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For today's trade there was almost a classic sell signal at 14:45;




But as you can see it was not a clear level double top so not traded. It came during the time that I'll be taking lunch at from now on.



This means I will now be trading full-time every other week from now on.


One week until the next tango.



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No signals today. Almost a sell signal on DIA at 19:30 but not an exact double top as is required;




A shame it didn't qualify as the market shed 14 points not long thereafter.

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There was a buy signal on SPY right at the close yesterday;




I don't take overnight positions but I will record this type of signal here, over time it might be interesting to see how signals on the close perform. The market opened higher today.


During lunch today there was a sell signal on QQQ at 15:00;




Not a perfect double top sell signal but good enough to trade. I sent a limit order at 2345 and a little box popped up on my platform advising me that the order couldn't be sent as there was no internet connection (I'm using an internet dongle with my laptop during lunch breaks). I spent the next few minutes trying to get back online but wasn't able to, not sure why. Then I had to return to work.


Then later in the afternoon I see this;



The market dropped over 1% after 15:00, at one point as low as 2316.75.


Highly frustrating.


On the positive side my indicator is giving some good signals of late and it's certainly worthwhile monitoring the market for at least part of the opening session, as I'm able to this week.

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There was a buy signal on SPY right at the close yesterday;




I don't take overnight positions but I will record this type of signal here, over time it might be interesting to see how signals on the close perform. The market opened higher today.



I just checked and see that there was a sell signal right at the close on SPY yesterday;



Let's see what happens today.

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[Written at 17:30 today] The sell signal on the close yesterday preceeded a drop in the overnight session, but only down 8 points, before the market picked up towards the open. I considered trading it as a trade right on the open but discarded that idea. Taking a signal from yesterday and applying it to the open today doesn't make a whole lot of sense. On to today During my lunch there was a sell signal shaping up into 15:00, the time came and it wasn't confirmed, by 15:05 it was confirmed in a most emphatic way. I've been classifying my signals and today I may have to start a new classification of signal [Absolute classic sell signal]. This type of signal is one where the top range of the double top is absolutely huge.


Here it is, a double top sell signal on DIA spanning 10 days, confirmed at 15:05; DIA1505.png


There was also a very unusual triple top formation on QQQ at the same time, intersected by a spike; QQQ1505.png


So I shorted at 15:05 for a fill of 2341.25. I then had to go back to work as my lunch break was over.... So there I was sitting at my desk working and I didn't have a break until an hour and a half later. So I went outside to check my phone, I immediately went to the orders page to see no working orders. I initially thought, "Oh I've been stopped out" but then I checked the fills... The market sold off very quickly in a sharp down move pretty much starting from where I'd shorted. My 8 point trailing stop had taken me out at 2321 for a gain of 20.25 points.


Here is the next chart, showing entry and exit; Screenshot2011-04-07at171334.png



That trade was like a cool breeze caressing the contours of my mind.



I'm on the train home from work right now, I checked just to see if there wasn't a buy signal maybe near the low today but there have been no other signals today so far...

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A further trade later on that didn't go quite so well as the first;


Sell signal at 18:15 on SPY, [Classic sell signal]



I wasn't in front of my computer when this one was generated, I had just got back from work and put my mac on so I was late to it.


I made an execution error. I sold short at 18:20, filled at 2328.75, but I had sent the order with a 1 point stop loss. As I realised this I was scrambling to change the stop loss order but it got taken out, filled at 2329.75 for a 1 point loss. I still wanted the trade though and sent another order in to short with the correct stop (OCO: 4.25 point fixed stop and 8 point trail stop). This new order was filled at 2329.25, the market sold off, down to a low of 2322 and for some reason I had this overwhelming feeling that I had to get out of the trade, so I exited at 18:49, filled at 2323.50 for a 4.75 point gain. As soon as I was filled I immediately thought I'd done the wrong thing and kept going over and over again why I exited, hoping the market didn't sell off further.




I think partly I was rattled with the late entry into the trade and the mistake in execution, I also didn't want to give back any of the earlier gains. I didn't follow my plan at all there so although I was wrong in not following my plan it was rather fortunate as 2322 was a new low, not reached for the rest of the day.


