The Weekend Trader – We Win!

They’re only two words … but they’re all that are needed to tell the story.

For despite massive and pervasive theft, corruption, self-interest, finger-pointing, red tape, and regulatory ineptitude at every MF Global turn, we simply wouldn’t back down.  And we won.

For this trader, the MF Global saga – with all of its twists and turns over the past 11 months – is over … and with a more than acceptable ending as by this time on Monday I will have completed the sale of my remaining MF Global claims and passed the risk of the last few pennies to the bond market.  And I hope the buyer profits from the purchase, as – borrowing from an old professional trader adage – it’s always good to leave some for the other guy.

And yes, I said pennies, as for all intents and purposes, bond market prices are screaming that MF Global customers will essentially get all their money back, and I was more than willing to “hit the bid” and give up a few cents to gain immediate access to the capital and grow it faster and farther than it ever would if it simply sat mired in bankruptcy red-tape.  Heck, percentage-wise, it doesn’t even rank among my largest trading losses.

Yes, we won.

Many months ago, I mentioned in these pages that it would be incredibly wrong to underestimate the conviction of those who were harmed, whether traders, investors, hedgers or farmers.  And for traders … if the world hasn’t noticed, we get knocked down every day in our business … BUT … we keep getting up.

We won because of people like James Koutoulas, John Roe, Trace Schmeltz, Greg Collett, and the entire Commodity Customer Coalition team, who when they saw the incredible ineptitude in dealing with this incredible wrong, stepped to the plate big-time.  We won because there were some in the press that didn’t listen to the JP Morgan and Louis Freeh spin machines, and instead listened to our individual plights and granted interviews to help get our story out.

I could go on.

On a personal level, the last year has had a profound impact on how I’ve viewed life, both solidifying the incredible good and evil that are at work and in constant conflict in this world.

Before I go further, let me say that I’m extremely fortunate in that my accounts could have been transferred to PFG Best as some were, where lightning literally struck twice.  So my thoughts and prayers continue to go out to those still stuck in the mire.

I suppose the greatest effect has been a stark reminder that we’re simply stewards of whatever assets God has given us during our brief time here, and that our true security lies in far greater places than a bank account.

For me, I still don’t know why I was so richly blessed with industry-leading performance in the late 2000s … just as I don’t know why much of the last year transpired the way it did where my capital and incredible passion for this business were temporarily stolen.  But what I do know is that both instances are reminders not to get too high or too low as we travel life’s roller-coaster, and that we should keep our eyes fixed on our true destination.

Another little-known tidbit in my personal story is that about a month prior to the MF Global Halloween fiasco, I was asked to help a growing international corporation (not at all related to the markets) develop their 2012 budget.  It was an interim effort which relied on past skills and relationships, with potential upside in terms of opportunity.  The downside?  It would temporarily take my mind and focus off the markets and, as a result, result in lower total income.  Yet I thought the change of pace would be good and accepted.

Looking back, it was as if the Master plan went something like, “OK, you’re heading for some incredible crap … but I’ve got a safe place in mind for you over here while that gets worked out. Just hang on tight and stay the course.”


Many have said over the years that my writing skills are strong … yet, even if true, I could never have crafted such a plot.  And even if I had, no one would have believed it.

The final moral?

Life happens.  It just does.

As I told my daughter the other day after she was questioning a recent decision to split with her boyfriend, there are no bad decisions.  Except that the only bad decision is no decision.  For every decision either teaches, reinforces, or redirects us to where we need to go.

And my previous decision to rely on the dozens of protective mechanisms in place to safeguard customer futures funds when choosing where to deploy my capital?  Well, suffice it to say that I’m now substantially diversified, and have added trading leveraged ETFs to my portfolio. And yes, I still trade and love trading the futures!

So another page turns … but the book remains the same.

For at the end of the story, right trumps wrong, and good overcomes evil.  It always has and always will.

It’s just that sometimes good has to stand up for itself to overcome the deafening roar coming from the other side.

And while much work remains to fully restore confidence and rebuild this great industry, at this end – like Rob Petrie in the opening to the Dick Van Dyke show – I don’t plan on tripping over the ottoman a second time.

