Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

CYWTP Blowout Christmas Extravaganza

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A Hermes handbag. A Tesla sports car. Chart Your Way to Profits.

All of these are on Christmas wish lists around the country, yet for many, their price makes them out of reach.

I, for one, intend to make a difference. On that last item – the book – I am doing a today-only offer of $50 for delivery by Christmas Eve for residents of the United States. That is one-third off the regular price, and I will happily sign the book to the trader of your choice.

Read about the book here, and if you want to pursue this once-in-a-lunchtime opportunity, send $50 via PayPal today to [email protected] – – there's no other book in the world about ProphetCharts, and even if there were, the author's hair wouldn't be as full and lustrous as my own.

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Review of Griftopia

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Please Note: since Matt Taibbi tends to write with an R-Rated word processor, some of the quotations from the book are on the blue side. Please wear your special Provo Goggles when reading this post.

Last night, I finished reading Matt Taibbi's Griftopia (which is on Amazon here), and I enjoyed it. However, I wasn't knocked off my feet by it for reasons I shall cite in a moment.

To give you a flavor of the book, I will type in a few excerpts:

Politics: "If you want to understand why American is such a paradise for high-class thieves, just look at the way a manufactured movement like the Tea Party corrals and neutralizes public anger that otherwise should be sending pitchforks in the direction of downtown Manhattan….That's why it's so brilliant for the Tea Party to put forward as its leaders some of the most egregiously stupid morons on our great green earth….the Tea Party has made anti-intellectualism itself a rallying cry…..What they are, and they don't realize it, is an anachronism. They're fighting a 1960 battle in a world run by twenty-first-century crooks."

Government: "There are really two Americas, one for the grifter class, and one for everybody else. In everybody-else land, the world is small businesses and wage-warning employees, the government is something to be avoided, an overwhelming, all-powerful entity whose attentions usually presage some kind of financial setback, if not complete ruin. In the grifter world, however, government, is a slavish lapdog that the financial companies that will be the major players in this book use as a tool for making money……the new America, instead, is fast becoming a vast ghetto in which all of which us, conservatives and progressives, are being bled dry by a relatively tiny oligarchy of extremely clever financial criminals and their castrato henchmen in government, whose main job is to be good actors on TV and put on a good show."

Greenspan: "Former Federal Reserve chief Alan Greenspan is that one-in-a-billion asshole who made America the dissembling mess that it is today. If his achievements were reversed, if this gnomish bug-eyed party crasher had managed to convert his weird social hang-ups into positive accomplishments, then today we'd be calling his career one of the greatest political fairy tales ever witnessed, an unlikeliest of ugly ducklings who through sheer pluck, cunning, and determination made it to the top and changed the world forever….[instead he] jacked himself off to the attentions of Wall Street for twenty consecutive years – in the process laying the foundation for a generation of orgiastic greed and overconsumption and turning the Federal Reserve into a permanent bailout mechanism for the super-rich." (note: there is an entire chapter devoted to Greenspan whose title, The Biggest Asshole in the Universe, tips you off as to Taibbi's disposition).

Mortgage Fiasco: "In this world, everybody kept up the con practically until they were in cuffs. It made financial sense to do so: the money was so big that it was cost-efficient (from a personal standpoint) for executives to chase massive short-term gains, no matter how ill-gotten, even knowing that the game would eventually be up. Because you got to keep the money either way, why not?"

Goldman: "One of the keys to talking to sources about any subject is clicking with their sense of humor, and I was noticing that with a lot of financial people I was calling, I was missing laugh cues whenever anyone mentioned the investment bank Goldman Sachs. No one ever just referenced 'Goldman'; they would say 'those motherfuckers' or 'those cocksuckers' or 'those motherfucking cocksucking assholes at Goldman Sachs.' It was a name spoken with such contempt that you could almost hear people holding the phone away from their faces as they talked, the way you do with the baggie you have to pick up after curbing your dog on the streets of New York."

Taibbi makes me look positively doe-eyed and optimistic. In any case, the first couple of chapters of the book are just terrific, but a good half of the book struck me as pissed-off filler about the health care system and commodities deregulation. On a scale of 1 to 10, I'd give the book about an 8, and I wanted to take the time to share with you some morsels so you could judge for yourself.

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Do You Use ProphetCharts? Get This Book!

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This post has nothing to do with AAPL. Time for a change of pace.

I just wanted to post a gentle reminder that I have a limited quantity of Chart Your Way to Profits Second Edition that I am signing and sending to anyone willing to part with $75 (for those of you who have been trying to short this market, you can send cans of dog food or S&H Green Stamps instead).

Please go to this page to read a bit about the book and get the particulars on parting with your hard-earned cash.

 

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Trading The Opening Gap (by Market Sniper)

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Trading the opening gap is a contrarian trade. You are looking to trade in the opposite direction of the gap. You will look to "fade" the gap. The stock market open at 9:30 Eastern time is a time, usually, of high emotions. You are looking to take advantage of those emotions.

What creates the opening gap?

