentum on the daily, and I am usually in trades using this method 7-30 trading days. I am consistently profitable as I keep working my basis down, and harvesting profits.
I like this approach better than moving stops or all in or all out methods. I have found that just moving stops up keeps traders from re-entering if it was just a stop run, and missing a bigger move higher and I hate the big overnight reversal and gap downs. I rather be buying into those gap downs with money I pocketed the day before then talking to myself all day about why I did not sell.
As most of you know I offer a buy and sell signal service, and now I am upgrading the service and am in the process of automating this in a bot, if anyone is interested in learning more email meat email@example.com
I also am automating my ES mini and Crude mini futures signals and if there is enough interest in receiving an automated buy and sell price signal via text let me know. It is based on a hourly signal so you are not trading like a bandit. The signal is currently producing pretty extraordinary net results, and I am happy to share results on an individual basis for those truly interested. I will limit how many people I will offer this signal to.
Enjoy the week.