Shaking The Coconut Tree – November 1, 2011

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The consolidation and shakeup scenario described yesterday is panning out perfectly so far. But the 20 DMF comment by Pascal warns of potential serious hazards within 2 days. Therefore my discretionary setup and trading plan below, written before reading Pascal’s comments, will include a time-stop exit at the close tomorrow if the position is not up by 3.80% from entry ( 1 ATR) by then.

Although the robot will stay in cash, I am a discretionary buyer of weakness today around the first support cluster (72.33-71.25) and will not pay more than the 3:1 reward-risk limit entry of 73.33. Ideally, an entry at daily S3 (71.97) is perfect with a 95% statistical probability of containing the low for the day. My discretionary stop will be a decisive break below the quarterly pivot (71.25). Such weakness would really warn of a bull trap and trend reversal. If the uptrend resumes, I expect the 200-day moving average (77.82) to be tested soon and it is my first target.

Notice that the second cluster resistance is now weaker than last month without any November monthly floor level. A bounce back from the strong first support cluster will have more chances to successfully reach the second resistance cluster and the 200 dma.

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GDX is on a very strong support cluster with strength of 28 and the path of least floor resistance is north. But remember that the GDX robot is neutral and the current volatility does not help the already weak reliability of floor levels for this emotional instrument.
Billy

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hi Billy,
What is your advise if the opening price of the IWM may be below 71.00, as it is now ... is it still a buy? Thx.
sorensen

Hi Billy,

Today's thread helps fill the lacuna in my knowledge regarding pivot trading. A terrific help. Thanks.

[QUOTE=sesorensen ;18210]hi Billy,
What is your advise if the opening price of the IWM may be below 71.00, as it is now ... is it still a buy? Thx.
sorensen[/QUOTE]

Sorensen,

I bought TNA at the open. With such a pro-active trading plan, the lower the entry, the better and you forget about the news, it is there to help you buy cheap.

When I enter below my initial stop, I always take the most logical nearby floor level as a tight stop if broken. In this case my initial stop is MPP (70.36). I have now trailed it to YPP (71.84).
Billy

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Billy

Hi Billy,
Wondered exactly if it was still a buy if below your initial stop. But I see the obvious now. And thanks for good trading guidance next time a similar pattern/setup occurs.
sorensen

FYI, I have been stopped out at YPP for a 3.15% gain on TNA.

Honestly, it smells bad out there and I think that Pascal's comments are prescient of bad things to come.
Billy

[QUOTE=Billy;18222]FYI, I have been stopped out at YPP for a 3.15% gain on TNA.

Honestly, it smells bad out there and I think that Pascal's comments are prescient of bad things to come.
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I have noticed the 20DMF intraday is somewhat positive now (0.3% at 13:51). Does this mean a turn to the upside, or (in the context of few days) is it pretty weak and therefore the picture is still bleak?

[QUOTE=senco;18231]I have noticed the 20DMF intraday is somewhat positive now (0.3% at 13:51). Does this mean a turn to the upside, or (in the context of few days) is it pretty weak and therefore the picture is still bleak?[/QUOTE]

Senco,

The reading was about the same yesterday at this time of day and it closed -275%!
All is said and done by the 20DMF in the last 30 minutes of trading.
At this 13:51 level, 20 dmf barely regained 20% of yesterday's outflow.
Billy

[QUOTE=senco;18231]I have noticed the 20DMF intraday is somewhat positive now (0.3% at 13:51). Does this mean a turn to the upside, or (in the context of few days) is it pretty weak and therefore the picture is still bleak?[/QUOTE]

I updated the ETFs and the futures.
Most show that money is moving back in, which is usual in a strong down gap.
But still. There is no panic.
I believe tomorrow could be positive. Energy is especially impressive.


Pascal

Today's turning into a major distribution day, with volume 65% higher than yesterday on NYSE and 45% higher on NASDAQ. The last 30 minutes will decide if it was hidden accumulation or not.
Billy

[QUOTE=Billy;18236]Today's turning into a major distribution day, with volume 65% higher than yesterday on NYSE and 45% higher on NASDAQ. The last 30 minutes will decide if it was hidden accumulation or not.
Billy[/QUOTE]

I think that we had hidden accumulation. One question is: "will we have margin calls tomorrow?"
If yes, waiting for a pull back early tomorrow could be good. I have taken some long positions.


Pascal

Interpreting 'hidden accumulation' - is it mostly because of the DMF of the ETFs, ot is there something I could see on price/volume or other charts? ... I was trying to get some reading from the NH-NL breadth, and it seemed to deteriorate in the afternoon.

[QUOTE=senco;18241]Interpreting 'hidden accumulation' - is it mostly because of the DMF of the ETFs, ot is there something I could see on price/volume or other charts? ... I was trying to get some reading from the NH-NL breadth, and it seemed to deteriorate in the afternoon.[/QUOTE]

Senco,
“Hidden accumulation” behind a distribution day would be detected by a positive intraday 20 DMF at the close (it closed at -40%) and a close above the intraday VWAP (all indices ETFs closed well below). I don’t see better ways to detect weakness buying by large professionals.
Billy