Remember to use both Selection and Timing in your trading!

Good evening everyone, 

I am running late tonight and apologize for that.  Lets get started.  

The latest IMPA selections   
Results based on latest government data! 

UCL/LCL official triggers (buy & sell selections)
* Dates in black indicate a new trigger selection or repeating selection.

FF - The Fed Funds, when listed , is for tracking purposes only.  We do not trade the Fed Funds.

The Markets

Energy Markets - We know these plungers are powerful and we have been tracking these formations with our IMPA selections for a number of years together.  Last week on 10/27 crude oil (CL) and Natural Gas (NG) both posted reverse plungers.  These plungers have succeeded as both markets have come down nicely following these formations.   Folks we talked about the double-whammy's here on Wednesday (10/27).  These markets (NG and CL) both posted outside day's down via reverse daily and weekly plunger formations on 10/27!  Since then these markets have come down very nicely as follows. 

In crude (CL) if you were filled at the worst price (lowest price) from the range of suggested entry prices from the daily plunger report you would have sold short at 52.44 on Thursday 10/28.   The high was 52.80 and we opened 51.65.  We closed 51.76 on Friday.  Thus that's a profit of $680 as of Friday alone.  This position may continue working this coming week as well.  The market has not even come close to touching the stop of 55.67 (which is the suggested stop from the plunger report).  I would suggest myself moving that down to breakeven now and you might go ahead and peel off 50% in profit on Monday.  This of course is a short-term swing trade only (based on the plunger and supported by our powerful de-trended study as well). 

In natural gas (NG) if you were filled at the worst price (lowest price) from the range of suggested entry prices listed for the natural gas reverse plunger in our daily plunger report for 10/27, you would have sold short at 8.773 on Thursday.  We opened 8.750 and got as high as 9.200 on 10/28 so you could have easily been filled at our higher price as well (which of course is the better price)  but for this example I'll use the worst case fill of 8.773.  Note we also did get as low as 8.620 on 10/28 so that would have been almost on the low.  Nevertheless that short position is showing a profit of $430 as of Friday alone.  Notice also how this market came down to the 18dma on Friday and held basically.  

The potential profits from these formations in both markets discussed above (CL and NG) could have been substantially higher if you were able to monitoring these markets intra-day on Wednesday (10/27) and picked up on the plunger formations as they were forming (intra-day).  This requires a bit more skill and obviously you need to have access to intra-day data and so forth.  Nevertheless,  had one noted this on Wednesday during the day and shorted either or both markets on Wednesday rather than Thursday this would have been a more optimum position to have.   That's because one would be able to fully benefit from the follow through selling on Thursday which is the selling that occurs immediately following a negative (reverse) plunger formation.  But at any rate, even using the worst case scenario we see that these still produced profits.  The NG of course also has one additional element that I need to point out!  It is coming off an IMPA sell selection which (the net-com position is just slightly above the LCL on our UCL/LCL graph).   Thus if NG can close under the 18dma for 2 consecutive days I continue to believe we may see a further move down (over the course of the next several days to weeks).   Let's look at the IMPA sell on the UCL/LCL graph here together. 

 

U.S. equities (S&P500 & Russell Futures) - These markets gained last week as well following the forward plunger formations in the S&P and ES on Monday.   We've also noted an increase in plunger formations recently in the indices and other markets which I'll discuss the significance of below in the paragraph beginning as "PLUNGER SIGNIFICANCE".  

For the week here we gained a very respectable $8750 in the Russell 2000 followed by $8600 for the week in the S&P (which again had a forward plunger buy on Monday).  We also had several intra-day FADE TRADES this last week which I have been providing reviews for in my evening reports.  You can access my intra-day S&P manuals throughout the vault and on our discussion board (the discussion board is for members only of course).  

This week:  This market may surprise everyone again this week and move higher (regardless of the election outcome).  As long as the election occurs normally (without any recounts or any of that) I think the market will rally. Overall the market and the data seems to be supporting a late Q4 rally.  