Don Miller’s S&P Trading Tank

The 200 Day Moving Average Says Buckle Up

Written By: DragonFly Capital

There are many tools technical traders use to look for confirmation of moves, trends and reversals. One I use is the percentage of stocks that are trading over their 200 day Simple moving Average (SMA). The chart below shows this for the last 9 years with the area chart behind it being the S&P 500 for comparison. Notice first that the two are very highly correlated. But also notice that the bottoms in the market have occurred when the percentage of stocks over their 200 day SMA has

shrunk to at least 45%. This was the level in the relatively calm 2004 to 2007 period. Since then it has been much lower with the 4 bottoms coming at levels of 1, 26, and 8 before the 45 in June. At a level of 60.80 today this implies there is room for a lot more downside. One indicator, one view, but not a favorable one.

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Dragonfly Capital Views Performance Through October 2012 Expiry

The post The 200 Day Moving Average Says Buckle Up appeared first on Dragonfly Capital.

Dragonfly Capital

Apple Inc. (AAPL) Ambush In Play

AAPL has retraced back to ambush zone of the Fibonacci extension.  This support zone should see buyers step in for a bounce.  The negative divergence of the RSI to the last higher high suggests caution.  At this point, we don’t know if AAPL will reach the next target of $ 770.00, but we have a good idea that it will get a bounce from support.  Failure of the ambush zone to hold as support would mean much lower prices going forward.

This morning AAPL announced the sale of 3 million ipad minis since it went on sale last week. The stock is higher in pre-market.

Wall St. Warrior

Diversification: The market is leaving Apple behind, should you do the same?

The first day of November saw the major averages all post greater than 1% gains.  This is significant for a couple of reasons.

  1. A broad-based rally across the DJIA, S&P 500 and NDX indexes failed to occur in October and hasn’t happened since the mid-September quantitative easing rally.
  2. It occurred without previous market leader Apple Inc. (AAPL  596.54 +1.22) leading the charge as its shares were up only fractionally from the previous day’s closing price.

To me this points out how the investment money flows could be diversifying themselves away from the previous market darling, Apple.  Besides a strong day in other sectors, financials, industrials, materials, energy, and technology all had strong sessions.  October’s earning season was less than stellar for technology overall, in no small part due to Apple’s shares falling from all-time highs valuing the company at 700 billion to under 600 dollars a share most recently.

Now while Apple appears to still be a wonderful company, the days of simply buying AAPL stock and watching it advance in price might be over.  Investors may consider a change to their strategy in trading Apple, by diversifying towards trading other stocks, or potentially doing both!

As the head of Risk here at OptionsHouse, the number one reason I have seen investors lose significant money is the result of their accounts being too heavily concentrated in one position or one stock.  Whether using a stock or option contract to gain exposure to a specific security, if you put all your eggs in one basket, this could be a recipe for disaster if something unexpected happens in that one stock you own.

The leverage which options offer presents the ability for investors to diversify across multiple stocks, sectors and even strategies.  Rather than buying their entire account value in Apple shares an investor could use stock replacement strategies by using options to gain long exposure at a fraction of the cost of stock ownership.  The risk to a long call is 100% of the premium paid upfront but that premium will be less than the cost of owning the shares which may allow you to spread your investment portfolio across multiple stocks in different sectors.

Investors can also use options to diversify across different strategies.  They can use bullish, bearish, non- directional, volatile, and neutral strategies depending on their investing outlook.  Perhaps an even better strategy might be diversifying across multiple strategies in addition to diversifying across simple stock selection.  On the OH platform the Trade Generator found on the Tools tab has a suite of useful tools which can assist you in diversifying across multiple strategies.

Once open, the Strategy Finder is the best place to start.

Users can filter by symbol, positions or watch list and pick their sentiment bullish, bearish, market neutral, or volatile. The Strategy Finder will find different strategies for consideration which would fulfill that investment thesis.

If you have more in depth questions, this tool is fully explained in our “How to” tutorials located on the home page or with the inline help by clicking on the ? icon in the upper right corner.

The results from this or any tool should not be construed as a specific buy, sell or hold recommendation, but rather a starting point for your investigation. I do want to call to your attention the potential benefits of diversification and not having your entire account concentrated in one position or one directional bias.

