Submitted by Tyler Durden

TCW, which incidentally is facing some pretty serious problems of its own lately, chimes in on Greece. Komal Sri-Kumar, Chief Global Strategist, is painfully realistic in believing that Europe should be much more worried about keeping the strength of the eurozone intact, and if that means jettisoning Greece, and devastating the euro, so be it. In fact, for an export-heavy Germany, this is precisely, as Zero Hedge has long been claiming, the end goal.

Greek Bailout

A couple months ago I started providing more of my intraday charts in hopes to educate traders on current market conditions so they feel like they are “in the zone” for trading. It’s crucial to understand the intraday moves and volume levels if you want to be consistently profitable trader. It doesn’t matter whether you are day trading or swing trading, you must be following daily and intraday charts.

I have been getting a few subscribers asking me: “Why I jump around from time frame to time frame so much?”

It’s a great question as some days I’m using the 60 minute charts, another day the 2 hour chart, and another the daily chart etc… well I hope to answer this question within this education report.

Trading Time Frames & Their Characteristics

Length of Trades – The longer the time frame you are trading the longer the trade will last on average. For example, if you are swing trading using the daily chart most trades will last 2-20 days, but if you are trading the 60 minute chart, then a trade may only last a few hours. Knowing this allows you to be more or less active depending on the market conditions or the amount of time you are available to trade.

Risk Levels/Draw Downs – The longer the time frame the more potential risk/draw down you will have. For example, when trading the daily chart you may set your protective stop below the previous days low. Depending on the investment, that could be $1-$50 per share or contract. Now compare this to someone trading the 5 minute intraday chart playing volume breakouts to generate quick gains. This person’s risk/draw down may only be 5-50 cents per share or contract.

This is the main reason why short term intraday traders play with larger amounts of money. Simply because their risk is so much lower, they can put more on the line for quick profits. On the flip side, swing traders should be trading much smaller positions to compensate for the increased risk.

Individual Personalities

Every trader sees the market in a completely different way because each of our brains process chart patterns and time frames differently. This is exactly what creates the market, everyone buy and selling at different times creating liquidity and the random chart movements.

The hardest part about trading in my opinion is figuring out what type of trading personality you have? It took me a few years to actually figure this out, but now I know exactly what type of trading strategies I’m good at and which time frames I prefer trading.

Myself, I like swing trading because it does not require a lot of time to follow the market, and trades last several days and sometimes weeks. But I also like to take advantage of the market when volatility rises and the market becomes choppy because this is when intraday trading becomes most profitable, in my opinion.

Personally I do not want to trade every day because it’s a ton of work and stressful. Rather, I prefer to sit back and cherry pick, only taking positions when I see a perfect setup. This way my win/loss ratio is very high, and I do not need to worry about finding trades every day or week.

Quick Note: When I am trading the intraday charts my focus is to find setups on the 60 minute, 2 hour, 4 hour an 8 hour charts. The reason behind this is that these longer intraday time frames provide very accurate trades and each trade lasts a few hours and sometimes a few days. Trading shorter time frames like the 5 minute chart is torture because you end up trading all day every day and to be honest that’s a lot of work and not fun at all.

So here are some charts showing you how different time frames show you different patterns, insight and setups:

SP500 Mini Futures contract – Daily Chart
Looking at the past 7-8 days we don’t really see anything exciting to trade as far as chart patterns go. So we sit and wait for something to unfold in a few days if we are lucky.

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SP500 Mini Futures – 2 Hour Intraday Trading Chart
What do you see? WOW a big fat head and shoulders pattern which indicates we should see lower prices.

Traders should have been looking to go short when the price was trading at this resistance level and the 5 minute chart confirmed resistance with the long upper candle wicks (reversal candles) shown in the charts below.

Important Note: When entering this trade, we did not know for sure it was going to be a head & shoulders pattern, but there was a high probability of it happening because of the previous couple day’s price action.

Notice how the left shoulder rallied up and got slammed by sellers, then the next rally (the head) also got slammed by sellers. This price action is bearish as institutions, hedge funds etc… dump positions once they have attained their profit goals for certain investments.

