Wait And See - September 20, 2011

[Billy]

Forum Clusters 110920.xlsx

Waiting for the Fed announcement, It logically feels like IWM is trying to find consolidation equilibrium around the weekly pivot (69.97), exactly mid-way between QS3 (68.17) and Yearly pivot (71.84). One of these two floor levels will probably become the first target after the news, depending on an initial positive or negative reaction. Serious follow-through will then be required to break through support or resistance, but floor support is much weaker than floor resistance. The most violent and extended move would be to the downside.

The robot keeps favoring holding and initiating new short positions, but obviously it cannot guess the impact and reaction that will follow the Fed announcement on Wednesday. We know that the ensuing move could be huge in any direction. Therefore, I have a personal preference to avoid leveraged positions until after the news.



The exact same reasoning can be made for GDX about a “ Fed wait and see” consolidation around weekly pivot (63.69). But here the easiest move will be to the upside, just based on multi-pivots. With a neutral stance for new long entries from the robot, there is nothing much to do apart holding existing long positions with disciplined respect for the trailing stop (61.24).
Billy

[nickola.pazderic]

Billy--

Say one bought TZA at different points according to the robot and say one didn't quite understand every missive from you and, as a result, has a cost average on TZA that does not fit any particular robot buy point, how might this person :) set a stop going forward?

Many thanks,

[Billy]

Billy--

Say one bought TZA at different points according to the robot and say one didn't quite understand every missive from you and, as a result, has a cost average on TZA that does not fit any particular robot buy point, how might this person :) set a stop going forward?

Many thanks,

Nickola,
In my humble view, every portion of the total position should be considered as a separate trade with its own stop management. A responsible trader would have a trading and exit plan ready for each portion, BEFORE buying. If one doesn’t do it, one simply doesn’t manage risk properly for his discretionary decision of cost averaging.
Any TZA bought on the initial signal must be protected with the official robot’s trailing stop. For the other entries, it is one’s responsibility to manage risk from the day after the suggested initial stop for secondary entries.
In the current situation, I feel it is wise to keep a stop just above yearly pivot (IWM= 71.84) for all IWM-related short positions, and the official trailing stop at 72.20 fits very well the bill with just enough wiggle room tolerance for a failing overshoot above YPP.
Billy

[nickola.pazderic]

Thanks for that.

[nickola.pazderic]

IWM trades down to 69.18, between DS1 and DS2. Is this significant?



Smoking TZA hopium,

[Billy]

IWM trades down to 69.18, between DS1 and DS2. Is this significant?

Attachment 10484

Smoking TZA hopium,

The day's highs reversed around daily R1, so there is a bearish bias implied in closing below S1. A neutral range day would be confined between R1 and S1.
Billy

[nickola.pazderic]

Your perspective is invaluable to me.