The Dudeman chimes in..........

DM: Wow man! How did you know that they would bid up the prices?

WSR: We didn't "know", actually we just had a hunch they would.

DM: But, they are still high on "Hopium" and in a frenzy man from "THe Jackson Hole Show"

WSR: Actually ,Uncle Ben gave them a placebo. He will only act if A.) The news the next 3 weeks is much better or B.) The SP500 crashes back down towards the lows or even lower! It would be silly to do anything if the markets have stabilized. He knows that.

DM: You think we are about done with this short-rally?

WSR: Yes. The market actually turned positive for the year for a brief moment at the end.

DM: You mean the market was positive for the year with all this stuff going on?! That's crazy man!

WSR: I know. That's why we added to our short at the end. The markets done for now. Maybe a little "more"; but it's running on fumes and the party is over. It touched the 30-day Moving Average and now-Pssst.

DM: Whatever that is, man. I think you are right.

Operation "Cold Shower" started....

We have begun a short program (check emails). We believe that the "Hopium" induced high will end badly. We began a pyramid program to short the market. Our initial purchase was very small and we will add as the participants get more hope.

The Great "Hopium" Trade......

We are stealing a term here from our boys at "ATF". It seems hope is alive and well the last few days that Uncle Ben will save the markets with some sort of QE3 (or Operation Twist) of some sort. The numbers are horrible. Consumer confidence hit a low today. As we posted in a previous post last Thursday, Uncle Ben not doing anything would make the markets go up. The have been doing just that since his speech. The Fed has bailed the markets out everytime thus far and there is no reason to think they won't again.......except:
ATF and MSB's are at complete opposite polls again. MSB's point to a "double-bottom" and potential "Goldilocks" scenario. ATF'S report that the fundamentals are still getting worse.

Our view:

Yes, there is a double-bottom that may take us too 12,500 Dow or 1260 SP500.

No, It won't last. That would be the last time to get out before Dow 10,000/SP500 1000

Yes, There are major problems in here. They are more than just normal market corrections-they are structural.

Why the markets are going up right now? Hopium, Double-Bottom Formation, and Window Dressing at month-end.

We will look to short.....soon

Big Ben must have been listening.....

Big Ben said nothing. They will discuss it at the Sept 20th meeting. The markets took it rather well. This will give time for the markets to naturally stabilize at the right price.

WSR: See Dudeman? Big Ben came through. He didn't say anything.
DM: Wow Man, you were right!
WSR: Well...The concert is over..shall we pack it in?
DM: Yeah man...it just fizzled out.

WSR: Big Ben made the smart move;)

10:00 AM......The Big Speech

GDP was revised lower this morning and Big Ben speaks at 10am.
What will he do? We have no idea;)
We will wait.

The Three Stooges...The Rating Agencies

It is now complete...."The Three Stooges" are now "bought". S&P was the last. "The Stepford Wives" are now all in tow. Quite frankly...they are now a moot point. Nobody who knows anything really takes them seriously anymore. Their usefulness is now officially: Terminated.

Can't say we are sad. Uum...seeee ya...Good Bye:)

Ladies and Gentlemen: Next up "The Jackson Hole Boys"

The mania is hitting a crescendo! We had a surprise appearance by "The Sage of Omaha" who made an early morning announcement. The clown excited the crowd for a brief moment before they took that as a warning sign. WSR could have traded it. We thought about a quick trade in GOLD and shorting the market at the open. We did not because we are waiting for The Main Event. At this point NOBODY KNOWS ANYTHING ABOUT ANYTHING., which is what we expected and is exactly what "The Dudeman" has been telling us. The level of "Knowledge Blackout" has just peaked. Big Ben is a fearsome character. He instills fear in BOTH the bulls and the bears. I don't blame them. He is "The Iceman". I like Big Ben. The guy is calm and cunning. I believe he is genuine in his attempt to do what's right. I also believe he knows that he should let the markets complete the move before he strikes. The crowd has no idea what to do and he should not listen to them. This is his "Jim Morrison Moment". He can instill the most confidence by not doing anything.

