Intraday Report for February 1, 2011 1

Daily "Idealized Trades" Report

S&P 500 ETF: SPY

1 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 2

As long as we stay above 1,300, the "History Repeating" scenario is of course off the table - and we got that breakout
today. I quote the last paragraph from last night's report (with emphasis):

"The only caveat I might add is that the Fed is actively manipulating cross-markets with QE2 and investors are thus
reacting to the future inflation that the Fed is openly creating - so that may be the overriding factor that derails the
train here from 'crashing' as it did in May. Believing that the Fed/QE2 is manipulating markets and acting accordingly
('stupid with longs, smart with shorts) has proven to be FAR more profitable than believing against it, so it may be that
the QE2 manipulations overrule this historical train on its previous course this time and we avoid a crash. Perhaps the
Fed knows this and will do anything it can to prevent the crash - so do keep close watch on developing structure."

2 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 3

So let me make it as clear as possible, in terms of what I've been saying for the last few months:

THIS IS A BULLISHLY (LIQUIDITY) MANIPULATED MARKET. And this belief helps us make money, not lose it.

The economy is recovering as is the case after a recession so that's on check - earnings are up and consumer sentiment
among other measures are rising. However, as I wrote in a report explaining QE2 after the Fed Statement, the Federal
Reserve does not believe the economy is recovering quick enough, and that unemployment is too high while inflation is
too low. Therefore, they have decided to embark on an extremely risky course of economic stimulus - now called
"QE2" - wherein the Federal Reserve increases the money supply (printing money which is inherently inflationary) and
buying-up US Treasury Debt in an attempt to drive down yields (also inflationary as it helps spur economic development
and cheaper borrowing/expansion costs). A recovering economy + Fed Intervention = SKYROCKETING prices. Simple.

What we've seen from the September low - as a result of these policies, the recovering economy, and the cross-market
direct manipulation - is that investors are preparing for the future inflation, buying literally every single dip on virtually
every single day on the way up to the present. My guess is that markets today are efficiently pricing in future inflation.
Remember, I'm not complaining or 'whining' by calling markets manipulated - I'm stating an observation wherein
"manipulated markets" seem to be the glue that holds all the strange information together, such that - and here's what's
MOST important - the belief in liquidity manipulated markets has helped me and fellow members MAKE MONEY, as
opposed to not believing in manipulated markets and being stopped out repeatedly from the short side. I'm stating this
as the overarching thesis that helps me make trading decisions during the day - namely because of manipulated
markets, I want to play very aggressive (to the point of stupidity) with longs and very conservative (only for quick
intraday trades) with short sales. Again, this belief in manipulated markets is perhaps the top factor in profit-potential.

I know people are having a hard time with this as I receive your emails and hear your frustration that "the market just
won't go down." Alternately, others are having a very easy time with this - those that believe the QE2 Manipulation
Thesis and are acting accordingly. I've said so many times "Play stupid with your longs and smart with your shorts" and
risked my reputation by calling the market "liquidity manipulated," but months later and with a non-stop breakout
through 1,300, it would appear those admonitions, analysis, and commentary were correct and was the simplest way to
profit from this potentially once-in-a-lifetime situations where the Fed is actively and openly manipulating financial
markets.

There's no need in me repeating this every day but days like this it's important to do so. Markets are driven by supply
and demand - so it was perfectly fine to try to short aggressively to expect a pullback as we challenged 1,300 with
divergences. However, buyers in aggregate overcame the sellers at 1,300 and now as the market is higher than 1,300,
all those who shorted (for anything more than a day trade) are now forced to endure the pain of loss, or BUY BACK to
cover, which adds further bullish fuel to the fire.

I come back to my original teaching that the BROADER NARRATIVE - that of the QE2 effects - is more important than
ANYTHING and that SIMPLE methods will trump complex methods as long as we're manipulated up. The upside break
was the alternate scenario - I think we all were expecting a deeper pullback than a single day - but in the context of
MANIPULATED MARKETS - perhaps this breakout should have been the expected play all along.

So today's trades and the official breakout through 1,300 were in line with this same old QE2 Liquidity Manipulation
thesis, and all trades were based on the logic of a Positive Feedback Loop and the Popped Stops pain from the bears.

3 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 4

1. BREAKTHROUGH ABOVE $130

This was the simple notion that IF buyers got us back to and above $130 (1,300) THEN we would look to play Popped
Stops to make money from the bears who were stopping out. The situation was different than Friday because breadth
and internals helped CONFIRM the move (chart later) instead of DIS-CONFIRMING it like Friday which gave us a great T3
trend day DOWN in collapse fashion. Today's action was a pure popped stops "collapse" to the upside, though the word
"capitulation" might be a better word.

Anyway - your goal as an intraday trader is to put the pieces together, come up with objective IF/THEN statements to
play if a trigger (breakout, for example) happens intraday, and trade within the context of a price move as it occurs in
real time towards or away from a key level. So you could have tried for a core position trade as price rallied to new
highs above $130.30's prior high from Friday (to be safe) or on the initial breakthrough from $130 on increasing
internals. Either way, this was a unique situation where Popped Stops was expected to carry price higher and a T3 Trend
day was certainly possible given the volatile state of the market and "all eyes" on 1,300. While it was certainly not
expected that we would go above 1,300 so quickly after such a bloody Friday, it WAS expected and WAS tradable that
any sort of sustained move above $130 SHOULD lead to a violent popped stops positive feedback loop mode - and that's
what happened. So it was your job to stay on top of price action and keep trading long while the feedback loop (new
buyers buying with old short-sellers buying) continued.