I have mixed feelings about this 2nd trade. First of all I left work early due to not feeling so great. Had I stayed until I originally intended, I wouldn't have got back home in time for the trade anyway. It's great that I took 4.75 points out of the trade, but it could have gone the other way. I also ought to have gone straight to my screen after work, as I would have seen the signal as it happened and would have been filled at or around the 2332 level.


Having said that, had I been filled at that level I perhaps would have been more inclined to let the 8 point trail stop play out, the market did rally back to 2330 so had I been there to act as the signal happened, paradoxically, I could have ended up with only 2 points.


That was really a fortunate set of circumstances that led to the gain on the 2nd trade.


I would have felt bad had the market collapsed after I closed the trade, as it's not part of my plan to exit on a discretionary basis, unless the market close is approaching. I got away with it this time.


Entry and exit



I don't generally draw trendlines on charts but drew this after the trade. Looking back I am wondering whether I saw this on a subliminal level or something, perhaps that explains the urge to get out. I surprised myself with this as I am typically very controlled with my trading and have typically avoided discretionary decisions as I've had many experiences in the past of seeing a low or high where there isn't one. That's why am I so reliant on both my indicator signals and the trailing stop.


A really fantastic day today - 25 points in total - I really couldn't be much happier than that. I did make the execution error, a result of my wanting to get into the 2nd trade quickly as I'd missed the signal by a few minutes.


I've been using my hypnosis mp3's to go to sleep the last few days, it seems to continue to have really positive effects. Perhaps I'm very susceptible to it but I couldn't recommend it more highly.


Similar situation tomorrow, I'll be at work, monitoring the market open during my lunch break so perhaps there will be another signal - let's see. I'll be home 2 hours before the close, and will still have to eat so I don't expect to trade tomorrow night unless I see something very compelling.

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A great end to the week today!


A sell signal on SPY at 14:40 [Classic sell signal];



This was a very awkward one to trade as it was a double top sell signal spanning one month. It was awkward because I couldn't see the whole formation on the screen all at once (both tops of the double top). Although it looks like the last peak doesn't reach that of the one connected to the line, it does when zoomed in, the line was too thin to be seen when zoomed out. I usually start by looking at a 5 day signal chart and if a top forms that is higher than the prior 5 days I have to zoom out. In order to see the first I had to zoom out so much that the "new" top doesn't show. It took a few minutes to check that both tops were aligned therefore I shorted late, at 14:46, filled at 2335.75.


I was on my lunch break at work so had to go back to work and check the market later.


Later I saw the market had gone down as low as 2322.75, dragging my 8 point trailing stop down to 2330.75, then it got taken out at 16:42, filled at 2331 for a 4.75 point gain.


E-Mini NASDAQ entry and exit






The delay before entering the trade was necessary as I had to be sure it was a confirmed signal. Only after the event I saw it was technically confirmed at 14:40 but it wasn't easy to see quickly at the time. Market only moved 2 points following the actual sell signal being given so no great shakes.


What a great week it's been for me, a gain of 29.75 points. The signals I have been getting are excellent, it's a real pity I lost internet connection on Wednesday as the signal then was a great one that would have led to a further 21 points. That would have meant I would be looking at a 50.75 point gain for the week instead of 29.75 points. Still a very good result for me though, especially as I was only in front of the markets for only a short period at the start of each market session. I have all the afternoons off next week so will make it home right for the market open all next week.


I'm looking forward to it already.



I'll keep an eye on the markets once I'm home in 20 mins, but I am generally wary of trading into the close on Fridays.

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Well I missed a signal this evening, there was a sell signal on SPY at 19:25;

[Classic sell signal]



A very nice formation, this would have yielded at least 10 points so far according to the trail, and would still be in play. I was annoyed at first but at the end of the day I do need to eat, I can't be permanently glued to the screen.

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A look at divergences;




I had a proper look at the NYSE composite index, comparing it to Dow Jones Transportation and SPX over a year.