DM: What do you mean man? Not do anything?!
WSR: Yes, Dudeman. Do nothing.
DM: I don't get it, man.
WSR: You see- If he does nothing, then he is in complete control of the crowd.
DM:I don't get. Won't that cause a crazy stir?
WSR: Yes. Initially is will. The markets may sell off; however, they will eventually worship him for the brilliance of the move.
DM: What?
WSR: It demonstrates complete control and confidence. They will find strength in his move and he still has the bullet left in his chamber for the Dow 9600-10,000 moment.
DM: You sure, man?
WSR: Yes. It sure would give us extreme confidence in his ability. The financial markets need a leader that is "above the fray". This would do it.
DM: Umm. Alright man...you're the expert trader-not me. Pass me another beer.
WSR: Sure thing-Dudeman;) Let's watch tommorrow.

Flash Crash....In Germany

The German DAX fell 4% in 15 minutes today. Another "flash crash"-this time in Europe. They are not sure what caused it. Things are getting crazy.

Buffett to the Rescue......again

Looks like Buffett has been asked to help out again. He got another great deal from Bank of America. The funny thing is that B of A insisted the last few days that it didn't need any capital- good one! Now they give the away the shop to Buffett. Sounds desperate to me. No wonder all the analysts came out yesterday defending the bank. Like we said before- it's a "those with info" and "those without info" market right now. I would bet dollars to donuts th0se analysts new about the announcement today ahead of time. The rules don't apply to Buffett though. It must be nice to speak with the president before you make any investments. The reliance on Buffett's seal of approval is getting old. It is not surprising that so many retail investors are dropping out of the game. They tell me "it's rigged". I have to admit it-sometimes it sure seems like it;)

P.S. Buffett did the same with GS at 115 before it hit 50 and GE at 20 before it hit 6.50 ;)

Still in CASH

The Main Event: "The Jackson Hole Boys"

Boy..Uncle Ben sure has a lot to live up to on Friday. The market has been biding up prices for "The Jackson Hole Boys" Friday performance. There is wide speculation they are going to play another remake of their #1 hit: QE. QE1 was a hit. QE2 was a hit. How will QE3 perform?

Normally, the 3rd remake is a bust. I don't know if they should even release it at this point. The problem is that they painted themselves into a corner. They said they were going to keep rates near zero for the next 2 years. This was totally out of the ordinary. They probally wish they could take that back. It would appear that they are watching the market indexes too much. Fed internal distress is very high right now.They are not going to beat the markets- It would be extremley costly. We are in an extremely precarious position right now. I don't know about other traders; however, it seems QE3 or No QE3 the markets are going to finish their natural progression. We feel it would be better for The FED to not do QE3 at this juncture. Let the markets hit their Dow 9600-Dow 10,000 targets and rebuild from there. Sometimes timming is everything and this is one of those times.

It is 50-50 in here and The Fed is feeling a lot of pressure to unleash QE3 right now. We say it is too early and they should wait until "They see the whites of thier eyes". Let the market have a "correction" of 30%. It used to be natural-20% is not enough. WSR advises not to waste the last bullet at these levels.

What Strategy has Produced the Most Losses?

The answer is counter-intuitive to the average investor. More money is lost BUYNG LOW or more appropriate PICKING THE BOTTOM. The "Buy Low; Sell High" just doesn't apply to the average investor. The first thing new investors do is "look for bargains". The stock was 30; now it's 15. it's a deal! It is natural instinct to get things 'on sale". I call this the "Mini-Buffett Syndrome". The market is wrong. Look at the information. It has a P/E of 10. It's cheap.

This strategy will cost you dearly. Stocks are cheap for a reason- you just don't know what that reason is yet. You are not finding "steals" that nobody else hasn't noticed. I know it feels "Great" when you pick the bottom- like you found a treasure at the bottom of the sea.

The problem is that stocks hitting new lows-go lower.

I just saved you thousands and thousands of dollars on your "Market Degree".

I know. I paid a hefty tuition myself early in my career;)

What happened to Gold?

It seems that Gold has been targeted by exchanges. The CME raised gold margin requirements by 26% today. This is 2 days after The Shanghai Gold Exchange raised their margins by 26% and only two weeks after the CME raised them by 22%.

This is forcing some investors to sell or add more capital. They are trying to put a limit on speculation.

This info is courtesy of AFG.

A Nasty Whip Saw....Crowd Surfing....Chill'in with Dudeman

During corrections-everybody loses in the end. The Bulls and The Bears get slaughtered. Well, this is exactly what is happening now. After a great run by The Bears, they are getting slaughtered the last two days! Gold Bugs-squashed! Market Bears-shot! The Bulls-were already dead. Impossible trading.

