Tuesday, January 24, 2012



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Monday, January 23, 2012


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Sunday, January 22, 2012




Wednesday, January 18, 2012


Commentary: A bullish engulfing candlestick pattern can be a very good indicator for finding turning points in a stock. The pattern occurs when an up-candle (close above open) completely envelopes the prior down-candle (close below open). This pattern occurs in the following four stock charts. While many people will look for this candlestick pattern to try to find reversals in downtrends, the pattern can be very useful when it occurs in the same direction as the current trend. The following four stocks are all in uptrends and have seen recent pullbacks. The appearance of a bullish engulfing pattern in such an environment shows the bulls are still alive, and the stocks could be due for another wave higher.

Philip Morris (NYSE:PM) was a great long in 2011 and remains in an uptrend. So far in 2012, though, the stock has been retreating. On January 13 a bullish engulfing pattern occurred; the price jumped from an open of $76.22 to close out the day at $77.32. This bullish day dwarfed the prior day's intra-range where the stock finished down marginally. The move shows the bulls are still alive and another wave in the uptrend could occur. Targets for the next wave are $82.50 and $85. Stops can be placed a little bit below $76, which provides an attractive risk/reward ratio. (From picking the right type of stock to setting stop-losses, learn how to trade wisely. For more, see Day Trading Strategies For Beginners.)

Dollar General (NYSE:DG) is another stock that had a great 2011, but started out 2012 by pulling back (not much though). With the stock still in an uptrend, the buyers stepped back in on Friday, creating a bullish engulfing pattern. Since last November the stock has been moving in a more choppy fashion, which means there is resistance and support close at hand. If the engulfing pattern does in fact indicate the stock is going higher, it will need to break through the recent high at $42.10. If it does, the target is $45 to $46. Ideally, volume should increase as the stock moves higher. Support is presently just above $38 and can be used as a stop level. A tighter stop, which has a higher chance of being triggered but reduces the risk, can be placed just below $39.50. (For related reading, see Interpreting Support And Resistance Zones.)

Nisource (NYSE:NI) was having a hard time breaking above $23 in the last half of 2011, but in December managed to climb to $24. As the New Year kicked off, the stock fell and has been falling since ... that is until the bulls stepped in in force on Friday, pushing the stock up 2.8%. The progressively higher lows since August 2011 indicate there is underlying strength, and the strong showing on Friday means the stock could hit a new 52-week high fairly soon. If a wave higher occurs, the target is $25 to $25.50. Stops can be placed near $22, with primary support just above $21. (Understanding this key concept can drastically improve your short-term investing strategy. For more, see Support & Resistance Basics.)

Sunoco Logistics Partners (NYSE:SXL) has been on a tear since last October, and the uptrend may not be finished yet. Since the start of this year, the stock has been pulling back, but the recent bullish engulfing pattern means the correction could be over. There is a support band between $36 and $34, so this is a likely spot for the bulls to step back in. If the stock breaks the 52-week high at $39.98 the first target is $42 followed by $44. Stops can be placed just above $33 (primary support) or near $35, which is below the engulfing pattern. (For more on stops, see Maximize Profits With Volatility Stops.)

Bottom Line
A bullish engulfing pattern can be a powerful signal, especially when combined with the current trend. All these stocks are in uptrends but have seen recent pullbacks, and the candlestick pattern indicates the correction could be over. The pattern shows that bulls are present and willing to buy, and the uptrend lends reliability to the signal. As with any pattern, this is not always reliable, so stop losses should be used


What's the Easiest E-mini to Trade?