Notice also that this market did not slide any lower last week after many thought it wound recently due to so called "support being taken out".   I heard that a great deal the week before.  However, as I have said many times in these reports,  this idea of so called "support" and "resistance" being real important is really over-rated in my opinion.  Most of the testing I have done shows traditional support and resistance levels work less than 50% of the time.  The 18dma is far more reliable as is any moving average for that matter.   But using these terms (support and resistance) is very misleading in my opinion.  Generally these so called support and resistance levels are derived from OLD price areas and they don't provide any useful input about the future price structure.  The market does NOT have to hold any previous level for example.   But it can do it and it does enough of the time to keep many smaller traders (who follow this stuff) interested in it.  If I could identify something tangible in the data that proved it was useful I'd use the stuff myself of course (obviously)!  Like anyone else I want access to the most useful and important indicators too!  Nevertheless to date I can't find any significant relationship between traditional support and resistance levels or levels based on fibonacci numbers and retracement figures and so forth.  It all sounds really neat, but it just doesn't work however (not in the real world of trading anyway).  Bottom line is that I am a data person.  I agree with whatever the data agrees with or supports and nothing further.  I do have my instinct and that's exactly what it is.  I don't try to quantify it, I except it as my instinct and that's that.   Ultimately I know the market will go where its going and will not stop for any road blocks called "support" or "resistance". 

PLUNGER SIGNIFICANCE
Tracking number of plungers on a day to day basis as an indicator itself. 
Several markets recently experienced an increase in plunger activity as the overall plunger frequency is up.  I have talked about the significance of this in my recent reports as well.  When this happens its a signal in itself.  Lets discuss this in more detail now. 

We generally do not see more than 8 or 10 plungers in one day.   Its rare to have more than 10 in one day and above 11 is statistically significant.  This by itself is an indicator I follow and plot as well (i.e. the number of plungers occurring on a day to day basis).   I plan to provide a graph for this on the site (graph of the total number of plungers over the last 10 years).  Studies show that relationships exist between the number of plunger formations and the price structures in both individual markets and the commodity markets in general (such as the Goldman Saks and even the CRB commodity market indices).  However, as an indicator I have found this to be most useful in the financials (stock indices, currency markets and interest rates).  Recently however I have noted a correlation with the energy markets too.  Basically this is how I review it (analyze it). I plot the total number of plungers for the last 5 years and add each market as a separate curve (44 total, one for each market we track or trade, I left out the FF) and perform correlation analysis to see which markets exhibited highest correlation coefficient between tops and bottoms and plunger frequency.  Further analysis shows that this works best with groups versus individual markets.  For example I find the stock indices, currencies and interest rates as groups of markets tend to be most sensitive to this indicator.  The energy markets also showing some correlation and this may be increasing now as well (with energy prices becoming more and more crucial to the economy and thus crucial to the financial markets)

The total number of plungers can be tracked as a "trend" in itself basically as well (and that's what I was explaining above essentially).  When we see the frequency (across the board) increasing it is often a signal that a larger shift is taking place.  For example in this case we have discussed the potential topping in energy and a potential bottoming out in equities that may lead to a late Q4 rally (Nov. and Dec rally in the S&P, Nasdaq and Russell) which we've already see some indications of.   I've also discussed this in detail recently.

Lean Hogs - This market closed higher last week, up $500 on the week and above the 18dma for the 2nd day in a row as of Friday's close.  For now that places the trend back up and I will move to the side Monday (if short I'd recommend exiting remaining shorts Monday via our 2-day 18dma rule).   Some sold short immediately following the large reverse plunger at the top which I felt at the time was decent.  Overall we see that indeed it did provide a decent swing trade sell.   Lets review the graph together. 

IMPA Short sell selections and setups
(trending lower)

Lumber - This market has performed very well for us overall via the IMPA sell setup.  However,  as mentioned a number of markets have recently been affected by the plunger formations.  This included Lumber via a forward plunger which has resulted in a $3080 per contract move higher.  We are now back above the 18dma and Friday's close marks 2 consecutive closes back above this area.  Thus this triggers our exit (the exit for those who have been short for many weeks).  This secures a very decent profit overall all and on all remaining contracts as well.  You should have already taken at least one 50% profit of course.   Even though we have just finished higher for 5 days in a row we have done very well here as this market had been moving lower day after day for quite some time via a completed IMPA sell setup!  

* The links above are the ONLY place to find OLD Auto-pilot reports (dating back months and years)