Hey Traders,

Crazy Friday to end a crazy week , seems like that can be said about every week for the past year.

ES closes weekly candle above January high also at highest weekly close for the year . Highest volume of the week today on bearish gap and fill candle, will take a closer top down look later. Ironic how all that price action to close completely UNCH.

Don’t know about you, but I am exhausted from this week and staying up 3 nights to trade, so will be getting some good rest before looking at charts again and sipping on some chilled Fazpaigne.

Will be doing regular weekend updates sometime this weekend.

Have a great weekend

Cheers

Vlad
Twitter: @esecfutures
Daily Email Updates Available, feel free to sign up on the right ->>>

p.s.

after crazy week good to review 40 Bits of Trading Widsom

1. Trading is simple, but it isn’t easy. If you want to stay in this business, leave “hope” at the door and stick to your stops.
2. When you get into a trade, start looking for signs right away that you are wrong. If you see them, then get out before your stop is hit.
3. Trading should be boring, like factory work. If there is one guarantee in trading, it is that “thrill seekers” get their accounts ground into parking meter money.
4. Amateur traders turn into professional traders when they stop looking for the “next great technical indicator” and start controlling their risk on each trade.
5. You are trading other traders, not the actual stock. You have to be aware of the psychology and emotions behind trading.
6. Be very aware of your own emotions. Irrational behavior is every trader’s downfall. If you are yelling at your computer screen, imploring your stocks to move in your direction, you have to ask yourself, “Is this rational?” Ease in. Ease out. Keep your stops. No yelling.
7. Watch yourself if you get too excited—excitement increases risk because it clouds judgment.
8. Don’t overtrade—be patient and wait for 3-5 good trades.
9. If you come into trading with the idea of making “big money,” you are doomed. This mindset is responsible for most accounts being blown out.
10. Don’t focus on the money. Focus on executing trades well. If you are getting in and out of trades rationally, the money will take care of itself.
11. If you focus on the money, you will start to impose your will upon the market in order to meet your financial needs. There is only one outcome to this scenario: you will hand over all of your money to traders who are focused on protecting their risk and letting their winners run.
12. The best way to minimize risk is to not trade. This is especially true during the low-volume “chop and slop” found during the afternoon trading session between 11:30AM Eastern and 2:30PM Eastern. If your stocks are not acting right, then don’t trade them. Just sit and watch them and try to learn something. By doing this you are being proactive in reducing your risk and protecting your capital.
13. There is no need to trade 5 days per week. Trade 4 days per week and you will be sharper during the actual time you are trading.
14. Refuse to damage your capital. This means sticking to your stops and sometimes staying out of the market.
15. Stay relaxed. Place a trade and set a stop. If you get stopped out, who really cares? You are doing your job. You are actively protecting your capital. Professional traders actively take small losses. Amateurs resort to hope and sometimes prayer to save their trade. In life, hope is a powerful and positive thing. In executing a trade, hope is a virus that can infect and destroy.
16. Be right on day one or get out. Don’t take a “red” position home overnight.
17. Keep winners as long as they are moving your way. Let the market take you out on a trailed stop.
18. Money management is the secret to success. Don’t overweight your trades. The more you overweight a trade, the more “hope” comes into play when it goes against you. Hope is to trading, as acid is to skin. The longer you leave it in place, the more painful the outcome will be.
19. There is no logical reason to hesitate in taking a stop. Reentry is only a commission away.
20. Professional traders take losses. Being wrong and not taking a loss does damage to your wallet, mind, and soul.
21. Once you take a loss you forget about the trade and move on. Especially if it is a small one. Do yourself a favor and take advantage of any opportunity to clear your head by taking a small loss.
22. You should never let one position go against you by more than 2% of your account equity. This means if you have a $50,000 trading account, you should never let one stock turn into a loss of more than $1,000. This means if you max out your 2 to 1 margin account and buy 2000 shares of a $50 stock, you must have a stop loss of 50 cents. That is tight and bound to get hit. Do yourself a favor and buy 400 shares of this $50 stock and use a $2.00 stop to start. That is only an $800 dollar loss and gives you room to trail your stop up to break-even before you are taken out on a wiggle. Is there ever a time when it is okay to take more than a 2% portfolio loss on a position? NO! Never means exactly that. This is a maximum loss by the way. Setting up your plays for losses of 1% of your equity is even better.
23. Use daily charts to get an idea of the 30-day trend, hourly charts to get an idea of the 1-day trend, and 5-minute charts to establish your entry points.
24. If you are hesitating to take a position, that indicates a lack of confidence that is not necessary. Just get into the position and PLACE A STOP. Traders lose money in positions everyday. Keep them small. The confidence you need is not in whether or not you are right, the confidence you
need is in knowing you will stick to your stop no matter what. Therefore you can actually alleviate this hesitancy to “pull the trigger” by continually sticking to your stops and reinforcing this behavior.
25. Averaging down on a position is like a sinking ship deliberately taking on more water.
26. Build up to a full position as it goes your way.
27. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.