Tags: E-minis, Austin Passamonte, Futures trading, E-mini trading, E-mini futures, E-mini markets
When traders talk about trading E-mini futures, E-mini S&P 500 or "ES" is the first thought that usually comes to mind. It is by far the most popular stock-index market traded, by retail traders and institutions alike. That widespread popularity is not necessarily a good thing. Program trading arbitrage attempts at capturing the difference in price values per tick between E-mini and full-size S&P contracts creates a lot of sideways buzz in price movement. Other program trading efforts by funds and institutions involve arbing the futures against cash index pricing with SPY shares, futures against cash SPX options, futures against baskets of big-cap stocks and a plethora of other complex spread equations.
That type of layered congestion keeps the E-mini S&P constantly retracing its steps. Between directional swings of price movement up or down, there is consolidation with any market. That's how the pattern of price action plays out... consolidation leads to directional expansion, which then settles into consolidation. That cycle repeats itself over and over again, through all time frames and conditions. In the case of E-mini S&P futures, consolidation is created and emphasized by any number of arbitrage programs playing tug-of-war with the tapes. It's not like the index is going through the usual progression of accumulation, distribution and rest. The ES is constantly being pushed around in a small sideways range by sideways trading strategies designed to arb temporary price discrepancies.
What does this mean to retail traders?
Many things. Because the ES contains so much sideways congested price movement or "noise", a lot of E-mini traders direct their focus on that. They work really hard at developing strategies that capture mere ticks of profit as successful trades. All manner of complex initial stop-loss, multiple contracts scaled out of to exit and bigger risk / smaller reward ratios are toyed with in search of success.
With very few exceptions, retail traders all fail miserably in these attempts. The concept of trading tiny scalps within sideways noise is just an illusion, not a viable path to success.
Nasdaq 100
Money is made for traders when price action is moving directionally. It stands to reason that the more directional a symbol is, the more opportunity for traders to buy low/sell high or sell high/buy low exists. Nasdaq 100 E-mini futures or "NQ" are far superior to the S&P futures in this regard. NQ futures lack the dogged back & fill behavior of ES futures. The NQ is smoother, straighter and much more directional. It spends less time in consolidation. When the NQ breaks from consolidation, it moves away from those areas where traders enter long or short trades without constantly chopping the initial stops.
NQ futures have more than enough liquidity for any retail trader. With 300k to 500k contracts traded per day, blocks of 50 to 100+ contracts clear constantly with nil or no slippage on the fills. At $20 per index point with four ticks inside, the $5 tick size is relatively tight. An average intraday price range greater than 20 index points creates plenty of opportunity for profit from directional swings.
Too many traders place emphasis on potential profit in the wrong areas. One of the mistakes I've heard & read about is a correlation between average true range of a symbol and/or tick size versus commission costs. The fallacy logic is that one symbol offering greater range or smallest tick size therefore gives best "bang for the buck" when it comes to trade costs.
That ill logic is a red herring. Trade costs are highest - worst in symbols that move sideways excessively, creating more trades due to stop-loss orders being hit in persistent chop. Trade costs are lowest overall in symbols that require fewest trade attempts to capture profitable swings. Fixating on commission costs and shaving a dime here & there to lowest possible per-turn rate is pennywise and dollar stupid relative to focusing on which symbol requires the fewest trades to capture price movement going up or down.
If it commonly takes a sequence of long, short and short in the ES to capture the initial $200 per contract price move lower whereas same signals in NQ are long and then short once to capture an equal $200 per contract profit, you saved yourself one commission cost in the entire exchange. That type of trade efficiency goes a lot further to shaving the bottom line than upping volume of contracts turned just to save another 20 cents per turn. Dollar-wise efficiency is one of many strengths the NQ offers. It makes straighter moves and has much less noise than ES. Therefore, a solid strategy to trade it will give fewer trade signals with higher win percentage ratio as a result.
10min Chart: NQ

An example of intraday behavior for the NQ is shown from May 12th. Price action opened just above the daily pivot point (black line) and moved lower to test for support. A lift from there broke through R1 (thin green line) and pulled back in methodical fashion before lifting to R2. A break above that resistance and pullback into what is now support then lifted further to new session highs as one would expect from that sequence in the afternoon.
Total price range was just over 40 index points from low to high, an $800 per NQ contract span. Smooth, deliberate, methodical and directional. Terms that apply to the NQ more than any other E-mini index symbol to date.
All markets are tradable, and all markets are different. Traders who are still struggling to create success and/or searching for their own personal ideal symbol would be wise to consider trading the NQ. It is the #2 E-mini contract in volume and open interest for a reason. Many professional, full-time retail traders are there. A good place to be for those who prefer less noise and more honesty in price moves signaled.

Thursday, January 12, 2012


Good Morning. Anyone who has read this column for any length of time knows that I don't believe in making predictions about the stock market. No, I believe it is critical to check your ego at the door each morning and to spend your time paying attention to what "is" happening in the market as opposed to what you think ought to be happening. You see, I learned a long time ago that Ms. Market doesn't give a hoot about what I think "should" be happening in her game or what "could" happen next. And it is for this reason that I do my darndest to avoid the use of the words "should", "could", or "would" in this business.

