March 9, 2022

The big picture is that of a market involved in a bottoming process that began with the late-January low, continued with a positive test two weeks ago, and is staging another test this week.

As the chart shows, this has the look of a triple bottom with this week's low coming on heavier volume than either of the two preceding lows.

The higher volume of Monday and Tuesday is actually viewed as a plus, since it begins to reflect a sold-out market in which a lot of the bad news is being priced in, or discounted. This discounting process is not understood by some investors, but it is part and parcel of the market's identity of being a discounting mechanism.

This means no matter how good or bad the backdrop is, the market will always discount expectations for the next 6-9 months, roughly, into today's prices. The market simply sees better than us mere mortals. Our market timing model seeks to embrace this fact and take advantage of it rather than fight it.

Of import: Stocks are getting a lot thrown at them these days, but the Nasdaq trades exactly where it traded six weeks ago. This is a distinct plus, and further suggests a market that has discounted much of the bad news.

Remember, they don't ring a bell at the bottom. The market tends to bottom when the backdrop is bleak and few give it much of a chance to do anything.

This is not to say we are putting in a bottom, necessarily. But the current bottoming process is a step in the right direction.

The game plan is to continue to play things close to the vest. This means cash and being patient to wait for another rally in the averages that might lead to another shorting opportunity.

Since the short side has done well for us during this bear market that began in November, I will see if the number of short ideas can be expanded without changing the model adversely. The success rate is high, but the trade frequency could be boosted. More on this below.

 

Q&A

Subscriber: "In one of your tweets yesterday you said, "20 ema is really the key ma. It is the one we use to time early entries and works extremely well on all markets and all TFs". Is there a source for members at your website that explains ways to use the 20 EMA for trades? I'm guessing in an uptrend we would look for pullbacks to the 20 EMA and go long at possibly the high of that pullback bar?"

K.M.: I do not use the 20 ema as an entry-upon-touch point b/c I want to see a sign that price has already begun to lift out of the pullback. However, it is key to "describing" the strength of the trend (e.g. too strong of a pullback when price takes out the line too deliberately is not good) and as a buy/sell line. The latter tells me whether a market should be looked at as something ready to be longed (if price is above the line) or shorted (if price is below the line).

Subscriber: I am confused. On your 3 recent shorts, you recently said that 1 of them was stopped out, 1 was negated because it traded through the entry at the open and only one of the three was still active. I looked at all 3 of them and couldn't figure out which was which. It would be very helpful if you would do more to let us know something new is on the focus list.

K.M.: Thank you for your email. I send a private blog post whenever there has been a change to the Focus List either intraday or prior to the open. These situations do not occur often. Otherwise, I attempt to post it right around the posting of the video or report. Last night it did not get updated as there was a technical problem with the file. This ended up being my fault, but it did provide my first opp of working with the site's new administrator. To ensure you are missing nothing, it would not hurt to check the Focus List an hour or so before the open, so about 8:30 a.m. ET. However, a notification email would have been sent out by then if there was a change to be made.

I just went over all short triggered trades since Nov. 22 when this bear market started. Per your question, what happened was I changed the rule about needing to see a trade-through entry (for shorts only), which you are aware of. I did this recently and I know it changed the outcome of a few trades since I verified the results after I got your email today. For shorts in this bear market (including inverse ETFs), there have been 12 wins, 1 loss. (Before the rule change, it was 14 wins, 2 losses.)

This is a 92% win rate and a profit factor of 12. The sample size is too small to attach much significance to these figures. Personally I would be quite pleased with a profit factor of 3.

Dec ASAN short (Win)
Dec BILL short (negated)
Dec DOCN short (Win)
Dec TWLO short (Win)
Dec ZS short (negated)
Dec JKS short (Win)
Dec TEAM short (Win)
Jan MSFT short (Win)
Jan ZI short (negated)
Jan ZS short (Win)
Jan SARK long (Win)
Jan SQQQ long (Win)
Feb APP short (negated)
Feb SE short (negated)
Feb TSLA short (negated)
Feb SQQQ short (Loss)
Mar BLKB short (Win)
Mar MNDY short (Win)
Mar PATH short (Win)

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
System R
Short-selling video (25:53)
Wyckoff spring setup (2:30) 
5-minute breakup test (8:01)