28. Look for opportunities NOT to trade.
29. You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of “failed” breakouts).
30. Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying
a decline by saying things like, “They are just shaking out weak hands here,” or “The market makers
are just dropping the bid here,” then you are embracing your opinion. Don’t hang onto a loser. You
can always get back in.
31. Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground. If you find yourself saying things like, “My stock in EXDS is still a good investment,” then it is time to start following the basic principals all professional traders follow. (That would be protecting your capital, aggressively cutting your losses, and letting your profits run by not giving in to the temptation to sell just because you have a quarter profit).
32. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t trade.
33. Professional traders only place a small portion of their assets into 1 position. Or if they take on a large position, then they strictly limit their risk to 1-2% of their current equity. Amateurs typically place a large portion of their assets into 1 position, and they give it “room to move” in case they are actually right. This type of situation creates emotions that ruin accounts, while professionals are able to make decisions and cut losses because they strictly define their risk.
34. Professional traders focus on limiting risk and protecting capital. Amateur traders focus on how much money they can make on each trade. Professionals always take money away from amateurs.
35. In the stock market, heroes get crushed. Averaging down on a losing position is a “heroic move” that is akin to Superman taking a spoonful of Kryptonite. The stock market is not about blind courage. It is about finesse. Don’t be a hero.
36. Sadly, traders never learn the importance of “the rules” until they have blown their account out of the water. Until you “lose it all” it never seems that important to have to follow the basics of professional trading. (Cut your losses; let your profits run, etc).
37. The market reinforces bad habits. If early on you held onto a loser that went against you by 20%, and you were able to get out for break-even, you are doomed. The market has reinforced a bad habit. The next time you let a stock go against you by 20%, you will hang on because you have been taught that you can get out for break-even if you just be patient and hang on long enough. Tell that to the folks who bought VERT at $145. When’s it going to get back to break-even? Well, if your timeframe is “never,” then you have nothing to worry about. Control your risk by sticking to your stops.
38. This next “bit” is brutal, but true. The true mark of an amateur trader who is never going to make it in this business is one who continually blames everything but his or herself for the outcome of a bad trade. This includes, but is not limited to, saying things like:
• The analysts are crooks.
• The market makers were fishing for stops.
• I was on the phone and it collapsed on me.
• My neighbor gave me a bad tip.
• The message boards caused this one to pump and dump.
• The specialists are playing games.
The mark of a professional, however, sounds like this:
• it is my fault. I traded this position too large for my account size.
• it is my fault. I didn’t stick to my own risk parameters.
• it is my fault. I allowed my emotions to dictate my trades.
• it is my fault. I was not disciplined in my trades.
• it is my fault. I knew there was a risk in holding this trade into earnings, and I didn’t fully comprehend them when I took this trade. The obvious difference here is accountability. For amateurs, everything having to do with the market is “outside their control.” That is not reasonable thinking, and really just points to an individual who has, probably for the first time, had to confront their “real self” as opposed to the perfect self or idealized self they have constructed in their mind. This is also known as “living in a fog.” A person can drift around through life in their own private world, where they are pretty special and can do no wrong. Unfortunately, trading rips off this mask, because you cannot dispute what has happened to your account. This is also known as “confronting reality.” For many people, when they start trading they are suddenly confronting reality for the first time in their lives. Just to see the world as it really is requires a lifetime of training, and for many people trading
the stock market is their first real step in this journey. Some people say that traders are born, not made. Not so. If you choose to see the world as it is, then you can start trading successfully tomorrow.
39. Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.
40. At some point traders realize that no one can tell you exactly what is going to happen next in the market, and that you can never know how much you are going to make on a trade. Thus the only thing left to do is to determine how much risk you are willing to take in order to find out if you are right or not. The key to trading success is to focus on how much money is at risk, not how much
you can make.

