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Geez. I’m dyin’ here. The temp has dropped 40 degrees since lunch. My cat met me at the door and said “meow?,” which, translated, meant “Dude, WTF??“. Tonight I could really use a cup of warm apple cider with just about that much Jim Beam stirred in.

Ok, November’s over. EOM markups, if there were any left, are done. Let’s get ready for activity to pick back up.

Also, something I’ve neglected to point out thus far- the action in the VIX. I had a post back waaay back in January talking about the VIX Fade Trade. Well, you’ll note on the chart below that on Monday the VIX hit 12.33, or about 15% above its 10sma:

As usual, the rubber band has snapped back, and we’re back to a point in the middle of the median of the average, where the market can comfortably surge in either direction as far as Uncle Vix is concerned.

Apple is set up for a nice trade. Here’s a chart of the rangebound action of the last five days:

We could trade a break of this range in either direction. Me, I’d prefer down because as you know (or in case you didn’t know), it is my destiny to short AAPL. Long uptrends in Apple aren’t money-making opportunities for me; they’re pauses between short sales. It’s not logical, it can be downright crazy, but like the Queen and her Skoal, it’s my own little indulgence, with proper management it costs me virtually nothing (and one day will make me the King Of The World HA!), and I long ago stopped trying to make sense of it.

The dollar broke (weaker) from its little pullback I mentioned yesterday, and of course, so did gold. Unfortunately, gold and [insert name of your favorite gold stock here] gapped up and didn’t give us a clean entry:

What to do? If tomorrow opens inside today’s range (63.90-64.43), then walks through the top of it, I wouldn’t at all mind going long at 64.44 with an initial stop of 63.89, for an initial risk (tah-dah! “R“) of 55 cents per share, with a position size chosen accordingly, based on how much I’m comfortable losing.

To the Qs!

It’s been a while since I’ve followed an ongoing swing trade day- to- day. I forgot how much fun it is. All that sh*t that looks so clear and certain in hindsight can cause some butterflies as it’s unfolding, can’t it?

The Qs printed a little doji with (just barely) the narrowest range of the 3-day “up” move:

If I had no position, I’d see this as a prime trade setup:

• If it opens within today’s range and heads down through today’s low, I’d use it as a pullback- into- a- downtrend shorting opportunity, with a stop either at 1) the top of today’s bar if I were feeling aggressive (usually am) or 2) the top of the recent uptrend (44.86), with a correspondingly smaller position size based on risk (less aggressive, wider stops, looking for longer-term gains… the “sensible” alternative)

• If it opens within today’s range and heads up, I’d let it be. Wait for a break of 44.86, maybe a little thrust- and- pullback action, then get long.

• If it gaps in either direction, we’re in daytrade territory, with a possible swing trade entry to boot, depending on the action.

However, I do have a dog in this race and a horse in this fight. I’m short with a stop of 44.62. That stop will not move, as today’s low was a higher low, and I don’t move short stops on higher lows. Second basemen either.

What I will do is quite simple: 1) get stopped out or 2) add to my position on a break of today’s low with a simultaneous lowering of my stop for the overall trade to keep my risk constant. I fully expect to have this dilemma resolved within the next couple of days, most likely tomorrow.

Cheers. Where’s the blanket?

• Listening To: The Essential Charlie Rich
• Temperature Outside: Cold as my ex-wife's short little feet

First, let’s look at that swing short trade on the Qs. It’s looking anemic:

The price action could pass for a pullback into a new downtrend, and so it may be. But that volume spike today tells me there are still a significant number of buyers who see this dip as an “opportunity.” Darn them all to heck. Since today did not print a “lower low,” I’ll leave the stop alone, at 44.62. See yesterday’s post for the cold, scientific method I used to arrive at that number.

And how about the Gorilla in the Corner, Cisco:

As you can see from the flag by Advanced Analyzer, today’s bar completed what’s called a Three Outside Up Bullish pattern. That’s a little wordy for me. And I think a clearer name would be “Bullish Engulfing Confirmation,” since that’s what it means.