At 1, during April last year, the NYSE composite made a lower high whilst the other two made higher highs, prior to the market drop.


At 2, at the end of May into June, the NYSE again made a lower high contrary to the other two and prior to a brief drop. It also made a higher low early in June, contrary to the other two, prior to a rally.


At 3, again higher highs were made as the SPX traded sideways and the DJT made higher highs.


At 4, resistance was seen, whilst the other two made higher highs. More recently on March 18th the DJT found resistance level whilst SPX bottomed.

The DJT broke out but the other two may have found recent resistance and did not follow.


Now that I have saved this look at divergences on my ThinkorSwim platform (as a "Style"), it means I can click back onto it in the future to see if any other divergences develop between the NYSE and the others, such as at 1, 2 and 3. I don't have to spend time setting it up again, I can just load it at the click of a button.


I also like the ability to plot volume in profile across price as I think it add a further dimension in terms of volume analysis;




The middle red line connects with the minor top in November, you can see that the blue volume falls away to the left showing very little interest above that level. The market then punched above and through that level to start a new volume profile band. At the top I've sectioned off where the market top was and you can see for this price band there again was very little interest in prices at this level.


These areas where the volume profile falls away can suggest tops and bottoms, areas of resistance etc., I find them useful for intraday trading.


You can also do more radical and creative types of analysis, such as set up a formula to express an idea that you might want to model and chart, using a separate chart function within ThinkorSwim called Prophet charts.


This concludes today's non-sponsored advertising for ThinkorSwim. In fact I am thinking of changing broker in the future purely for cheaper commissions, but I will always keep ThinkorSwim for analysis.


You can take tours of various functions on the platform here

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I realised yesterday I should also place focus on what I did right, the trades where I did well, so here is another video.


I'm dedicating this to my late friend Richard, during the time of his illness he made me realise that you should not place limits on yourself. He was into editing and creating videos so I'm sure he would like this. There's a reference to the CME as I plan to go visit someday.


Richard, this one's for you.


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Just want to correct an error a previous post. I've stated weekly total is 28.25, it should be 29.75. I'd included the 1.5 loss for monday last week in the total in error.


An update to the position with my trading;






So I'm up 52.5 NASDAQ points, which is great. However the equivalent of 16 NASDAQ points has been spent in commissions, so really I'm up 36.5 points net.


The total amount I would be up by had I started with the 4.25 fixed stop and 8 point trailing stop as OCO, and not missed any trades, is 205.75 NASDAQ points.


There were 28 points from 1st April missed as a result me being at work, and again on 8th April, a further 12 points missed while I had a meal.


The average points available per trade is now up to 11.08.


Trades available over 10 points is now up to 21.


Going back to the figure of 205.75, I am very pleased with this as it adds further weight to my growing belief that I have a good strategy here, it also gives me extra confidence in it. I know there will be drawdown periods but as long as I can take as many trades as I'm available for then I ought to pick up the big points trades, that is my aim with the 8 point trailing stop.


I'll be at home in time to watch the markets full time this week, so let's see what the week brings.

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There was a sell signal on SPY at 14:35 that took me some time to identify;



By the time I had cleared it as a valid sell signal the market had sold off by 3 points, therefore I didn't trade it;


E-Mini NASDAQ with what should have been the trade entry;



The horizontal red lines are previous days support and resistance levels both on a price and volume profile basis. I use these while trading but typically remove them before I post the charts.


The signal took me time to identify as the double top spanned quite a number of days and it was difficult to quickly check if it was a valid signal. I usually check my signals and price levels a few minutes before the open however the 5 minutes I gave myself before the open today wasn't long enough to check the levels on my indicator so it took me too long to identify the signal to trade it.


As a result of this, after the close each night I will now mark up my indicator and price charts, so that I have all this ready before the close and can be alert to any potential signals that might generate early after the opening bell. An opportunity loss of 11 points.



There was a buy signal on SPY at 17:15 [standard buy signal]



Filled at 2309.50, market rallied slightly then came back to take out my stop-loss, filled at 2306.25 for a 3.25 point loss. I used a smaller stop as I wanted to protect my position just below the recent low.