This is why we stayed out. The Whip Saw is nasty and nobody knows what is going on-they are in a frenzy. Right now our "Wood Stock" is nuts. There are traders "crowd surfing" just hoping they don't get dropped. The "Main Act" will come on Friday when "The Jackson Hole Boys" hit the main stage....until then, we are hanging out with The Dudeman-chill'in.

WSR: You were right Dudeman- better to just sit here watching the crowd work themselves up into a frenzy than getting trampled..

DM: Yeah Man! No reason to wear yourself out before the main event, man! hey man, pass me another beer.

The Dudeman is a very wise man.

Why we have not traded yet this week.....

As we discussed at the end of last week, this is now a market of those "with info" and "those without info". The market is going to do strange things and we do not want to be a part of it. That is why we stay Neutral and in Cash until there is some clarity or new formations. It looks like today is the first time that The AFG's are actually silent. Uncle Ben is a formidable enemy to the bear camp. Is there a double bottom? Has Gold topped? Is it over? Is there a recession?

We at WSR don't really care from a trading stand point. One of our mottos is: "You never really miss anything- if you don't know-don't play"

I have no idea which way it goes from here. We still would not be buyers until the dow 10,000 area and we would not be short going into Jackson Hole. A good week to do other things besides watch the market- Dudeman!

Uncle Ben's Rice & The Manchurian Candidate

It seems the market has two things to cheer about today. The first is that "The Manchurian Candidate" is in place. We are talking about the new head of S&P's rating services. He is a former Citi guy and you can expect a debt upgrade by the end of the year. The second is Uncle Ben is expected to add more rice to the already over cooked pot. It might make for a quick "pop". The problem is that the market goes up and everyone else gets poorer. QE1, QE2, and probally QE3 are doing nothing but printing more money and devaluing the savings and purchasing power of everybody else in america. Today may have felt good; however, we are not out of the woods yet. The market is acting like QE3 is all but done. We shall see. Expect fireworks either way.

A Silly Bet......

A lot of traders are pricing in help from The FED today. There is no help at these levels. It would only cause a momentary bounce in the market. Bank of America is rumored to be in huge trouble and the 2-year treasury auction just went off at a record low. I would not play this bounce. Might be a good time to buy some gold and silver. I have a feeling a big show will drop in here. We will see.

Developments and the potential plot.....

The plot thickens......The CEO of S&P Rating Corp "stepped down" (that's corp speak for fired) and is replaced by the COO from Citi of all people...the markets are pushing hard for FED action by telegraphing favorable moves if it were to happen-then fading at the close when there is any doubt....Gold is nearing the 2000 mark...

What we see happening.....

U.S. debt gets upgraded by S&P soon
The market is setting up for a major rally in September

The characters are all being put into place.....The only question is...do the technicals play out by the end of the week. (10,000 or double bottom?)

What the Computers Want......

The computers really want Dow 10,000 area. At this point, it would be very diffucult for anybody in their right mind not to cover their shorts. Until we get to that point or near that point , there just is no real support. The traders are going to sell any type of rally in here unless they feel it has legs. The AFG's are recommending to sell any rallies and the MSB's are hoping for Santa Ben to deliver presents from Jackson Hole. The interesting part is some and some AFG's are getting less bearish and some MSB's are getting more bearish. Either way- there is probably only about 900 more points on The Dow before this should be about done. Any federal action before these points would be wasting ammunition (they know that). Our guess is that THE BULLS will take control in September.

The Computer's want:

Gold to hit 2000
Dow to hit 10,000
The VIX to hit 60

Until these points- Nobody is happy.

Monday Review......

It should be a very interesting week. The markets are in a precarious position and the trading should be choppy. There is going to be those "with information" and those "without". The Jackson Hole meeting will have a big impact this week. We are going to just watch in here as the movements are going to be very difficult to play with any certainty. It could go either way. Check emails for sudden updates.

Done for the week. It was a good one!

No reason to hang around. . We had a good week and don't need to trade today-so we are going to cash. Have a good weekend! We may check in later in the day.

Just going to watch today.....

The Bears are clearly in control and nobody's around to stop them. Would not be surprised to see The Dow hit 10,000 by the time this is over.

Counter-Trades? I've been asked a question...