During the last 2 months of the rally, one particular phenomenon became regular occurrence on every 10 pt pullback. Events known as FAZ Parties where hosted on every 10 - 20 ES futures point pullback…… the amount of “I TOLD YOU SO” , “GOOD THING I BOUGHT FAZ AT THE LOWS” , “TOLD YOU TO LOAD UP ON PUTS”,  “SWEETT, LOADED up ON SP 500 PUTS at the HIGHS”, “THIS IS IT, SP 500!”, “STUPID BULLTARDS WILL FINALLY LEARN A LESSON” “SUCKERS RALLY IS FINALLY OVER” (suckers’ rally = rally you missed) on all financial blog comments, messageboards and stocktwits was reaching an absurd amount. Needless to say, followed by complete silence from the faz party camp as market for whatever reason continued to rip higher

Official Beverage of FAZ Party  and sponsor, yours truly , FazPAIgNe bubbly:

FAZ parties were hosted without any significant technical breakdowns  more often than I can indicate on this chart:

After reaching weekly R2, Montly R1, Novermber 2008 gap and overall running up quiet a bit, I think I am ready to pop a cork and take a sip of fazpaigne myself.

Will be stopping out at highs (954 entry), with this paticular retracement zone being key to defend for faz partiers:

Also watching close above January highs of 939.50 ES on the weekly charts, as that would be rather bullish for ES and would likely put me in faz partier hangover camp as well.

All jokes aside hopefully you are doing ok surviving this tape.

Cheers

Vlad

credit to: David for introduction of Fazpaigne beverage

Update 2:55pm EST:
Needless to say, be extra careful in the last hour of this crazy week. no need to prove anything at this point in time

Update 12:14pm EST:
Must defend ambush zone for the bears:

Break above 948 would mean retest of highs very likely.

Gold has one of the wildest 2 hours in a long time after the jobs data and has found support at retracement/trendline, key level for further direction:

Euro is having a big down day and broke through some key support levels, next support level bottom of the channel and bigger retracement, at this point euro is also suspect to shorting retracements:

Update 9:06am EST:
WOW!!! Gold and euro charts….. will see what happens at weekly R2 958.25… if this will stop, it will stop around 957-958s,will b watching those levels very closely. Be careful trading these nutty moves

p.s.
#s do smell a bit fishy, will be interesting to see the revision

(i am going to venture a guess that these 957-958s are it for the week, and maybe a little more than week)

====================

Good Morning Traders,

nothing much has changes from Daily ES and Euro updates (2 previous posts) , like the rest of the trading world awayting 8:30 am nonfarm payrolls.

As always will keep updating if I see something new develop here and on Twitter @esecfutures

Have a great trading day

Vlad

Hey Traders,

the picture hasnt really changed much, except for few more broken bear dreams who were celebrating another 10 pt pullback few days ago. Overnight ES found some resistance at trendline connecting two recent highs:

That is the only thing I see in the way of getting to the highs. As mentioned in all analysis posts 954 still remains the target, as a target of an ambush play:

and also gap fill from November 2008

Weekly R2 level at 958.25 right above 954 resistance.

ES continues to trade above 200dma and closed above January highs for the second time. Volume has been very low, on pace for one of the lowest volume weeks in a while, suggesting no conviction in either direction, which is rather odd considering break above some key levels.

On the downside will be looking at ambush zone from the weekly lows at 933, with key levels below being 917 ambush, which will be right in the area of 200dma tomorrow and also gap fill at 921.75 right above.

As always will be watching tape one technical development at a time and let price suggest where it wants to go

830am EST Nonfarm Payrolls should be a market mover in the morning

Cheers

Vlad

Hey Traders,

Currency market volatility continues as euro and dollar are near key levels. Let’s take a top-down look at whats going on in the euro.

For Head & Shoulder pattern lovers (probably most overrated technical set up, but good to use for targets), there are two possible ones developing, the one highlighted in blue box suggesting possible head and shoulders top, and the one in orange box suggesting consolidation before making a push higher.

Break down from the range suggesting a trip to the bottom of the channel and larger retracement zone in mid 1.38s, if euro breaks down from the channel that would be big time trend change clue and will strongly add to the bearish case

If the range from the first chart breaks out to the upside would expect  retest of rally highs as well as test of key daily trendline on the euro

The trendline is key for to defend and should determine further euro direction, if it does trade above, RED ZONE is literally that, if euro breaches that level, retest of all time highs is very likely. Test of those key levels will coincide with test of key level on the dollar index:

If dollar manages to trade and close below 77. 7 level, that would suggest another 10%+ of downside for the dollar.

Another thing worth noting on the Euro is that pullback/chop of past few days short term momentum is no longer at extreme levels so push to that level is more likely, as previously mentioned will let that range give direction clues.

Hope this helps

Vlad

By Robert Prechter, CMT

The following article is adapted from a brand-new eBook on gold and silver published by Robert Prechter, founder and CEO of the technical analysis and research firm Elliott Wave International. For the rest of this revealing 40-page eBook, download it for free here.

I have often read, “Gold always goes up in recessions and depressions.” Is it true? Should you own gold because you think the economy is tanking? Whenever we hear some claim like this, we always do the same thing: We look at the data.