The next rally (right shoulder) drifted up slowly to test the previous resistance level. But look at how the price moved higher…. It drifted higher, which is bearish.

So, if buyers were still in control then we would have seen the price shoot straight back to resistance on big volume then form a mini bull flag (drift sideways) as it digests the resistance level before moving higher. It’s this price action here that was screaming at me to go short.

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SP500 Mini – 60 Minute Intraday Trading Chart
The 60 minute chart helps me to clearly measure how much potential there is for this trade. If you understand technical analysis you will know how to calculate a measured move. It’s simple really.

Take the previous move and add it to the where you think the price is headed. I’ve shown it in the chart below.

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Trading Time Frames Conclusion:
Well there you have it. I hope this report answers some basic trading questions.

If you would like to learn and trade at the same time I will be launching a service where I provide all my personal trades and analysis for your to follow along in real-time. Members will receive all my intraday and swing trade alerts for stocks, indexes and commodities allowing you to trade which ever vehicle you want whether it’s a high beta stock, leveraged etf, futures contract or cfd. This way your timing is accurate and you can trade which ever investment you are comfortable trading with.

There will be a 24/7 chat-room allowing us to trade around the clock when setups arise. Also, members can swap ideas, ask me questions, make new trading buddies etc… There is even a squawk box feature! When I talk everyone logged into the site can hear me for important news or trades alerts.

All trade alerts are instantly posted in the members area, chat-room and sent via email making it one of the most powerful trading services I have seen available online.

If you are interested please fill out the form to be notified for this service. It will have limited availability:

Get Notified Of Launch

Name:

Email:

Chris Vermeulen
http://www.TheTechnicalTraders.com/

Disclaimer: I currently do not have a position in the ES futures contract.

CalculatedRisk

Courtesy of The Pragmatic Capitalist

The market’s love affair with Ben Bernanke continued today as stocks rallied on the release of Bernanke’s written testimony. This was in the face of some pretty bearish news. New home sales data was very weak this morning coming in at 309K vs the expected 360K. This was a new low for home sales. It is a notoriously weak time of year for the housing market and I fully expect to see some stability in housing this Spring – particularly as procrastinating home buyers jump in before the tax credit expires. This data, however, shows what the market looks like underneath its calm surface. This is a market that is reeling and still at risk of substantial downside.

Stocks are rallying almost 1% this morning, however, as Bernanke reiterates the need for accommodative measures. Bernanke has essentially become a broken record. He is a one trick money printing pony and will reflate this economy regardless of the long-term destruction it causes. In his testimony he repeated the comments we have heard all too often. The economy is modestly recovering, inflation is benign and low rates are warranted for an extended period:

“The improvement in financial markets that began last spring continues. Conditions in short-term funding markets have returned to near pre-crisis levels. Many (mostly larger) firms have been able to issue corporate bonds or new equity and do not seem to be hampered by a lack of credit. In contrast, bank lending continues to contract, reflecting both tightened lending standards and weak demand for credit amid uncertain economic prospects.”

Source: Econoday

CalculatedRisk

Courtney Comstock of Business Insider

According to the Wall Street Journal’s sources, SkyBridge Capital is talking with Citi about buying Citi’s fund of funds business.

Citi plans to offload their $4 billion hedge fund investment business as part of a plan designed to unwind $715 billion in non-core assets, said the WSJ. The pool is currently down to $547 billion.

Apparently the current plan is to keep Citi’s employees in place. Citi’s core fund of funds earned 21% last year.

Read the full story on the Wall Street Journal.