This philosophy likely comes from the fact that I was influenced early in my career by the likes of Marty Zweig and Ned Davis. These two men were both rule-based investors who relied on their indicators instead of their gut feel, which can obviously run hot and cold (anybody remember Elaine Garzarelli or Joe "I'm the greatest" Granville?). While I am guessing that you're probably sick of hearing it, one of Mr. Zweig's almost off-handed remarks has stuck with me for the past 20+ years and is just as important today as it was back then. In the late 1980's Zweig said, "Investors who rely on a crystal ball will wind up with an awful lot of crushed glass in their portfolio."

I bring this up (again) because (a) I happen to believe wholeheartedly in this concept and (b) what I'm about to review may sound an awful lot like a prediction. However, before we get started, let's be clear about one thing: I am NOT suggesting that one should invest according to cycles. No, I believe that the best way to succeed in the long run is to stay with your investing strategy/discipline and follow your rules. Although markets can make any set of rules or strategy look silly at times (2011 was a pretty good example), I truly believe this is the key to long-term success in the business of investing.

With that said however, it is interesting to note that cycle analysis has a tendency to provide a very nice overview of what we might expect to see in the days and weeks ahead. I've found over the years that the combination of the rolling one-year, four-year, and ten-year cycles of the stock market is either a great guide to what lies ahead or... wait for it... utterly useless. But, before you click the delete button, when the cycle composite is "on" it tends to be dead on!

One last caveat before we look at what the cycles say is I can't lay claim to the concept here. No, it was the fine folks at Ned Davis Research that originally put together a composite of the rolling one-, four- and ten-year market cycles and keep them updated each year. But since I've likely wasted enough of your time this morning by now, let's go ahead and get to it.

In general, the cycles suggest that 2012 will have something for everyone. The early part of the year is projected to be choppy and with a modestly upward bias. To me, this looks like a continuation of what we've been seeing over the past few months. However, from there, things could get downright ugly as both the four- and ten-year cycles sport meaningful declines from about mid-March through the end of June. (The one-year cycle doesn't contain such a decline. However, the declines seen in the other two cycles simply overpower the one-year.) And from the looks of things, this could be a serious drop.

The good news is that by the time the summer months begin to really heat up, so do the bulls as all three cycles, as well as the composite itself, sport serious rallies during the July through early-September period. How far the bulls run with the ball varies by cycle as the one- and four-year cycles suggest new highs for the year, while the ten-year shows a less energetic advance.

From there, the usual seasonality looks to take over as the cycles project a less serious decline than that seen in the summer when the leaves start to fall, which is then followed by the traditional year-end rally.

So there you have it. Sideways for a few months, a serious decline, a strong recovery, another modest pullback, and the usual rally into New Years. Any questions?

As I stated above, the important thing to keep in mind when looking at this type of analysis is that when the cycles are "on" the market eerily follows the pattern. But once things go off the tracks, it can be quite some time before the market gets back in line. So, although all of the above needs to be taken with about a block of salt, I believe it is worth noting that we could see big swings in stock prices again this year. We shall see.

Wednesday, January 11, 2012


Good Morning. Yesterday's market headlines from the biggest of the big news websites read: "Stocks Finish at Five Month Highs," "Stocks Notch Another Win," and "Banks Lead Rally." All of which would seem to indicate that the bulls are on a roll right now. And while I think our Market Wrap headline, "Bulls Breakout But Momentum Lacking" may have been a bit more accurate, a picture of the Wall Street bull did indeed adorn the article.

My trusty spreadsheets also tell me that there is no doubt about it; our heroes in horns are winning the game so far in 2012. Stocks were up nicely on Monday, are up on the year, and did finish at the best levels since the summer smashing. Assuming the formulas are still correct, the Dow Jones Industrial Average is up +2.00% so far on the year, the S&P 500 has advanced +2.74%, Smallcaps have increased +3.42%, and the NASDAQ is up +3.74%. Not bad, not bad at all.

So why then are so many of my colleagues (people in the business of investing) frustrated these days? Why am I taking calls and explaining the bull case? And why are so many folks complaining about the current trend - especially when these same folks are basically in the bull camp? While I could certainly be wrong, my thinking is that the dissatisfaction with the market is due to the new trend of the market's trend.

Upon further examination of the calls I took yesterday, it occurred to me that while each was, to a caller, bullish, they were also all looking to add long exposure to their portfolios. And in short, there have been few opportunities to do so this year as the point moves seen in the indices have almost all come before the open. Sure, there have been some dips to be bought. But if you were buying at the open on the "good days," you were generally disappointed by the close.