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Related posts:

  1. OptionsHouse and mPower Announce Licensing Agreement
  2. Take Chips off the table? Using Stock replacement strategies!
  3. Chips off the table? Using the Call overwrite.

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Top Trade Ideas for the Week of November 5, 2012: The Rest

Written By: DragonFly Capital

Here are the Rest of the Top 10:

Catamaran, Ticker: $ CTRX

Catamaran, $ CTRX, tested the triple top at 52.50 Friday back at the Fibonacci Fan line before pulling back with the market. It has a Relative Strength Index (RSI) that held in bullish territory with a Moving Average Convergence Divergence indicator (MACD) that is improving towards a bullish cross. If it can get over the top it has a Measured move higher to 56.50. Watch the Simple Moving Average (SMA) cluster lower as support.

Hanes Brands, Ticker: $ HBI

Hanes Brands, $ HBI, is moving higher out of a quasi-diamond continuation pasttern following the ascending triangle break out. The target from the triangle remains at 36.25 with the diamond break re-enforcing that target. With the RSI bullish and making new highs and the MACD positive and rising, it is on its way.

Manulife Financial, Ticker: $ MFC

Manulife Financial, $ MFC, is testing the top of a symmetrical triangle with a RSI that is holding bullish and a MACD that is about to cross to positive. A break of the triangle higher carries a Measured Move to 13.90, near the highs from earlier in the year.

Mindspeed Technologies, Ticker: $ MSPD

Mindspeed Technologies, $ MSPD, is pushing above the consolidation box. It has support for a a continued move higher from the bullish and rising RSI and the MACD about to cross to positive. A Measured Move higher takes it to 4.40. This name reports after the close Monday.

Ross Stores, Ticker: $ ROST

Ross Stores, $ ROST, has been beaten up after reaching a top over the summer. Falling a bit faster than it rose, the RSI is now technically oversold but the MACD is negative and growing, supporting more downside. This may consolidate for a day or two but then has a look both ways feel to it. A move under 56.50 has a Measured move to 50 and a bounce back over 58 has room to the 200 day SMA.

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If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which, sees continued weakness heading into next week. Gold and Crude Oil look better to the downside while the US Dollar Index seems to be turning up and US Treasuries are biased lower within the Uptrend. The Shanghai Composite and Emerging Markets are poised to continue consolidation, Chinese markets within the downtrend. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the Dollar Index and Treasuries undercutting it. The Indexes themselves all look biased to the downside with a chance of consolidation within the longer term uptrends. Use this information as you prepare for the coming week and trade’m well.

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Dragonfly Capital Views Performance Through October 2012 Expiry

The post Top Trade Ideas for the Week of November 5, 2012: The Rest appeared first on Dragonfly Capital.

Dragonfly Capital

Canvassing for Elizabeth Warren

I visited a 55-year-old friend who is politically involved and considers himself extremely well informed. He spent today canvassing for Elizabeth Warren in Waltham, Massachusetts. Armed with a clipboard and data sheets on 50 solid Democrats and/or undecided voters, he was somewhat surprised by the shabbiness of the houses that he visited, all inhabited by people getting various amounts and kinds of government assistance.  He said that the stories of how the native-born folks had ended up in poverty often started with a health problem. Thus he was hoping that one thing Warren will do is make health care available to poor Americans. “What about Medicaid?” I asked. He was not aware of the existence of this program. I said “I think it might be the fourth largest federal program, after Social Security, the military, and Medicare”. That did not help. He did not know about any government program to pay for routine medical care for any American under age 65.

[ shows that Medicaid will consume about 30 percent of DHHS’s $ 941 billion budget or about $ 282 billion, but this does not count spending by the states. Page 66 of the document explains that this $ 282 billion is 58 percent of the total for the 57 million Americans enrolled in Medicaid. That means the total spending is about $ 486 billion.]

My friend could not understand how people in red states could be so stupid as to attempt to reduce the size of the federal government. “I think people in Texas get back 15 times the money that they spend in federal taxes. It is people in the blue states who pay to run the country.”