2. FLAG BREAKOUT
This was your classic aggressive positioning on a trend day, given that the market could not even pull back to the 20
EMA. In positive feedback loops, such as was expected if the market firmly (not just by a few pennies) broke above
$130, then the game is to GET THE TRADE ON or miss the move. If you try to play conservative or play perfect, you'll sit
on the sideline - positive feedback loops are rare and different than normal conditions, and thus call for (demand)
aggressive tactics. It's totally fine if you do not feel you can make these trades - you're not required to. If you can't
bring yourself to chase markets, then don't. Just realize that you can't catch every move and positive feedback loop
environments like this that erupt from major turning points on charts - that drive in multiple timeframe players big and
small - are unique situations where price continues in one direction indefinitely.

The best entries will come from monitoring structure on the 1-min chart - or just holding long for the majority of the
trading session unless price breaks down through the rising 50 EMA on the 5-min chart. Either we get a breakdown
through the 50 EMA or the market closes - otherwise you are to remain biased/trading long. If this was your first entry,
you could have held it until the close else you exited at either the 11:30am or 12:30pm little reversal candle and
divergences at the upper Bollinger at $130.70 or $130.90 respectively.

While you certainly could have attempted a short-scalp at the $131 level - notice the doji, upper Bollinger, and dual
divergence - these trades are VERY aggressive and often ONLY good for little scalp moves to the rising 20 EMA. It would
have worked but it was very risky. The final trade was a retracement breakthrough.

3. 20 EMA, RETRACEMENT, TRENDLINE BREAK

Simply stated, the market paused sideways and formed a declining parallel trend channel until price broke through the
channel with two thrusts at the $130.80 level at 2:00pm. This was your entry to try to play for the $131 level again,
which was hit prior to two down bars ahead of the close. Given the proximity to the close, this didn't allow for much
time to run higher so it wasn't a perfect trade, but a bull set-up nonetheless.

4 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 5

If you put on a core, 'all day' position from the initial break above $130, or the trade 2 break to new highs, then you
could have made a little less than $1.00 if held until the close (the stop is always trailed under the 50 EMA). Use smaller
position sizing for core positions and larger sizes for aggressive scalps around your core - ALWAYS in the direction of the
prevailing trend day and NEVER against it (unless you are experienced at doing so and understand the risks).

Otherwise, without the core, 60 cents to 80 cents was possible, depending on how you exited trade #2 (less if you exited
where I drew it above, more if you went up to the doji break at noon).

5 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 6

You may be surprised to know that volume "slightly" confirmed today's big bull breakout - it did not do so convincingly
(only 520,000 shares of outperformance above the 10-day average per period).

Volume was heavy, but not overwhelming. I'd keep a close watch on price in hopes we get more volume in here.

6 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 7

I mentioned earlier that internals were much stronger on the initial move UP this morning AHEAD of the 1,300 breakout,
and then stronger STILL on the actual breakout, rallying on to new highs to close the session at the 2,000 level. What
we're seeing above is Breadth through two viewpoints - pure (price) and histogram (lower panel). Main idea is that prior
market turns (recently) were marked with obvious divergences in breadth and now we see price and breadth at new
highs, suggesting confirmation and the potential for further upside action - and confidence that the break would hold.

7 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 8

The 'expected' play was for price to pause at the confluence EMA level just shy of $129 but I guess an intraday pause is
all we get. The expectation was two-fold from last night's report:

1. A breakthrough above $129's resistance should lead to a play to $130

2. A "Repeat Pattern" of the April prior top fractal gave today a BIG up day

Both came true, only price went as far as to trigger the Positive Feedback Loop and official Popped Stops play.

Though I would like to see volume surge higher on the break, the game plan is thus very simple:

As long as we're above the $130 level - particularly breaking up beyond $131 - then this is a buyer's market and you
should trade that accordingly. A move down from here is possible, though anything under $130 would be a short-term
breakdown of a key expected support level - and we won't expect that for our dominant thesis.

8 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 9

Same thing - the price breakthrough early targeted the $130 level, and buyers pushed price above that, triggering the
Positive Feedback Loop where old short-sellers were forced to cover as new buyers entered the system - as both bull
AND bear drove prices higher.

We'd expect that to happen again tomorrow UNLESS the repeat pattern I described last night comes true, wherein the
next day (today) was an UP day (that didn't quite make a new high) and the day after (tomorrow) was a down day.
We'll keep watching for that but until then, we're in clear and objective BULL territory. No bears allowed.

9 Corey Rosenbloom, CMT Afraid to Trade®

 Intraday Report for February 1, 2011 10

Another reason I'm calling this a Liquidity Manipulated market is the signals from volume and momentum being
completely trashed as price just goes higher and higher. That's in line with a "Nothing matters but price and moving
averages" environment, such that I've been saying for months. But I at least thought we'd get something more than a
one day move. Apparently not, which truly underscores the point that the market is liquidity manipulated and designed
to create inflation - as in falling dollar rising stock market.

The simple math goes like this: A Recovering Economy (bullish) PLUS the QE2 manipulations (bullish to create inflation)
EQUALS non-stop rising stock market. So far, the math overrules everything - this is a liquidity-driven market.

It's a bull for popped stops as suspected above 1,300, cautious from 1,280 to 1,300, and bearish for a play to 1,260 ONLY
if we're under 1,280. Do keep in mind this is a manipulated cross-market (Fed is printing dollars and buying Treasury
notes over the course of the next few months to drive yields down and purposely create inflation)- I cannot say that
enough.

10 Corey Rosenbloom, CMT Afraid to Trade®