Yes, I know, this is exceptionally short-sided thinking. However, I do find it odd that the stock market's gains are now occurring when the stock market itself is closed. So, unless you are awake at 2:00 am and can click a mouse faster than a computer can execute a trade instruction, you can't get in on these moves. In fact, the trend of the new trends is that the market actually trends lower after the initial joyride to the upside at the open.

My question is where is the follow-through? Or perhaps put more accurately, where are the buyers once the opening bell rings? Why are traders selling into the advances? And finally, is this really the new trend?

My working theory is that the new trend in trends isn't likely to last and can be attributed to the overtly negative macro view amongst so many of the big hedge funds. According to research report from International Strategy & Investment Group, their proprietary gauge of bullishness within the hedge fund community remains at the lowest level since 2009. The report shows that hedge funds, which had a horrible year in 2011, continue to cut their exposure to equities, likely in response to the dour macro outlook in Europe. And although these are supposed to be the most nimble investors around, the hedgies haven't increased their long exposure since the October low.

Thus, I believe it is safe to assume that the intraday selling we've been seeing this year is coming from those folks with a less-than optimistic macro view of the investment world. The good news is that the bulls have been able to prevail thus far. And then the even better news is that if the nattering nabobs of negativism were to find a reason to see that there actually is water in the glass, we might have one heck of a ride to the upside.

So, as someone who is leaning long at the present time, here's to hoping that the new trend in trends doesn't catch on

Monday, January 9, 2012


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Sunday, January 8, 2012

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Sunday, January 1, 2012


Tom the trader & Redliontrader.com & Cathy
December 2011 > 40% gains for the month, > 100% for the quarter!

Below is our trading results for December and the fourth quarter. For those not familiar with our live trading room, we track each trade officially called by our lead traders Tom and Cathy. These trades are logged an results generated each month, quarter and year. These are our monthly and recent quarter results from that tracking. We are one of the only trading groups to openly publish and track trades. If you have any questions, let us know at membership@ttthedge.com.

If you are looking for a team to trade with, and we think trading is a team sport.. give us a try. We are introducing our new pay as you grow plan for just $149/month and if you signup in the next 48 hours, we are going to tack on an additional two weeks free! to that first month. So the next payment will not be until mid February, giving you plenty of time to fit in and learn.

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TTTHedge.com announced their preliminary tracked trading results for the month of December and the 2011 fourth quarter. Hitting all on 8 cylinders, each of the portfolios put in substantially better than market gains.benchmarked against the SP500 which had about a 1% gain for the month and 11% gain for the fourth quarter on a year that closed flat.

“We continue to show that actively trading accounts in a volatile market outperforms buy and hold strategies. With interest rates at record lows and a market that remained flat for the year, the only way to capture and grow wealth was through smart market timing. We look forward to outstanding performances in 2012. While we are concerned about the fragility of the Eurozone, in general we feel that the markets still have upside left and eagerly await Q4 earnings season to capture a better picture of what is driving the economy.”

December 2011:

Compared against a 1% gain for the SP500 over the same period, the TTTHedge model portfolios, tracked live and independently in our trading room, out performed all the way through the month. Cathy Cullen, trading the Mini account using mostly Russell 2000 TF e-mini contracts continues to amaze us as she leads us through one of the most volatile and leveraged trading instrument available. Our mini account is 100% day trade only with no overnight holds. That is a stellar performance.

Tom Malone, CEO and founder of TTTHedge.com, trades the remaining three accounts leading the trading team and demonstrating that with good market time, courage and conviction the markets are repeatably beatable. The santa rally may not have lived up to everyone’s expectations, but the trading room’s performance for December was outstanding.

Q4 2011

All four portfolios out preformed for Q4. We love the December contracts and they loved us back, helping to hit our quarterly doubling goal in both the Mini and Traders account. Our equities tracked trades we track were also superior, with a longer hold time and less leverage our goal for these accounts is a double each year, a goal that was summarily surpassed.

We want to thank Jay for all his hard work in meticulously tracking a logging each trade. His record keeping makes everything possible.

The elves are busy putting together the year end data and statistics which should be out some time today or tomorrow.


For those interested in the raw tracked data that generates these number you can access the 2011-Q4 data at this link: 2011-Q4 trades.