As the volatility rises, we place small attempts at "Counter-Trades". These are trades that are placed contrary to the trend. We set these up as traps for "The Whip Saw". They start out very small and are placed with discipline in a "pyramid manner'. We expect to take multiple minute losses as they are taken out. As the trend starts to exhaust itself out, we begin to place larger blocks with tighter stops. Eventually, we are totally counter-trend after a significant rise/fall. This is a derivative of George Soros's "Theory of Reflexivity". As the rubber band gets "flexed" more and more past reality, we position ourslves increasingly with larger amounts of "Counter-Capital"- When the the trend is "snapped" back to reality- We make a huge profit. It takes lots of skill to execute properly. We are attempting this move in here. Not for the faint of heart.

Wish us luck!

We took a very small position in XIV

Bought some at 6.62 for another attempt at a counter-trend trade. We will be trying to build a position as the market tanks-attempting a "pop". Check emails.

Well Dudeman, what now?

DM: Hey Man, you left a huge amount on the table by not following your systems-dude!

WSR: I Know Dudeman. It was very depressing! Our trading systems said to bet large on TVIX and we chickened out.

DM: Why man? Why?

WSR: It's complicated.

DM: Ya gotta trust it man! Isn't that one of your golden rules?

WSR: Well, yes...but..

DM: No "buts" about it. Listen to The Dudeman- make you own rules and live by them..alright man?

WSR: Alright!


The Dudeman is a smart man.

TVIX at 53!

It is the last time we don't trust in our trading program! Oh the Pain!

Stop out of XIV @ 8.25

Good thing! getting out of the way of this trainwreck!

Going to take off GOLD

Sold DGP @ 67.15. We are going to initiate a counter trend trade. Going to start selling volatility. We picked up some XIV at 8.45. Check emails.

Played too conservative....

Our TVIX is at 51!

We owned it at 35.33 yesterday:(

It starts..........

* Futures Tumble
* Gold Hits New Highs
*Russian Stock Exchange Halted
* VIX rockets

Should have held our TVIX...I guess being in 100% 3X GOLD is a good second prize.

Check emails..............

Back in GOLD

Bought DGP again @ 65.33. It seems Venezuela is going to nationalize GOLD. This should take some supply off the market. If DGP breaks 66- it is a confirmed breakout. We are anticipating this event as countries scramble for gold reserves. If it does not, it could be a double top. We will be tracking it very close! Check emails for update

Sold TVIX at 38.88...for now

That should be enough volatility for a couple hours. Going to take a break and get some exercise. I don't think it will run away from us- a nice +8.8% pop for the day. Be back soon. Check emails.

What are "The main Street Boys" (MSBs) saying....

The "Main Street Boys" (MSBs) are saying this is it. The bottom was already reached. There is value here. All the stops are being pulled out to demonstrate these points. For those of you who forgot, the MSBs are the "mainstream pundits embedded in the media".

So here is the scenario: It's AFG (bears) vs. MSBs (bulls)

So where are we (WSR) currently? AFG........WSR............../......................MSBs


You got that man?

In from "AFG": Mutual Fund Outflows

Our friends at the "Above the fringe Group" (AFG) just posted a very interesting bit of information:

34 Billion in equity mutual fund outflows so far in August. Just 13 billion more and this will be the single biggest monthly outflow in ICA history! The problem? As of June ,the mutual funds held a record low of just 3.4% cash....you get the point. Ouch!

In the last 3 weeks 67 billion has been withdrawn from all asset classes.

Scary stuff...scary stuff.........Dudeman.

Where we stand.....

A quick update of what we did this morning....

We swapped the TZA for the TVIX @ 36.07 (betting volatility would rise). The reason was that the VIX was right near our near term suport target of 30. We had been waiting for that for the last few trading sessions. The VIX has a lot of support at this area and we don't think the correction is over. A couple of our most trusted computer trading indicators signaled a double bottom in the VIX. Our most bullish sign yet that we have a good chance of a major event comming. Plus we have experience trading the TVIX. The "AFG" group put out some very good bearish info this morning.

Check emails for details....

Out TZA @ 45.86

Just didn't like it. Check emails.

Financial Woodstock and Death Crosses! Dudeman!

The "expert opinions" and "financial articles" in the media are like a "cluster funk of personalities" last seen at Woodstock in the 60's. There are so many contrary opinions and weird analysis out there-it could make your head explode! Dudeman-the market is going to crash! Dudeman-this is a great buying opportunity! Even "The Sage of Omaha" is getting a contact buzz-no man, the USA deserves a quadruple A rating! Ours goes to four A's! See-it's better than three A's! Got it, man? Hey bud-even da Prez says we just ran into a bit of bad luck!