A quick look at the Oil Services ETF, which broke out nicely today:

Twenty dollar oil. Yeah, right.

And I certainly can’t overlook gold, seeing as how it’s so closely related to my favorite soapbox, currencies. Is the gold going higher or are the dollars going lower? Well, in this case, it’s the dollars going lower, which means it takes more of ‘em to buy an ounce of gold:

That little pullback on the upper right edge of the chart perfectly matches the minor pullback the dollar has had since it broke down over $1.30/Euro. I know “down” and “over” may seem to contradict, but remember: more dollars per Euro means weaker dollars.

• Listening To: Leonard Cohen
• Supper Tonight: Hot dogs and Shiraz

The Qs acted pretty well today (considering that I’m short):

They opened down, formed an OGRe (opening gap reversal), and climbed higher by the close. This formed what’s known as a Thrusting Bearish candle formation. It should indicate a lack of buying conviction, which should result in further selling which should make the shorts (including me) more money.

However (and there always seems to be a damned however doesn’t there?), focusing on this just because it’s what I want to see, and ignoring any conflicting signals could be detrimental to my Pork Rinds and Beer Fund. And there were certainly some conflicting signals today:

• First, the Qs themselves. Itself. Whatever. Note what happened the last time they had some selling action then formed a Thrusting Bearish candle:

  

  Next day was a monster “up,” followed by a serious rally.

• Next, note that although a big stock like GOOG also made a bearish formation, a bigger stock in MSFT made a bullish hammer. And then there’s Cisco. The masochists who’ve read this site for a while may remember that I made a big deal when Cisco broke out back on August 9 and none of the talking heads on TV even mentioned it. Cisco proceeded to lead the market into the bull rally we’ve seen since then.

  Look at what CSCO did today:

  

  For you home gamers, that’s a massive Bullish Engulfing candle (I think that one’s pretty self-explanatory). Not only that, but it’s a huge move on a huge stock. Nearly five percent on a 164 billion dollar company in one day!. About 8 billion bucks gained. That’s a sh*tload of capital. We’d be fools to ignore it.

So, cut and run on the short trade? Of course not! I’m just extra-cautious looking at that CSCO action, and not bragging at the water cooler just yet. Here’s where the CSCO event has its effect: on my stop management. Although the swing short is still perfectly intact and behaving, I’m gonna be more aggressive with my stop due to the Cisco factor. Let’s look over my options:

• [I should note that I’m talking about a short entry below 44.25 with an initial stop above the 11/24 high of 44.86 for a total initial risk (tah-dah! “R“) of (44.87-44.25) 62 cents.]

• First, there’s the Dave Landry method- leave your friggin’ stop alone! Close half the position and move the stop to breakeven when/if it reaches “2R,” or 43.01. It hasn’t yet, so do nothing.

• Next, there’s my “you’re only in it for a minute” stop method, which is to set the stop at the high of the prior bar for shorts. That would put my stop for tomorrow at today’s high of 43.84. (Guess what would happen then)

• Finally, there’s my patented DummySpots 20% trailing stop method. Take the previous stop (44.86). Take today’s “lower low” (43.34). Calculate the difference (1.52). Move the previous stop by 20% of that difference (~0.30). 44.86 - 0.30 = 44.56.

With this trade, I’m committed to being a little less aggressive with my stops, and giving the trade some breathing room. So #2 is out.

If CSCO follows through (upward) and the rest of the market goes with it, my stop will get hit wherever it is. If the market continues to fail, there’s no way the Qs will go all the way back up to 44.86 and then fall. Something below that is more reasonable. So #1 is out.

Ok Goldilocks, #2 is too hard and #1 is too soft, is #3 just right? Well, almost. I see from the chart that the high of the break day (yesterday) was 44.61, very close to my calulated #3 stop. So I’ll exercise a little executive privilege and put my stop where it’ll include both of those prices: at 44.62.

Ok, I need a beer.