E-Mini NASDAQ entry and exit points.




So I'm 3.25 points down today when it should have been 7.75 points up...


To reiterate, my pre-market analysis of indicator and price chart support and resistance levels will from now on be done after market close ready for the next day's trade, rather than just prior to the open, so I'm much better prepared for what to look out for.



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Some more analysis I did to try and give me a backdrop to the market in general.




Charts are all in log scale on a 1 year time-frame.




Dollar Index



The US dollar index is in a clear downtrend however a Tom DeMark sequential countdown buy signal (green up arrow at current price) has been generated today. A PDF explaining Tom DeMark indicators can be found here. I have found these to be useful in the past but the joke is it picks 10 out of every 7 market tops (or bottoms).


The channel lines are Linear Regression channel trendlines. These section off price action to show extremes in price action. When the price is at the far upper or lower line it can be said to be 3 standard deviations from the mean price covering the last year. What I've also set it to show is the 95% line, 2 standard deviations from the mean price. So if price is at the upper or lower 95% line you can say it's at a price extreme that has only been seen 5% of the time during the past year, two standard deviations from the mean price.


I also show the 68% lines, that's those lines closest to the middle of the channel. The reason for this is because I want to section of the trend channel in the same way as a bell curve distribution, so that I can easily see areas where the price is 1, 2 or 3 standard deviations from the mean price.






Crude oil futures



In the Crude futures chart we can see a Tom Demark countdown sell signal was generated on April 7th, since then the price touched the 3rd standard deviation line, and today has moved inside the 2nd standard deviation line. Standard deviation is based on mean price and is therefore a moving target but it's interesting to note.



Silver futures



This chart shows a Tom Demark sell setup signal (red arrow on current price), not as strong a sell signal as the countdown sell signal but a signal nonetheless. Price is at the 3rd standard deviation line but again it is a moving target.




DBDT sell signal for NASDAQ




This is my indicator on a daily timeframe chart covering the last year, there is a double top sell signal suggesting that we are at an interim top in the NASDAQ. If this is the case this is good news for me since my system appears to pick up more points on the downside than the upside.




There was also a story on Zerohedge earlier today stating that Bill Gross's Total Return Fund is sitting with $73 billion cash right now;



As you can see the cash level for his flagship Total Return Fund is at it's highest level for a number of years. He is also $7.1 billion short US government debt. The headlines will say Bill Gross is short treasuries, but it seems like what he may be positioning for is a strong rally in the dollar with that high level of cash right now.



Also, from Zerohedge on April 4th, someone purchased 249,420 April $130 strike put options on SPY



Clearly this could be a hedge for another position but it's interesting to note.



I also looked at divergences comparing the NYSE composite to the Dow Jones Transports and SPX;




At 1, during April last year, the NYSE composite made a lower high whilst the other two made higher highs, prior to the market drop.


At 2, at the end of May into June, the NYSE again made a lower high contrary to the other two and prior to a brief drop. It also made a higher low early in June, contrary to the other two, prior to a rally.


At 3, again higher highs were made as the SPX traded sideways and the DJT made higher highs.


At 4, resistance was seen, whilst the other two made higher highs. More recently on March 18th the DJT found resistance level whilst SPX bottomed.


The DJT then broke out but the other two appear to have found recent resistance and did not follow through.




So in summary all of the above suggests to me that we may be at a market top right now.


If there is a marked sell off silver will correct sharply to the downside as it's typically volatile.


I have a physical silver position and I hedged it today with May $35 strike SLV put options.

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I then also began to look at dates when there were clusters of either buy or sell signals on the same date' date=' what I found was interesting.


When there were dates with a lot of either buy or sell signals, these clusters of buy or sell signals were also good as directional signals for the index itself. Here's the rundown for signal cluster dates for NASDAQ stocks in relation to the NASDAQ index.


QQQQ with above cluster signal dates marked (Red = sell signal clusters / Green = buy signal clusters)



I found time to go through the stocks that make up the S&P100 and NASDAQ 100 today and there are 12 sell signals today for stocks within the NASDAQ and 9 sell signals for stocks within the S&P100. This qualifies as a cluster sell signal today for both the S&P500 and NASDAQ. This is in addition to the sell signal on the actual NASDAQ index and QQQ today.