GOOD GRIEF!

What do you do? Luckily we hooked into a group of very smart bloggers and analyst types that provide information for information's sake only. They will never get air time in Main Street media ,even though some run large amounts of money and tend to speak in pure non-political language. I call these the "Above the Fringe Gang" or AFG.

The analysis by AFG is very real and very scary. Who's right? Quite frankly, I don't know. There is a lot of talk about "The Death Cross" technical formation. Scary stuff and the media will terrorize investors with it. AFG found out it occurred 7 times in the last decade and the market actually went UP after the formation in 4 of 7. This means- The market may go up or down from here in a big way. UP or DOWN! The "Main Street Boys" don't tell you that part.

We will stay NEUTRAL and stick with our "Deploy and retreat to cash" tactics. Trade long and short as opportunities arise- then come home to cash after short excursions. The market has a 50/50 chance of going either way.

AFG has some very scary financial stuff; however, that didn't stop the markets from going up before.

So that's our strategy- DUDEMAN!

Amazed at the market's strength

It should be failing here- so we took a small position in TZA (3X short small cap stocks) @ 47.17. I just don't think Europe will bail out the mess. I don't see how the market can hold in here- it may, so we took a small position for now.

Check emails....

Sold DPG @ 64.86

Still think GOLD is good; however, in these markets you have to book profits.
DGP booked (+5%)

Stay tuned.....

What's Next?

Food for Thought:

* The markets rise was on only 40% of average volume for the last 10 days.
* SP500 at crucial 1200 area resistance (maybe as high as 1250) .
* The Global Structure is Not stable to say least.
* Fed's promise to keep rates for 2 years...unprecedented (What do they know?).
* Massive CDS and derivatives exposure by the banks is a black hole.
* Someone had to blow-up the last couple weeks of trading-no word yet?
* Volatilty has collapsed the last few sessions.

What does this all mean? You can figure this one out.

We stay in GOLD, away, or wait to short again.

As Predicted: The Whip Saw came....

When we predicted to the coming of "The Whip Saw" on 8/11 at 10:00am The Dow was at 10,800. The Dow closed almost at 11,500 today- a reversal of almost 700 points! A lot of institutional traders got crushed the last 3 trading sessions betting short. We avoided it and actually made money by being long stocks and hiding out in Gold this morning. The levels reached today are very interesting. Check emails for updates........

Hiding out in Gold....

After a 3 day sell off in gold, we are going to stay in DGP (3x gold price) till things become more clear. Bought @ 61.73. Check emails for details.

Actually...cancel that! Too much for one week!

We cancelled the trade on FAS. We had a good week and it's Friday! Time to go have fun-tired of trading.....

Enjoy your weekend! Elvis has left the building!

back to an oldie....FAS

With consumer confidence in banks at the lowest on record, it might be a good time to play the banks ETF 3X. Bought some @ 14.77.

Dropping trading the XIV

It appears some sort of "backwardation" is happening in this product and no longer moves as we feel it should. Moving on to other securities.

Sold all this morning in the pre-market

We got 11.50 for MGM (+6.5%) and 9.82 for XIV (+6%)

We have things to do today and cannot watch the trades.

Check emails for details.

The end of the day report......

XIV up roughly 4%
MGM up roughly 4%

We know...should have taken the profits before the close. I like our prices. We expected a sell-off going into the close. Why did you not sell then? Because we have good "base prices". , We may lose our profits or not. The point is that we are trying to establish a "Beach Head". It gives us a point of reference. This is crucial in setting up for max profits. We committed a fair amount of capital; yet, we want to see some stability before we send in all the troops.

Our bases are tentative...yet we hold off....Meat Grinder Rules.......

Further explaination of our early morning post...

A few of you have asked why we reversed our position this morning from last night. The answer includes the discussion about "The Bots" which we explained at 10am today. As we were doing our market scans and picking targets last night and early this morning, we noticed how many "inwestors" and "traythers" (spelled that way on purpose) were now using technical analysis the last few days. In poker we learned that when all at the table begin using the same strategy (including the donkeys), it is time to CHANGE GEARS. Changing gears in poker is a crucial strategy to use if you want to succeed. The Stock Market is the biggest poker game in the world. We decided to stop and think. Are all the price targets going to be hit with all these "Traythers" now jumping on "The Strategy"? Everyone is distracted and are they missing anything?