[ shows that Texas gets 94 cents of federal spending for every $ 1 that the state’s residents pay in taxes. Of course, this does not mean that the average Texan gets back 94 cents in value for every $ 1 spent. Most of the spending is presumably military and health care-related. So a hospital and doctor might get $ 50,000 for performing a procedure, but that doesn’t mean the patient experiences $ 50,000 in value (especially since the procedure might have been obtained for $ 8,000 in France or Israel). See this New Yorker article regarding Medicare spending in Texas.]

Separately, I had dinner with some foreigners on Friday evening. A couple from Canada who lives here in Massachusetts said “Is Scott Brown a Republican? I thought that he was an independent.” Conclusion: political advertising works remarkably well!

Philip Greenspun’s Weblog

Updating SP500 and INDU Swing Structure and Key Levels

What are the key Daily Chart levels in the S&P 500 and Dow Jones Industrial index and – taking it one step further – what does the current swing structure suggest about the next move?

Let’s update the Daily Charts and Intraday Structure Charts for these indexes, starting with the S&P 500:

A quick look at the Daily Chart shows us the current EMA resistance cluster near 1,430.

This will be the key pivot level that will define a bullish bias (breakout) above 1,435 and 1,440 (which would target 1,460) or else a continuation of the bearish swing structure in motion which puts 1,400 then 1,380 as potential downside targets.

It will be very important to note how the market closes Friday and behaves on Monday relative to the overhead EMA resistance cluster.

The Swing Structure similarly rests at a turning point:

Check out my prior update on “Swing Structure” to see how price behaved as expected in terms of reversing and trading toward lower targets (educational reference).

Now, we face a similar situation in terms of the structure, meaning classic structure suggests a  turn lower may be more likely than a powerful upswing continuation or breakout.

This time, I overlaid price distance to the swings in order to highlight the progression.

In looking at structure, our main goal is to assess trend and we do so simply by measuring the reversal points or swing highs and lows.

A downtrend is a series of lower lows and lower highs while an uptrend is a progression of higher highs and higher lows.

We can take it one step beyond by quantifying price distance traveled on swings with the thesis that price travels more distance in the pro-trend swings and less distance in the counter-trend retracements.

Intraday Structure started to reverse in mid-October when price pushed to a lower low (covering more distance on the way down) and rallied to a lower high (again with less distance than the downswing).

From there, price impulsed 60 points lower confirming the downtrend and at the moment, we’re seeing a rally higher which is where we focus our attention.

Structure will tilt to the bullish case (breakout thesis) if two things happen:

  1. Price breaks above the 1,430 Daily Chart resistance cluster
  2. The current intraday swing (in motion) trades GREATER than 38 points.

Price rallied 38 points on the prior upswing in mid-October to give us that reference.

That’s what we’ll be watching today and into next week:  Will price break resistance and will this current ‘retracement’ swing develop into an “impulse” swing.

The situation is identical in the Dow Jones, yet the current resistance cluster is perhaps stronger:

The 20 and 50 day EMAs cluster (cross) exactly at 13,290 and of course that’s where we’ll focus attention as the key “Bull/Bear” Pivot.

A firm breakthrough above higher favors a stronger rally and strengthening of bullish structure but UNTIL that happens, we’ll focus on the potential for a stall into resistance.

The lower target remains the 13,000 “Round Number” and 200d SMA cluster.

Intraday Structure also reminds us that we are at a “make or break” turning point:

The last two bullish rallies traded up roughly 285 points.  That’s what we’ll compare with the current swing.

Adding 285 points to the recent swing low at 13,040 gives us a “similar structure” swing toward the 13,325 level.

Of course, it would be a very bearish sign if price failed to rally to this level – today’s high so far failed into the 13,300 price resistance.

Going forward into next week, let’s focus on the key daily chart EMA cluster resistance levels and the objective swing structure in motion.

It would be a very bullish development (potential intraday trend reversal) to break through resistance and extend the upward swing in motion, but unless that happens soon, structure seems to suggest a potential return to the prior swing lows.

Either way, what happens here will help shape our short-term trading plans and price targets for the next swing.

Corey Rosenbloom, CMT
Afraid to

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