This is a great video that explains the Theory of Reflexivity. Enjoy!

• 0 comments »

This guy, Bo Yoder has come up with which I think a great idea for struggling newbie traders to raise capital for their trading. He found that most traders tend to fail in their trading career not because the lack of skills or whatsoever. The reason behind their failure is the lack of capital aka undercapitalized. In his survey, he found that most traders started with a capital amount between 2000 to 5000 bucks which is so so tough to trade profitably.

He named this trading strategy the 'Cash Bomb Sequence' which in turn I call it the 'Do or Die' strategy. The idea is to fund a small amount of money and leverage it to the maximum. Of course, this is not the right way to trade in long term but the objective here is to raise enough capital in a short time so that you trade comfortably in a later time. He assumes that losing the entire small amount of capital for this type of trading will not kill you in any way.

I guess he himself can explain the whole idea better. Read more about it here.

• 0 comments »

So this is the third post of me calling for a pullback of the current rally. Reasons after reasons that I gave, and yet we have not seen a meaningful correction yet. To me, it was disappointing but still I have to accept it. Yes, I took loss on my April Bear Call position.

So we have seen a six week rally and what now? No doubt, in medium term, this is a bullish market which I mentioned earlier. However, in my mind, the overall market is still bearish, a long term view. Perhaps, that is why I was defeated by the bull. I was anticipating a significant pullback day after day, only to see the market making higher high day after day. Even Bear Calls position which I consider a safe strategy got hit. Yes, the bear lost but at the same time, I am still sticking to it. I think it is too late for me to shift to the bull side considering the risk reward ratio.



Looking at the chart of SPX above, we can see a formation of a rising wedge which is a bearish sign. Yeah, of course this call for a pullback might fail again and therefore, I do not have any open position (except for some Bear Calls) until I see a strong confirmation of a pullback. Any break below the wedge with high volume and long solid red candle would be the trigger to the downside. Meanwhile, looking back at the VIX on March when the rally started, SPX is actually trading very close to 2 standard deviation and this is the reason behind the entry of my Bear Calls position.

• 0 comments »

My anticipation of a correction on the current rally which I mentioned on the previous post did not come true. The market did fell on Monday but I don’t think that could be considered a meaningful correct in comparison to the magnitude of the current rally. Hence, I still look forward a correction to come very soon.



The S&P 500 Index made another new high yesterday. It pulled back in the final hour to close right at the 61.8% Fibonacci Level. What’s more interesting is, we have a price/oscillator divergence. The index made a higher high while both slow stochastic and RSI have a lower high. This is also known as a Bearish Divergence. In fact, divergence signals are also seen in the Dow and NASDAQ. From what I have observed so far, divergence signals are very reliable on both daily and intra-day charts. While the index may not be falling as hard, I am still expecting it to go lower from here for few days to come. If my expectation is right, I shall start to see profit again with my Bear Call position on SPY which expires slightly more than 2 weeks from now.

Coincidently, today is the first Friday of April which we will expect the announcement of Non-Farm Payroll. Is this going to be the first test of this rally? Let’s see.

• 0 comments »

There is a trading theory that goes like this.

Candlestick theory states that after about eight to ten
new highs or lows, without a meaningful correction, the odds are strong
that a significant correction will unfold. Each new high or new low for
the move is called a "new record high" or "new record low" by the Japanese.

Referring to the chart of S&P 500 above, we have actually seen 10 new highs since it started its rally on 10 March. If slow stochastic is used an overbought/oversold indicator, this has been the longest period we are in the overbought zone (above 80) since May 2008. So, are we going to see another bear leg? Although I still think that the bear market has not ended yet, RSI is telling me another story. It told me that the bull is back at least for the medium term. It looks like both sides are equally possible now.

• 0 comments »