We think the answer is YES (at least for now). The Chip Leaders will start to look for value and pick up the dollars while the rest are still changing pennies. The "inwestors" are terrified and will not be bargain hunting ; the "Traythers" are still too busy programming their buy/sell points to notice anything.

It is amazing what a good night sleep does for ya!

Bought More MGM....

Cost basis is now 10.70......

The Current Market Environment.....

What we found out last night (we had a hunch before)......

This market is currently being dominated by technical traders (like ourselves) that are scrambling for the best prices. It is now over saturated with us. This is creating a vacuum. The vast majority of trades are being done by technical buy/sell points without much real thought. What this means is....time to shift gears! The "Bots" will jump on any direction the market will start to go. It is now time to look for value and start to think. The computers won't think, they react. A computer doesn't know value. I have a feeling this will all be over by the end of the week (at least for a short while) as the value seekers will over-turn the "bots" and they will have to buy. This is a marked difference from my post last night (as I was still in "BOT MODE"). Time to use human judgement as there are way too many technicians running the market right now....

Following an old friend....MGM

As we were assessing the market damage, we came across an old favorite-MGM. It is around $10 and change and now has a Market Cap of 5B. Las Vegas is up in revenue and The FED signaled 2 more years of low rates. I really liked their earnings release a few days ago. Football season is about to begin-big betting season. We bought our initial purchase high today @ 10.74. and again @10.49. (10.62 Cost Basis). We could probably wait for the technical $9 target; however, I am really excited about the prospects. Hopefully my impatience won't cost too much. It seems now is a good time because of all the distractions. It just seems like such a good deal. We will be watching close considering our computers say $9 is very likely. My hunch is, this Gem will be snatched up quickly when traders get tired of playing the futures and ETF's. We will see.

Check emails for details...

Play it again Sam.....

We picked up some XIV near the close @9.25. We will try to build a position by Friday. Check emails for price targets. My hunch is that the market will open down pretty bad tomorrow and we will buy some more at the open. We'll see.......

There is just no support at these prices....

Other than some "announcement"- There is no reason why The Dow should not go down near 10,000 or even 9600. That is another 800 points from here. We will be waiting. It would be foolish for The Fed to waste a bullet in this technical "No Man's Land". One has to ask themselves- Why would anyone want to own stocks right now?

It is ugly out there folks. The Meat Grinder is chewing up some hedge funds right now and there may be margin calls coming that would put a lot of pressure on the selling side.

Check emails for target points....

Bailed at Open

Back to cash. XIV @ 10.15 (+2.5%). We will wait............

Our Trading Rules?

No. We will not publish them at this point. They are under "lock and Key" like the Coke's recipe. I appreciate the interest:)

P.S. I'm not sure they should ever be published. What is the point of 17 years of work? Pass it down like "The Others"

It ain't over!

Pardon the country vernacular, must be my wonderful time spent in The South. "The dawgs are still hunt'in and dat injine just don't sound right". It feels like we are broken. I don't think I have ever felt quite this way. People are hurt'in- The great USA (who I have loved my whole life and still do) needs leadership. The pot smok'in, free love, self-indulgent- baby boomers are killing us. They are fighting over a firestorm of sh$t. I have never seen so many extremists on both sides since the 60's. If you have ever played Sid Meir''s game CIVILIZATION, you would understand. Our happiness level is falling fast. Not good for the stock market. Not good for us. What does this mean to us as traders? It means that The Meat Grinder is still here. We will look to step aside yet again. I still think S&P500 1000-1100 is a reality. We will probally reset and go to cash at some point again. I would not reco any moves by The Fed until these levels- we have one bullet left-save it "until you see the whites of their eyes". We will probally bail tommorrow.

What a day! We beat The Meat Grinder!

We finally have time to post as we were trading all day! The emails sent this morning and this afternoon explained our strategy. Here is what transpired:

Despite the fact that we said to avoid The Meat Grinder-We planned hard last night.

A. We were already holding the XIV (Betting volatility would go down) @ $10.10
B. We bought TVIX (Betting volatility would go up) before The FED meeting @ $39
C. We sold TVIX after The Fed meeting @ 44
D. We doubled up on XIV @ 9.70 ( 9.90 Cost Basis)

XIV closed at 10.72

Thus, +13% on TVIX AND currently +10% on XIV

Sometimes you just trade it perfectly. It was a good day today!