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Sell signal on QQQ at 18:00 [standard mid sell signal]



Filled at 2292.50, market sold off, then chopped up and down before rallying up to 2296.75, taking out my stop for a loss of 4.25 points at 19:08.


During this trade at 18:55 there was a further sell signal on QQQ [standard mid sell signal]



Had I not been in a trade and taken this one, it would also have also been stopped out.



E-Mini NASDAQ short and stop out point;





Earlier in the day at 16:50 there was a sell signal on Crude oil (USO) [standard mid sell signal]




I didn't spot this at the time therefore it wasn't traded, although it was a great signal since Crude oil futures sold off $1 following this...;








It'll be interesting to see if the market sell off continues, and what I can gain from any of the downside.

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A look at the different types of signal on my indicator;





I looked at the different types of intra-day signals I get on my indicator to see if there are any patterns, since most of the classic signals seemed to work I wanted to see if there were any patterns that could help me further develop my system.


The main types of signals I get are;


Standard double bottom





Standard double top




Classic double bottom





Classic double top





Mid-range double bottom





Mid-range double top




All 12 of the Classic Double Top and Bottom signals were winners


77% of the Standard Double Top signals were winners (sell signals)


46% of the Standard Double Bottom signals were winners (buy signals)


67% of the Mid-range Double Top signals were winners (sell)


And the single Mid-range Double Bottom signal was a winner (buy)



For the other more unusual types of signals the three double tops were winners, whereas only 1 of the three double bottom signals was a winner.


Points to note are that my system is more geared to short trades, and that the Classic signals are accurate, they have all been winners.

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Today is a good day


Sell signal on DIA at 15:55 [standard sell signal];



Filled at 2318, the market stayed at the same level for a while before gradually selling off, the sell off wasn't too sharp at first therefore I thought it was a simple retracement of the recent rally. As the sell off progressed further, I was watching the bid ask ladder on the S&P futures and saw what seemed to be a titanic battle between the buyers and the sellers. At points the ask size was 9 times that of the bid. I found it fascinating to watch.


Then I got a buy signal on QQQ at 17:50 [Classic buy signal]



Now, my rules are, if I get a signal in the opposing direction to an existing trade then I close the trade, if there are two signals in the opposing direction to the trade then I reverse the position.


Due to the sell signal I had on the daily timeframe chart of QQQ on Monday I opted to leave the trade open, thinking that based on this the probability of further downside was high. What this meant was that instead of closing the trade at 2299 (when my trail stop was at 2303) I left it open, risking 4 points of existing profit on the possibility of further downside. The buy signal was 4 minutes and 4.5 points from the low of the day (so far). The market then rallied up to 2303, taking out my trailing stop for a 15 point gain.




Even though not taking action on the 2nd signal caused me to give back 4 points of profit, I think it was the correct decision to take since signals on the daily timeframe chart have sometimes led to moves of several %, although not always immediately. On balance risking 4 points of existing profit for the possibility of a much more sizeable gain was worth it, and still within the spirit of both my indicator, and system rules. In my mind, it makes sense that daily timeframe signals cede weight to those that occur on an intraday basis. The market is back down at 2300 as I write this.



{Written later}

Edit - I should have reversed my position when the classic buy signal was generated at 17:50, that indeed was just following the low of the day. I did some research yesterday that showed all of the classic buy signals I've had so far have been winners. Market is currently at 2310.25. I've only been at this for a number of weeks so I can't expect to get it right every time - it's a continual learning process.


When I get a signal I draw a line on the chart to confirm it: - the point to recall for the future is that from now on I will also write the signal classification on the chart as well (eg Classic buy signal], as I didn't take account of the classification at the time.






Interestingly, on the daily timeframe signal chart of QQQ we seem to be at a point of resistance;







Entry and exit;







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Well, today started out in quite a similar vein to yesterday.


