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Intraday Report for February 7, 2012 1

Daily "Idealized Trades" Report


S&P 500 ETF: SPY

1 Corey Rosenbloom, CMT Afraid to Trade®


Intraday Report for February 7, 2012 2

2 Corey Rosenbloom, CMT Afraid to Trade®


Intraday Report for February 7, 2012 3

Today was rather difficult for new traders, given that the best trades were advanced “failure” trades that we call
“Popped Stops” plays (see archives for plenty of examples). Today’s session was also explained best by our longstanding
“Algorithmic Market Manipulation” thesis which states that algorithms/funds surgically inject capital into the market at
JUST the right time to create or force a short-squeeze (these Popped Stops plays we’ve been trading/explaining in the
reports). I spent a lot of time discussing the Algorithmic Market Manipulation thesis just about every day in January and
more prior to that, and today gives us a great example of why that narrative – or thesis – is so important.

In general, it states that we should frame our trades more to the long/buy side and be willing to take sub-par bullish set-
ups in real time and then be very demanding (conservative) with our short-sale trades unless they form intraday into a
known/obvious resistance level.

Case in point, though a lot of traders expected today to be a lower session (at least from the chart logic), the two best
trades of the session were Popped Stops plays from the failed morning break under $134 (and trigger above the 20/50
EMA at $134.20) and the failed break under the 50 EMA and Bollinger Band (poke) prior to the close (which triggered
Popped Stops for a sudden short-squeeze). Let’s refresh these ideas and learn about today’s trades.

1. POPPED STOPS BREAKTHROUGH


It should be common wisdom to you now that our top trading phrase is:

“IF something should happen but does not, THEN it often leads to a larger than expected move in the opposite direction.”

Not only is this good trading logic, it’s the general vehicle that funds are using to manipulate stocks higher via a long
series of busted short-sell patterns that force short-sellers to exit which drives price higher, creating these “Popped
Stops” opportunities for advanced/experienced traders (like you). The average trader continues to be chopped up and
popped out when they take a logical short-sale signal  that almost immediately fails.

It’s difficult for a new trader to understand quickly, but this type of logic comes in time. Logical trades don’t always work
out like they should, and when they don’t, price tends to move into the “pocket” of stop-losses (clustered around a
given price level) which then triggers their live orders, resulting in a sudden burst/impulse higher in price which tends to
be BIGGER than what most likely would have happened if the trade (set-up) worked as expected.

The first trade was a perfect illustration of this point. From last night’s report, I made it clear that $134 was a key
support level and to trade real-time bullish set-ups above $134. When price opened the session lower and broke under
$134, we then began looking for any short-sale/bearish trades that would develop under $134. When instead we saw
two ‘thrust’ bars that took price back above $134, our “bullish above $134” picture came back into focus. The trigger
signal came on the breakthrough above the 20/50 EMAs at $134.20 for our “Popped Stops” breakout play. The stop
went under $134 and we held this trade – per impulse/Popped Stops logic – as long as possible, which was the reversal
candles and divergences into $134.85 at 10:30.

Given the strength of the market, there weren’t really any short-sale trigger signals, and if you bought logical
support/retracement trades, price still continued to stagnate between $134.60 and $134.85 for the next few hours,
making trades in either direction fruitless. The final opportunity came at 2:30 with identical logic as the first trade – a
manipulated/cheated injection of capital that thrust the market higher to trigger more Popped Stops/Short-Squeeze.

2. POPPED STOPS TRAP


The breakdown under the 5-min 50 EMA was a logical short-sale opportunity, but traders who aggressively shorted here
were met immediately with a surge of buying that thrust the market higher into the “pocket of stops” above $134.80. If

3 Corey Rosenbloom, CMT Afraid to Trade®


Intraday Report for February 7, 2012 4

you didn’t get caught in the trap (remember, we were to be biased bullishly above$ 134) then you had a quick chance to
play the Popped Stops potential impulse that triggered above $134.85 (see 1-min trendline). The target was $135 and
beyond, though as you can see, the $135 target served as resistance as reversal candles developed for an easy exit.

Today’s session was likely very difficult for new traders, but also a great learning experience for the “Popped Stops”
concept – recognizing it in real time and acting accordingly (meaning quickly exit any short position that failed instead of
holding on, and looking to get long on the breakthrough into the “Pocket” of stop-losses). As such, 70 cents was
possible today.

4 Corey Rosenbloom, CMT Afraid to Trade®


Intraday Report for February 7, 2012 5

Recall that in January, I wrote almost every day about the “Algorithmic Market Manipulation” thesis. Today (really this
whole week, but especially today) played very well into that broader (controversial) narrative. Remember, we’re not
here to solve the mysteries of the market – only to make money. Pattern recognition and narratives/theses help us do
that, or at least frame common/repeated occurrences into a logical framework to help in our decisions.

How do we approach the trading session tomorrow? All eyes will likely be on the Greece vote/situation, so any surprises
there could send the market surging strongly through overhead resistance or else collapsing as so many traders think it
will. For a short-term unbiased trader (you!), look to continue trading long for more market manipulation/popped stops
(short-squeeze) above $135’s key resistance level, though if we don’t see that sudden breakthrough, be cautious and
willing to trade bearish developments that occur under $135 and especially $134.50.

5 Corey Rosenbloom, CMT Afraid to Trade®


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We look to broader narratives to put together different pieces of the price puzzle. For me, the “Algorithmic Market
Manipulation” thesis does the best job of putting together so many contradictory data points, including why advanced
and intermediate analysis (fundamental, technical, and quantitative) have failed from December to present and how the
best trades have continued to be the “Popped Stops” or otherwise bullish plays. I don’t claim to know all the answers
(no one should) but I know what’s working and what’s not and am eager to adapt to what’s working.

A simple glance at the chart above shows that bullish trend following (simple) strategies trumped complex strategies of
any sort – all of which most likely had you doubting the rally or expecting a reversal “any day now.”

All complex logic aside, CONTINUE trading long/bullishly biased if price continues its current pathway on a breakthrough
above $135. Yet don’t be blindly bullish – be cautious if price stagnates or retraces from the $135 target, looking to
trade short into $134 or $133. A big ‘collapse’ would take us back to $130 but until we see PROOF from price of a
breakdown, DO NOT TRY TO CALL A TOP. The truth is – if the market really is manipulated up, it will go up no matter what.

6 Corey Rosenbloom, CMT Afraid to Trade®


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If we keep it as simple as possible, we’ll continue being buyers on further moves above the current resistance cluster
between 1,340 and 1,370. We’re now officially into the target resistance zone where buyers will likely start taking some
profits and short-sellers will find it irresistible to put on a position here with a tight stop above the obvious cluster.
Should the market continue its upward move – overtaking these sellers – then those same short-sellers will capitulate
(buy-back their sold positions) at financial losses which will join with new and existing buyers putting on bullish positions.

In other words, we’re in a “gray area” battle zone at this exact moment, and will expect a bullish surge higher above
1,360/1,370 due to Popped Stops/Short Squeeze (capitulation and removal of hedges). Anything less than a bullish
surge here suggests that the market at a minimum will stall/stagnate here between 1,340 and 1,360, and should the
market fall back under 1,340 (as so many traders expect it to), then we can look to play intraday moves/trades that
target 1,300’s support.

If you’re blindly bearish in either direction, you’re almost certain to lose money. Be objective and rely on signals from price.

7 Corey Rosenbloom, CMT Afraid to Trade®