I want to talk about today’s trade based on the setup I posted last night, but first I’ve gotta get something off my chest:

The most textbook failure into a textbook swing short setup that I’ve ever caught:

A gap-down opening, a weak retrace to near the previous close, then a failure of the retrace, then a failure of the opening range and the previous day’s low (which were within pennies of each other). Finally, the BIG failure of the 11/22 Hanging Man I wrote about last night, a 10-minute retrace back up to the failure point of 44.26, then it’s OFF TO THE RACES! Here’s the chart for the entire day:

Now I’ve just gotta find Michelle B. and bum a few Red Apples off of her. [It’s a little celebration joke about “I don’t smoke, but if I did…” — ed.]

In Other News…

Dave at StockTickr.com has been kind enough to post an interview with me on his site. I’ve followed his interviews with other traders, and to be included in the same series as that group is very flattering. Thanks Dave![Insert Wayne and Garth here chanting “He’s not worthy! He’s not worthy!”]

Be sure to check out Dave’s entire site while you’re there. You can scroll thru various folks’ StockTickr portfolios and see how they’re doing. Here’s the one for the stocks profiled on WallStrip, for example. Also, there’s the Pro service (I haven’t tried it yet) which has a built-in trading journal and even automatically generates charts for all your trades. Sounds interesting.

I’ve got electric light
And I’ve got second sight
Got amazing powers of observation

And that is how I know
When I try to get through
On the telepone to you
There’ll be nobody home

(Pink, at his sardonic best, to his cheating wife - From Roger Waters’ brilliant writing on THE WALL)

Ah, yes. The closest rock music ever came to being literature. And the engineering! Whose idea was it to have Gomer Pyle on the TV in the background saying “Surprise! Surprise! Surprise!” precisely at the most despondent, bitter pause in the passage? Probably Waters as well.

Oh, stocks… What about ‘em?

I know it takes the visual acuity of Helen Keller to see the topping action in the market, but it’s scary as hell to say it out loud, lest that beeyotch goes up another 500 points. That’s ok, I ain’t skeered. Here goes:

The VIX is about as low as it’s ever been:

The Qs showed a big volume day on 11/8/06 which looked like topping action. But since then the price has run another couple of dollars. HOWEVER, note that the volume has been diminishing the entire time. Is this the little guys exhausting themselves?

And here’s a closer look at that Hanging Man:

What to do? I can only speak for me (and don’t do that very well), but I’m looking to Get Smart Short on a break of the Hanging Man’s low with a stop at Friday’s high. If this trade triggers, I’ll be looking for a minimum of a couple days’ pullback, with the potential for an actual downward thrust.

If the market roars onward and upward, well, next time, then.

Spent some time this evening working on a print stylesheet for the site. The sheet itself isn’t hard at all, just tedious.

A print stylesheet is to a printout of your site what your “normal” stylesheet (”style.css” for most) is to the “screen” (monitor display) version: it defines what the output looks like when anyone hits print or print preview while reading your site.

Most sites, and certainly most WordPress sites, have no defined print style, and so what you see on the screen is far from what you get on your printer. What you’ll get is the content of the site with no CSS styling or formatting at all. Ugly, and hard read. Just click “File / Print Preview” on a few sites and you’ll see what I mean. [As of this writing, I don’t have the print stylesheet finished for my “index” page, so you can hit Print Preview right here and see the ugliness.]

A print stylesheet lets you control exactly what prints and exactly how it looks. Very cool.

How to do it? Here’s the best reference for WordPress users: Styling for Print from the WordPress codex.

Basically you take your current style.css stylesheet, and save a copy as print.css. Edit the print.css file and add a line at the beginning that says “@media print {” then put the closing brace “}” at the very end of the stylesheet, so the whole thing is contained within that declaration. Then add a line in your header to link the site to the new “print” stylesheet in addition to the original one. Just under the usual stylesheet declaration, you add something like:

Note the media=”print” part! That’s what tells the browser this stylesheet is only for printer output!

Now edit away on the print.css stylesheet, “hiding” all the ids and classes you don’t want on the printout (e.g. some people don’t want the header or sidebars to print) by using the declaration {display: none;}. You can also doodle with the width of some elements (content, post or whatever) to get the most use out of your paper.