Phil’s Stock World

As you can see from our chart set, our major indices are trading very much in synch, more likely than not propelled by trade-bots that already have the next 25 trading days already mapped out to take us through the end of the quarter. Of course you can argue that it’s perfectly natural for 8 of 9 different indexes to follow virtually identical patterns as a result of the random trading of millions of individuals trading Trillions of Dollars worldwide and that’s your perogative. I prefer to think of it as one giant scam and then figure out ways to make a little money off it for ourselves…

Several times last week I said to members I thought “THEY” were running the market higher so they could sell calls to suckers at high prices but, in general, the move was “fake, Fake, FAKE.” What do we do in the face of flagrant market manipulation? What do you think we do – we play along! We don’t complain about good manipulation when we see it – we join in! Don’t be confused by the fact that I complain about it in my morning post – once the bell rings we move right to the other side of the table and happily run with the wolf pack. We’ve tried to fight the power – it’s not fun, nor is it profitable…

We remained fairly conservative last week and, as I discussed in our “Weekend Trend Spotting” post, we are more inclined to believe we are in a range that centers around 10,400 than about to break back over 10,700. The bounce zones we predicted when we first began to sell off in January are finally being tested (red lines on above charts) but the 5% line (blue lines) are still exerting a pull and we NEED some healthy consolidation in between those blue and red lines if we are ever going to get serious about making a real move higher.

Speaking of healthy consolidation – Congrats to our own David Ristau of the Oxen Group and all the members who played along with yesterday’s specially featured selection of SAH. David nailed it in his 1pm post (also sending out a 1:06 Alert to our Members) and put us into the stock right in his target range at $9.45 and it looks like we’re getting a nice 3-cent beat this morning (20%) and this should be a very nice 5% day-trade gain. We also played the longer-term March $10 puts, sold at .95 and those are looking like strong candidates for 100% gains. If you want to get these trade ideas when they are published along with Alerts that come right to your inbox while the trade is hot -Subscribe HERE.

Evan Lazarus of T3Live.com

What had been one of the market’s leaders during the run-up from the March lows now looks weaker than the broader market. In today’s Trade for Thought, I took a look at a longer-term chart of Apple (AAPL) in order to gauge which way it will break next.

Traders, be sure to check out the web’s first-and-only Virtual Trading Floor, offering unparalleled access into T3 Capital Management’s elite Alpha Fund trading floor!

Zero Hedge

Much has been said lately about the record cash balance on the books of S&P 500 companies (ex. financials- those are a different story altogether). Bullish pundits claim that this money will be used for all sorts of M&A, stock buybacks, expansions, etc., to make the point that companies can’t wait to go out spending, so we should all front run them and buy whatever public companies may one day be on the auction block. We decided to take the inverse approach – by looking at the balance sheet and the cash flow statement of the S&P 500 companies (again, ex fins), we have attempted to understand just what the source of all this excess cash is. Listening to any of the permabulls on CNBC, one could easily get the impression that all this newly record cash comes simply from excess revenue which, courtesy of massive layoffs and a collapsing SG&A line, feeds an ever increasing retained earnings line, which in turn goes straight to cash. While this is certainly possible, our analysis indicates that the primary source of cash over the past year has really been a very generous cash “rotating” adjustment in some critical CapEx and Net Working Capital items. Our findings demonstrate that of the nearly $130 billion in additional cash on the books of S&P 500 companies from June 2008, through September 2009, two key sources, net working capital and a reduced capex spend, have generated over $150 billion, meaning organic operations have accounted for a whopping -$20 billion (yes, negative) of incremental cash.

We have used CapitalIQ data to analyze quarterly periods beginning in December 31, 2005 through September 30, 2009 (the data for the most recent quarter has not been fully compiled yet, with about 100 companies having yet to file a 10-Q. Once all the required data has been deposited into Edgar, we will update this analysis for data including the Q4 2009 period).

First, we present the cash holdings for all companies, ex. fins, that make up the S&P 500. It should come as no surprise to anyone that companies have been hoarding cash: whether this is due to uncertainties about the future, or some other reason, is irrelevant. Again, our focus here is whether this cash was accumulated fair and square, or whether it was some simple accounting fudge of balance sheet/cash flow items.

So once we know that S&P500 balance sheets are replete with cash, the next question is not where it is going, but where did it come from. In other words, is this merely a transfer from one asset/liability to another?