The first thing to point out is that gold did not make a nickel of U.S. money for anyone in any of the recessions and depressions from 1792, when the gold-based dollar was adopted, through 1969, a period of 177 years. Well, to be precise, there was a change in the valuation in 1900, when Congress changed the dollar’s value from 24.75 grains of gold, the amount established in 1792, to 23.22 grains, a devaluation of just six percent total over 108 years. The government did raise the fixed price from $20.67/oz. to $35/oz. in 1934, but that action occurred during an economic expansion, not during the Depression. In 1968, gold finally began trading away from the government’s fixed price. Even then, it slipped to a lower price of $34.95 on January 16 and 19, 1970. So the idea that gold always goes up in recessions and depressions is already shown to be wrong. It did not go up in terms of dollars in any of the (estimated) 35 recessions or three depressions during that period.

What almost always does happen during economic contractions is that the value of whatever people use as money goes up as prices for goods and services fall. When gold is used as money, its value in terms of goods and services goes up. But gold can’t go up in dollar terms when gold and dollars are equated. So no one “makes money” holding gold under these conditions. It is a fine point: What tends to go up relative to goods and services during economic contractions is money, and when gold is officially money, that’s how it behaves. What we want to know is how gold behaves in recessions and depressions when it is not officially accepted as money.

Many gold bugs say that because gold was a good investment during the Great Depression, it is a “deflation hedge.” We addressed this topic in At the Crest of a Tidal Wave (1995, p.357) and Conquer the Crash (2002, pp. 208-209). At the time, government fixed gold’s price, so it didn’t go up or down relative to dollars. Gold was a haven during that time, the same as the dollar was, since they were equated by law. But gold served as a haven because its price was fixed while everything else was crashing in price during the period of deflation. Gold bugs like to claim that gold would have gone up during that period had it not been fixed, but the crashing dollar prices for all other things suggest that in a free market gold, too, would have fallen. It would have fallen, however, from a higher level given the inflation of 1914-1929 following the creation of the Fed. So gold became worth more in dollar terms than it was in 1913, which is why it began flowing out of the country. In 1934, the government finally recognized the new reality by raising gold’s fixed price. Since 1970, markets have been in a large version of 1914-1930, except that gold has been allowed to float, so we can clearly see its inflation-related, pre-depression gains.

Observe that gold’s price remained the same for a Fibonacci 21 years after the Fed was created in 1913; it was revalued in 1934. [Ed. Note: For a full chapter on Fibonacci time considerations for gold, download the 40-page Gold and Silver eBook.] Then it held that value for 35 (a Fibonacci 34 + 1) years, through 1969. So aside from the revaluation of 1934, the inability to make money holding gold during recessions, depressions, or any time at all save for the day of the revaluation in 1934 held fast for 56 (a Fibonacci 55 + 1) years following the creation of the Fed. So even after Congress created the central bank, no one made money holding gold in a recession or depression for two generations.

In 1970, things changed dramatically. Investors lost interest in stocks and preferred owning gold instead, for a period of ten years. The same change occurred again in 2001, and so far it has lasted seven years. But, as we will see, recession had nothing to do with either of these periods of explosive price gain in the precious metals.

The period of time one chooses to collect data can make a huge difference to the outcome of a statistical study. If we were to show the entire track record from 1792, gold would show almost no movement on average during economic contractions. If we were to take only 1969 to the present, it would show much more fluctuation. To give a fairly balanced picture, combining some history with the entire modern, wild-gold era, I asked my colleague Dave Allman to compile statistics beginning at the end of World War II. This is what most economists do, because they believe “modern finance” began at that time and that things have been “normal” since then. It’s also when many data series begin. So our study fits the norm that most economists use. It also provides results entirely from the Fed era, making it relevant to current structural conditions.

[Ed. note: To study the six tables revealing gold's performance record vs. stocks and T-notes since WWII, download the 40-page Gold and Silver eBook.]

Table 1 shows the performance of gold during the 11 officially recognized recessions beginning in 1945. Although one could make a case for different start times, we took the 15th of the starting month and the 15th of the ending month as times to record the price of gold. The results speak for themselves. Even though it is accepted throughout most of the gold-bug community that gold rises in bad economic times, Table 1 shows that such is not the case.

The only reason that the average gain for gold shows a positive number at all is that gold rose significantly during one of these recessions, that of 11/73-3/75. The average gain for all ten of the other recessions is 0.16 percent, almost exactly zero. The median for all 11 recessions is also zero. If we omit the five recessions during which the price of gold was fixed, the median gain is 3.09 percent.

For long-term forecasts and more in-depth, historical analysis for precious metals, including the six revealing tables mentioned in this article, download Prechter’s FREE 40-page eBook on Gold and Silver.