The obvious answer is the price differential between the previous day's close and the next day's open. If your trading the broad market futures indexes, due to GLOBEX, there really is no opening gap. Trade resumes 15 minutes after the close (the close of pit trading and electronic trading for those is 4:15 pm eastern time and trading resumes in GLOBEX 15 minutes after that close at 4:30 pm eastern time) and continues until the open outcry (pit session) with the market open at 9:30 am eastern time. The gap would then be the price differential between 4:15 pm and 9:30 am next day. In the ETF's and individual stock issues, at the present time, there is no trading after the close at 4 pm with the exception of a often VERY thinly traded after hours session for a four hour period. If you are trading in the after hours, word of caution. Your broker may shut down your platform for trading one hour prior to close of the after hours session. You will then be required to call your broker and have him close out your position. That will possibly cost you extra on execution of such an order.

For stocks, the opening gap is created by an imbalance of of buy and sell market orders at the open (also known as MOO which is Market On Open orders). If there is an imbalance of buyers, the NYSE floor specialist and the electronic market makers will open the price higher in an attempt to balance buyers with sellers, Since they are charged with maintaining an orderly market, they will most often sell  stock into the imbalance so as to maintain that orderly market. This would make them net short on the open. The reverse would, of course, hold true if there was an imbalance of sellers, they would then supply stock at a lower price and they would be net long at the open. This is important to the understanding of why gaps tend to fill.

Why do opening gaps TEND to close?

The easiest explanationis because NYSE floor specialists and electronic market makers are in business to make money! If the specialist and or the electronic market makers have a net position either long or short, they will seek to move price in the direction of their net position. If short, they will seek to move price down and if long they will seek to move the price up. They accomplish this because they have vital information that you do not. Since they make a market, they have the resting orders! The NYSE specialist has, in his "black book" ALL the orders by price and size away from the market. He has the stop orders! So if he is short, he can move the price lower to trigger sell stops and thus move price lower so as to cover (buy back his stock short position) at a profitable price. If he is long the stock in his book, he will seek to trigger buy stops by moving price higher so as to, again, exit at a profitable price. There are many market maker games also that are employed to move price. This can be a special study all its own. To obtain more in depth understanding of this I recommend Richard Ney's two classics: The Wall Street Gang and The Wall Street Jungle. Also, a fine book by Joshua Lukeman, The Market Maker's Edge.

When do you fade the gap?

This is complex. All gaps are not created equal! I will briefly outline how I view each gap and give you some additional resources. My basic methodology is derived from the pioneering work of Scott Andrews, also known as The Gap Guy. I was a student of his and even was in his trading room for a few months. Since I now have all the data he does and have added my own refinements, I no longer subscribe but it is a very good place to start. Here is the link to his site. http://www.masterthegap.com/ Scott breaks the gap down into 10 zones. Five for up gaps and 5 for down gaps. Here is his zone "map" http://www.masterthegap.com/public/Gap_Zone_Map.cfm Now to utilize this, you will need to know the historical probabilities for each zone for that day based on the combination of 1) day of the week; 2) day of the month as well as identifying pattern risk. If your planning on using Scott's services, you should be aware of the stops he employs in his trades. It is 5 ES points or 30% of the weekly ATR whichever is greater. Be sure this fits within your risk management parameters. Not a futures trader? No problem. You can trade ETF's, stocks and if you are knowledgeable and very nimble, you can even trade options off the gaps! To give you an example of some historical probabilities by day of week for successful gap fills derived from the work of John Carter:

Monday             65%

Tuesday            77%

Wednesday       79%

Thursday           82%

Friday               78%

In John Carter's exceptional book, Mastering The Trade, he has an entire chapter devoted to trading gaps. Here are two of my basic rules as applied to ES gap fade trades: 1) I do not consider trading a gap that is smaller than 1.75 ES points and 2) if for any reason I do not trade the gap, I do keep it in mind during the trading session if, according to my trading methodology, a trade is triggered in the direction of the gap. Many gap fill trades can come out of other trade triggers during the session. In pen gap trading individual equities you must be aware if that gap was caused by some announcement directly related to the company you are trading. Was it caused by an earnings announcement or something else directly related to the company? If so, perhaps you should pass on the trade. Could be a gap and go situation! Even if you do not choose to include fading opening gaps within your trading plan, awareness of it can yield other dividends. It can set up price action for the rest of the day. The price reaction to the gap if not filled (gap and go) can give you an excellent heads up for a trend day, etc. I have a little pdf that I found about trading around the opening range (of which, a gap can be a large part of). I would be glad to forward it to anyone who wishes it. It is titled Trading The 10 O'clock Bulls. Email me at Dutch at WeJustTrade dot com if you have not gotten it.

The purpose of this post is not to encourage you to fade the opening gap willy-nilly or without discrimination. You must trade it or choose not to trade it based on your own plan. Do your homework on the subject, see if it fits within your trading psychology, methodology, etc. It is one of my top setups, if not the top setup as, with my own refinements, when do I fade the opening gap, I have better than an 80% positive expectancy for the trade. Awareness and understanding of the opening gap should be a part of every trader's tool box even if you choose not to include fading the opening gap within your trading plan.