A small attempt at profit....1010 wins

We are going to place a small buy order on the XIV @ $10.10- It is near the first major support area ($10). We play slightly above to be ahead of the other buyers. If it gets filled, fine. If it doesn't get filled, fine

This is a Meat Grinder strategy.....check emails

Avoiding The Meat Grinders

A lot of traders get caught up in "Meat Grinders". This is when the markets are churning and volatility is high. it is very difficult to trade in these because the moves are arbitrary and those with access to information ahead of the majority are at a distinct advantage. It is best to avoid them except on the extremes.

We are in one of these right now. A trader can lose a lot of capital in these environments because there is no rhyme or reason for the direction changes and they are violent.

How to play it is: 1. Be very patient 2. Don't chase 3. Be very quick

Usually it is best to avoid them

What the chart looks like....not a good sign

Potential Dow Targets:

10,000-10,300 Target

Out of the way!

We were lucky to dump the XIV break even at the open. This looks like a train wreck. Two well known tech analyst put a sell on yesterday and told their clients to get out of the markets. One would think this is a Good time to buy. It might be; however, there doesn't appear to be any catalyst that would want to make people buy. The Fed is out of moves and Washington seems to be fighting over everything.

Technically: There is some support here and it may hold. If it does not hold, I really don't see anything until around the S&P 1050-1100 level. This 1200 level should be a battle ground. Let's watch if the Bulls can hold their here. We will stay on the sidelines for now.....

Check Emails....

Start to buy XIV...will post later

Got stopped out of GENE

Our stop loss got hit on GENE today at $7. We dont' really mind because the market looks horrible. We will continue to monitor it. Continue to stay on the sidelines.

Back in Gene Gene the Dancing Machine...

I found out what sent GENE surging yesterday. It appears a U.S. court overruled a previous ruling not allowing human genes to be patented. This is crucial to GENE. We decided to go back in today and bought some at 7.24. Wanted to back up the truck; however, we will pyramid into the trade while watching the action.

GENE GENE THE DANCING MACHINE IS BACK ON STAGE AFTER MR. SMITH GOT GONGED!

What's HAL 3000 saying........

I have received some questions about what our computer program HAL 3000 is indicating. It worked great last year so I wiped off the dust and lit the fires to see what HAL has to say-

" The Market action the last two days has formed what it calls a small "Chart Cut".

This usually means that all previous formations up until this point are erased. The trading programs start new formations today. This means that the double tops in Dow, SP500, and the PMI should be ignored because the previous formations up until today may be of little meaning in the short-term. A "Chart Cut" is a fairly rare event and usually happens around crucial inflexion points. Without this formation, the markets look extremely bearish. Our response is to step away and watch for the trend. Dow 11800-12000 remains the battle ground.

Stay tuned.....

Had to let Mr. Smith go.......

We bailed on our XIV this morning at$16.25 for a 4% profit. One of our golden rules has always been: "If your trade is not acting how you think it should, you might be wrong and/or you lose control". We never want to feel that a trade is out of control and is acting different then our expectations. I thought the XIV would get a nice bump today-It didn't. Better to step aside then get all emotional about what you expect to happen. Check emails for info.

The Market from here and our XIV trade...

Our "MR. SMITH GOES TO WASHINGTON" trade (XIV) performed exactly as thought- An initial bump on the debt news and then a sell-off. We considered dumping it at the open; however, decided against it. The S&P500 is almost touching it's 200-day Moving average and the relative strength is in the low 30s. The news is horrible on the ISM front and it looks like the world is falling apart. Our natural instinct is to bail or short the market. What did we do? WE BOUGHT MORE. The Dow 12,000 level is so important and I don't think anybody (those that are really bullish but don't want to show it) want to break it. The XIV is holding up extremely well considering all the negativity. The average share volume is about 4 mil and it has already traded 8 mil. Mind you this ETF is based on short-term futures and it appears to me that there is a LOT of buying here. This is pure instinct; the human side says its scary to buy in here- the world is falling apart.

We now own twice as much and our cost basis is RAISED to $15.64

I have faith in MR. SMITH and more important- it looks very fishy in here that the market would sell off while people are hoarding the XIV.

Wow! The Dancing Machine was a Hit!

We made 30% plus on that one in two days. I can't find any news; however, I think we have to pull the trigger when our stock is up almost 40% today. We will track it for another entry point. Sometimes you get lucky. Check emails for update.

Gene Gene The Dancing Machine is Rockin!

We are selling here at $7.80. It is up over 39% today. Sell and I will will follow-up shortly.