Then, what took the most time for me: change all your {font-size} declarations to pixels instead of em or percent. These relative font sizing designations are more desirable for the “screen” display, as they allow user-resizing of text and are more “accessibility” friendly. But printers like pixels, and you’ll find that stuff doesn’t look the same printed as it did on your monitor. Depending on the font, it may be unreadable. So for the “print.css” stylesheet, I changed all the font-size properties to pixels, then kept going back and doodling with them until I got a reasonably readable printed output.

Finally, you’ll find that there are many classes and ids you can just delete from the print.css stylesheet - for instance, all those which fall within another class which you’ve already blanked with {display: none;}. You’ll probably end up with a print.css stylesheet that’s very short and to the point, as compared to your “screen” stylesheet.

Important: We all know to measure twice and cut once, right? The web corollary is save a backup of your original and only work on copies! Once you start messing with print.css, you’re destined to leave an extra curly brace here or forget a semicolon there. Keep an untouched copy of the last clean, working version as a backup so you can revert to it when things mess up. And I do mean when, not if.

Anyone who’s an HTML, CSS or PHP guru (or any other kind of guru) can tell that I’m certainly NOT one. Everything I know is from “on the job training,” so there are bound to be better/ faster/ cheaper/ sexier ways to do everything than the way I do it. I’d certainly defer to the experts on any of this.

But maybe this’ll getcha started.

From my post Dollar at Inflection Point two weeks ago:

And now from Thanksgiving day:

The dollar is trying to break down. Why? Here’s a quote from the Bloomberg article Dollar Declines to 19-Month Low:

People’s Bank of China Vice-Governor Wu Xiaoling said East Asia needs to reduce its reliance on dollar inflows because of the risk of a further slump in the currency. China’s foreign- exchange reserves exceed $1 trillion, the world’s largest.

Wu’s comments were released today in an article circulated during a press conference in Beijing.

“China holds most of its reserves in the dollar and these comments may lead to speculation they will sell,” said Tohru Sasaki, a strategist in Tokyo at JPMorgan Chase & Co…

Ya’ll know my site is filled with currency rants. I believe the effect of currency values on our economy and the severity of the Real Estate Crisis are the two most understated and under-reported phenomena relating to our finanancial (and even political) futures today.

As the dollar fails thru the top of that right shoulder (on the H&S) and threatens to spiral to multi-year lows, here are a few of my recent mumblings on the subject:

The most recent was the above post from only two weeks ago.

Back on October 29 I wrote this post as the yuan hit another new high.

And then from September here is the article where I tried to show, at least to my understanding, how China and Japan have been manipulating their (and in turn, our) currencies for some years now.

Took a nice little trade on Cephalon this morning. It gapped down, then pulled back for one (30min) bar inside the opening bar’s range, then broke down on the 3rd bar:

Since this break was so close to the O.R. low, and I was still being cautious from being “On Tilt” yesterday, I positioned differently than usual: I took HALF my usual position at the break of the second bar, then added the other half after a break-retrace-break of the O.R. low on the 1100 and 1130 EST bars.

All was going very nicely, 30min bars gently falling with the “patented Trader-X 5EMA” just above. But then near 1200 EST, that 1130 bar started acting funny- walking back up, then down a little, then up more, leaving a long wick on the bottom. Remembering the old block trade lesson I’ve used successfully on trades such as the URBN trade, I switched down to 5min bars to have a look:

Lo and behold, there sits a little 5-minute bar with monster volume. What’s that say to me? You just touched the near-term bottom, dude.

So instead of just trailing my stop down, I used this evidence to go ahead and close the postion.

Was it a good move? Here’s the entire day:

Yep, good move. That block trade pretty much tagged the low for the day, and getting out there saved me significant (time) exposure.

Trading the longer (15 and 30min) bars is much more consistent. But remember to watch those 5s also- a big volume spike on the short bars is often your first indicator that a reversal is at hand.