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Full-time stock trader. Follow me here and on 12631


…on making your brokerage rich via copious amounts of commissions from your overtrading.

This kind of market does not just wipe out stubborn bulls who buy stocks the whole way down, it also punishes habitual bottom pickers, and basically everyone except the most talented of daytraders. Eventually, we will form a tradable bottom.  When that comes is anyone’s guess, and is out of my control. What I CAN control, however, is not making low probability trades out of boredom while the market remains unhealthy.  On the back of last Friday’s distribution day, the bulls have to overcome a heavy burden of proof to get me enticed on the long side anytime soon. I am willing to change my mind at a moment’s notice, but I need to see the evidence first via accumulation and healthier setups across the board.

Finally, I urge you to continue to monitor $FCX as a broad market tell.  It continues to weaken and has yet to see any kind of a bid.  Watch it closely to see if that changes.

If you are having problems sitting tight, go get some discipline at basic training for Marines:
(Warning on the video for all of you thin skinned types)

[youtube:http://www.youtube.com/watch?v=yyC0BmTYTgI&feature=related 450 300]

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My Trader Creed

I trade stocks to make money,

I do not trade stocks to win an intellectual argument with the stock market.

I trade stocks to make money,

I do not trade stocks because I love the way the action/gambling makes my heart race and my body feel truly alive.

I trade stocks to make money,

I do not trade stocks because it helps get my mind off of the problems in my life.

I trade stocks to make money,

I do not trade stocks to impress my friends, family or significant other.

I trade stocks to make money,

I do not trade stocks to become a famous celebrity, and appear on financial news networks or in any other media.

I trade stocks to make money,

I do not trade stocks when I am drunk, high, tired, hungover, hungry, or ill.

I trade stocks to make money,

I do not trade stocks out of boredom, and when I think it would be something fun to do.

I trade stocks to make money,

I do not trade stocks when I am feeling particularly emotional or on edge.

I trade stocks to make money,

I do not trade stocks within the first thirty minutes after the opening bell.

I trade stocks to make money,

I do not trade stocks to boost my self-esteem and overall self worth in life.

I trade stocks to make money,

I do not trade stocks to prove other traders that I know are wrong about a certain thesis.

I trade stocks to make money,

I do not trade stocks because I feel an emotional attachment, or indeed any emotion at all towards any one individual issue, ETF, commodity, currency, or option.

I trade stocks to make money,

I do not trade stocks when I have no discernible edge, that I cannot objectively articulate with clarity.

I trade stocks to make money, and that is enough for me.

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Am I Death Cross Diversified?

On CNBC’s Mad Money, Jim Cramer runs a weekly segment called, “Am I Diversified,” where diabetic retirees call in and seek Jimbo’s input as to how well they can spread out their losses via diversification techniques. In that spirit, I am going to play that game too. Only this time, I am going take an admittedly hardcore bearish stance. The daily charts of the stocks seen below all show a “death cross,” where the 50 day moving average crosses down below the 200 day moving average. This cross reliably illustrates that a former uptrend (as seen in the inclining/flattish 200 day moving average) has grown long in the tooth, and the fresh downtrend is taking hold (as seen via the down sloping 50 day moving average).  Basically, the presumption is that a bear market is now upon us.

Moreover, all five firms are considered best in breed in their respective sectors, and have very large market capitalizations, none less than $29,500,000,000.   They are: $FCX (my “tell”), $GILD, $GOOG, $GS and $KO. In my charts, look for the blue line (50 day) crossing below the yellow line (200 day). I fully admit that I am cherry picking these five stocks to illustrate the death cross.

Assuming the death crosses hold, I would like to hear your comments over the weekend.

I would like to know, specifically:

Can the market successfully rebound with these five mega cap names in bear market mode?

It has been a long and intense couple of weeks. So, feel free to vent anything else that is on your mind in the comments section, when you guys check in to iBC periodically over the weekend.

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Cruising Down Cape Fear

Ever since the market made a temporary low last week, we have been in a highly volatile consolidation zone just under the 200 day moving average on the S&P 500.  Naturally, you would think that just about all traders would be fearful of another sharp leg down, and thus would be reticent to put on any long positions in the past few days. That assumption would be wrong.

One of the most capital destructive fears that traders have is the fear of being left behind in the dust, if the market suddenly sprints higher on a new bull run.  It should be obvious as to the reason why this fear of being left behind is far more destructive than a fear of a downturn: The money you allocate to buying longs in anticipation of a move higher can easily be wiped out, versus a risk averse strategy in anticipation of a pull back of sitting in cash or putting on hedges.

The setups that I proffered last night looked enticing and actionable, when seen through a vacuum. Unfortunately, most stocks in the market do not trade in a vacuum.  They are subject to the machinations of the broad market in such a way that you had better respect the movements and trends of the senior indices, before you become aggressive with any individual issue. Thus, I felt compelled to note that we needed to wait and see confirmation before allocating capital. Indeed, we have seen anything but confirmation to the upside today, given the huge selloff.

With the continued news driven price action to the downside, the market has yet to convincingly given us swing traders a reason to get involved.  As frustrating as it may seem to sit in high levels of cash right now, it would be wise, instead, to think about the better opportunities that we will see down the road, once the market firms up and is done shaking out the weak hands. When things are going well, the market seems like the easiest game in town.

However, it is the patience and discipline shown in markets such as the current one, that truly distinguishes the traders that have lasting power in this business.

NOTE: Bear vs. Bull today:

[youtube:http://www.youtube.com/watch?v=rm81LSKJC2k 450 300]

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It has been quite some time since I have had a chart-filled post with setups.  I must say, despite how good some of the charts seen below appear, we are still on very shaky ground as far as the broad market is concerned. Seeing as at least seven out of ten stocks move in concert with the broad market, I will wait for confirmation by the senior indices (namely the S&P 500) before allocating capital. I urge you to do the same.

With that said, however, I am eager to get involved in the issues listed below upon said broad market confirmation.  As always, feel free to pick and choose whichever setups best fit your style.  Also, I urge you to use stop losses in order to mitigate your downside risk.

I hope you find these helpful.

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The Calm Before…


With the S&P 500 edging up 0.41% to close at 1102, this market is at a clear and undeniable crossroads. On the one hand, we have all of the makings of a bearish wedge, or continuation pattern, since finding a temporary low at 1040.  The updated and annotated daily chart of the S&P 500, seen below, should illustrate this notion.

Not only have we struggled to recapture the 200 day moving average, but volume has been steadily declining throughout our attempts to do so. This shows that the big institutions do not have much conviction in accumulating stocks, despite the most recent selloff.  On the other hand, the bulls can argue that the hammer from May 25th is still valid, and that some key stocks and indices are holding up well.

Moreover, the Nasdaq has already recaptured several important moving averages, as seen in the annotated daily chart below.

In sum, there are strong arguments in favor of both bulls and bears at this point. With that said, I am starting to see some enticing setups on the long side. I will post some trading ideas later this evening, but please keep in mind that I will be waiting for confirmation to the upside before acting on them.

Be back with more charts in a bit…

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