We analyzed the Capital Expenditures and Depreciation and Amortization data of the universe under observation. What we noticed was a dramatic reduction in cash outflow patterns, coupled with a substantial increase in the depreciation and amortization, beginning with the Q1 2009 quarter, or just after the economy went to hell in H2 2008. As the chart below demonstrates, CapEx which has historically trended not only higher, but represented an average $26 billion differential to Depreciation and Amortization over the past 4 years, took a sudden and dramatic leg down beginning in Q1 2009. At precisely the same time companies, no doubt in order to get the benefit of a D&A tax shield, ramped up their asset depreciation activities. The net result: for the first time in many years, the differential between CapEx and D&A turned negative: companies were depreciating more than they were adding to their PP&E, in Q1, Q2 and Q3 (although in Q3 the number turned just slightly positive). This is the definition of asset stagnation, as normal asset-intensive businesses (remember, this exercise excludes financial companies), need to add to their PP&E by more than they traditionally depreciate due to the unequal GAAP amortization schedules. In other words, in the first three quarters of 2009, the S&P 500 asset base depreciated by much more than it was repleted, thus substantially impairing its cash-generative powers. This can be seen on the chart below.

It is no wonder then that companies managed to “generate” substantial cash – instead of investing in their asset base, they simply let PP&E (unadjusted for various GAAP gimmicks) decline, while building the cash and cash equivalents portion of the balance sheet.

What will be the impact of this going forward as the PP&E has to be renormalized? In the LTM period CapEx – D&A was negative $42 billion, while the average LTM differential over the past 4 years has been positive $13 billion. This means that companies will have to spend an incremental $55 billion over time just to catch up to the PP&E trendline, let alone to add incremental cash generating assets. And since the immediate IRR for organic capex is traditionally much higher than for external acquisitions (with some notable exceptions), it is only after this catch-up has been accomplished, that the S&P500 companies will be truly seeking M&A opportunities, as opposed to what the mainstream media will have you believe. The topic of how much less in taxes S&P 500 companies paid in 2009 due to the tax shield nature of the incremental D&A boost is a topic for another day.

In addition to cash retention through asset deterioration, another favorite trick of company CFOs is to boost cash at the expense of Net Working Capital (ex. cash), i.e. the difference between current assets (Accounts Receivable and Inventory) and current liabilities (Accounts Payable). Therefore, the next analysis we did was to analyze the Net Working Capital status of S&P 500 members. The results were as expected: from a peak of $520 billion in June of 2008, NWC (ex. cash) has declined to the current almost three year low of $430 billion. In other words, as companies have accelerated their cash collections via declining AR balances, they have also pursued inventory liquidations, coupled with flat or expanding Accounts Payables. The chart below shows this accounting gimmick in vivid color:

Following the cash generated by this decline in NWC, leads to the following chart: as pointed out above, roughly $90 billion has been generated simply as a function of squeezing cash out of other current net working capital, and simply rotating this into the cash & cash equivalents balance sheet item.

So what does combining all this data conclude? As was pointed out initially, the non-financial S&P500 companies boosted their cash holdings by roughly $130 billion from June 30, 2008 through September 30, 2009. This would have been great if this was cash attained in the traditional way, whereby sales get converted into retained earnings, and cash, all else equal. However, a dig through several hundred balance sheets and cash flow statements, indicates that of this $130 billion cash increase, about $90 billion was due to Net Working Capital Changes, and another $55 billion was due simply to underfunding capex by an amount required to preserve maintenance cash generation from existing asset bases. Which means that of the cash boost, operations generated a whopping…($15) billion in cash! Had companies not been using accounting gimmicks to boost cash on a one time basis, current cash would likely have been about $15 billion lower than June 30, 2008, or $688 billion. The adjusted cash balance, normalizing for Net Working Capital shifts and normalizing CapEx spending since June 30, 2008 is shown below:

The conclusion is that one should be very wary of generalizations such as those by JP Morgan which claim that companies, sitting on huge cash war chests, are now ready to go out and spend, spend, spend. The truth is that had companies not been using various accounting fudge factors, their real cash position would have been much more precarious. Should companies revert to their mean Net Working Capital and CapEx exposure over the past 4 years, we will see $155 billion of cash disappear merely to plug the hole that was dug over the past 3 quarters merely to make S&P 500 balance sheets more palatable.

We will update this analysis with Q4 data as soon as it is available in its entirety.