Sell signal on QQQ at 15:40;



Sold short at 2303.75, the market then sold off down to 2294, at this point I thought we might get a replay of yesterday's sell off but the market rallied back up from there to take out my trailing stop at 17:05 for a 1.75 point gain.







The NASDAQ price action wasn't too interesting today, later on I took a look at Crude.


There was a sell signal on my indicator for Crude at 16:00 and a buy signal at 18:30;



Equivalent signal points on Crude futures;



The sell signal was good for a $0.50 move, the buy signal was good for a move of $0.70.


A lot of the signals on Crude are good and I should make a habit of recording all of them each trading day along with my NASDAQ trades, so I can analyse them ready for the future if I decide to include it as part of my trading.


Let's see what tomorrow brings.

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Sell signal on QQQ at 16:35;



Filled at 2306.5, the market dipped slightly then rose back up, taking out my stop at 2310.25 (I'm now using a 3.75 point fixed stop loss on entry, along with an 8 point trailing stop as part of an OCO order)




Short and stop out point




The market was very quiet today, possibly related to options expiry. I caught the high of the day the last two days, not today though...

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This is my working week, I can watch the market open for 40 mins during lunch and then for the last 2 hours when I get home.


No signals on or following the open sadly so I just had to watch the sharp sell-off from the sidelines.


Buy signal on QQQ at 16:15 [Classic buy signal]




Well, a classic buy signal at 16:15, and I wasn't available to trade it, another good one. Signal was given when the NASDAQ was at 2256, had I been available for it the trade would still be running, the market is at 2283.25 as I write this.






I think that is now something of the order of 14 "Classic" type signals on my indicator that have all been excellent signals, it's really quite remarkable.


I'll have the laptop at the ready during market open all this week so hopefully I get some signals that I'm available for to trade.

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Charting the classics


I thought I'd zoom out the charts after I'd noted signals from 29th March onwards, to get a different perspective;



Red dots = sell signals

Green dots = buy signals

Blue dots above price = Classic sell signals

Blue dots below price = Classic buy signals


In case it wasn't already clear to me I've certainly developed a system designed for buying lows and selling highs.


I thought charting the signals in this way might give some additional insight regarding the classic signals. On this small sample the classics bought two significant lows but did not sell the significant highs.

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No signals today - no trades. I was actually at a training course at work during market open so I'm glad there weren't any signals at that time otherwise I would have been very upset since the course was a bit boring dull and the woman presenting it didn't make it exciting.


Let's see what happens tomorrow.

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Again no signals today, no trades. I sold my SLW puts a few days ago as they were about to go underwater, silver is flying at the moment, it feels like watching one of the great short squeezes of all time.

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SLW/SLV ratio


SLW outperforming SLV ended in early December, almost a textbook head and shoulders (I have SLW puts as a hedge against a silver correction right now)



I lifted my hedge a few days ago as it was about to go underwater.



Interestingly Silver Wheaton has completely stopped responding to the hot metal itself, in fact quite the reverse....




ps. maybe the market just doesn't like Randy Smallwood




SLW/SILVER ratio today



When priced in silver, SLW topped around 6th December and has been falling ever since. It looks a bit suspect to me, why wouldn't people be loading up on SLW at the same time???


To my mind the move in silver appears to be changing from a steady rise in a bull market to a parabolic blow off top. There needs to be a correction at some point.


I'm not an expert but this looks like a parabolic blow off top in the making...if it is SLW will get crushed. A final blast up to $49 or $50 for silver?





The only way I can see this move continue is if there is a transition into a real dollar panic.


I put the option hedge back on, it's a very cheap way to protect against a serious correction.

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Sell signal on DIA today at 1450



Shorted NASDAQ for a fill of 2371, stopped out 3 minutes later for a loss of 3.75 points.


Not a very pretty picture today;




This reminds me of a trade on 18th March that had a 17 second duration;



Later on I think I'll check whether I entered previous longs on an up bar and previous shorts on a down bar.


I will now go back and check what results I would have gotten on all of my trades had I waited until the previous bar was in the same direction as the trade, before I entered the trade, to see if I should include this as a final check before I enter a trade...



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