Thursday, December 8, 2011
The 10 Key Differences Between Bull and Bear Rallies
http://www.traderslog.com/the-10-key-differences-between-bull-and-bear-rallies/
http://tradesystemguru.com/content/blogcategory/23/53/
1. Learn to instantly recognize cyclical versus secular trends on any stock chart. Cyclical bulls and bears are much shorter-term compared to a secular market bull or bear. At the other end of the scale are the powerful but brief one-day sucker’s rallies. Those with short investment time horizons can still make money buying stocks during a cyclical bull within a secular bear market. However, cyclical bulls can be very expensive for those without clearly defined exit strategies. No matter what your time horizon, it’s important to be aware of the prevailing secular and cyclical trends and trade accordingly. Overstaying your welcome in a trade during a cyclical trend can be very costly for those who get it wrong when the secular trend resumes.
2. Short-term bear market rallies are much more powerful than shorter-term bull rallies. Relief rallies are extremely powerful and why selling short can be so dangerous. This is one big reason why traders such as Dan Zanger prefer long trades.
“You can make money in both bull and bear rallies, but it’s a lot tougher in bear markets. It’s important to remember that the max you can make shorting a stock is 100% and that is only if the stock goes to zero. You have a limited upside but unlimited risk if the trade goes against you,” opines Zanger. “But you can make thousands of percent during a strong bull rally and unless you’re trading on margin, the max you can lose is what you paid for the stock in the unlikely event that it goes bust.”
3. Relief rallies in bear markets generally lack follow through. This point is a subset of point 2. Unlike bull market rallies, powerful bear rallies are often followed by ugly down days. In other words, buying into a big bear rally can be even more expensive than trying to catch a falling knife, the dangerous habit of buying during a big correction. So even if you do make money initially buying a bear rally, the gain can become a loss in short order.
4. Buying volume is higher on up days in a bull rally. In a bear rally volume is higher on the down days. This is one way that a trader who’s been away from the market can quickly tell which kind of market he is in. Stock rises tend to occur on falling volume in a bear rally. If volume falls during an up move, it often signals that the rise is nearing an end. Don’t get caught.
5. Bullish pattern failures are more frequent in bear rallies. According to Zanger, a pattern failure can often be a powerful signal to reverse direction. He provides a detailed description of the most powerful chart patterns such as cup & handles, head & shoulders, flag and pennants and parabolic curves at http://www.chartpattern.com/understanding_chart_patterns.html If you are in a long trade and there is a pattern failure, it is an exit warning. Cyclical chart patterns also tend to have a shorter duration than the same patterns occurring in a secular market.
6. Market sentiment responds differently in bull and bear markets. Bull markets climb the proverbial wall of worry. Both bullish and bearish sentiment tends to be more muted with euphoria usually only occurring near the end of the move. Bear markets on the other hand, slide down the slope of hope and are generally accompanied by extreme highs in sentiment followed by extreme lows (highs in bearish sentiment) which is another reason why volatility is higher during bear markets. Hope is one big reason why relief rallies can be so powerful. Pent-up investor optimism causes investors to pile into stocks on positive news, whether it is real or perceived.
7. Volatility is higher during bear rallies. Large shifts in sentiment aren’t the only reason for increased volatility during bear markets. As we have witnessed in the last four years, there are a number of other factors. Institutional traders must quickly react to big swings by unloading large positions. Governments also get involved in markets, especially around election time, making changes in monetary policy that can have a large impact on stock prices like we saw on November 30, 2011 when central banks led by the Federal Reserve announced that it was opening the discount window to European banks. This was perceived as good news and caused the huge spike in stock prices.
8. Short squeezes occur more often and are more powerful during bear markets. This is one big reason that shorting can be so dangerous. A short squeeze occurs when those who have borrowed a stock to sell short get caught when unexpectedly good news temporarily propels the price higher. Those with short positions scramble to cover (buy back) their short positions and in the process help propel the stock price even higher. Unfortunately for these shorts, the price usually hits their selling target but only after they have been forced out of the trade.
9. Leadership isn’t clear during a bear market rally. Different stocks generally lead the next bull market than did during the last bull. During the tech bubble in the 1990s, Internet stocks were the dominant leaders but financials led the next bull rally in 2003. Changing leadership is further confirmation that a new bull rally has begun according to Zanger. However, if leaders are defensive stocks such as utilities, it usually indicates a countertrend rally, which is a shorter-term rally in the opposite direction of the larger trend.
10. If a rally is occurring below a previous high, it’s either a bear rally or cyclical bull until proven otherwise. A new secular bull trend in U.S. stocks in real terms won’t be confirmed until the S&P500 breaks well above the 2000 high of 1527 and the longer that takes to occur, the higher the confirmation threshold will be. Until that time, any rally will simply be a cyclical bull rally.
Putting It All Together
It is a key requirement that to be successful traders must learn to differentiate between moves that are potentially profitable and those that aren’t. Zanger relies on his stock market leaders to help him decide when the time is right to buy. He then uses chart patterns and volume to help him confirm the trade and then tell him when it’s time to get out. Assessing the strength and duration of the current rally is an essential requirement.
http://tradesystemguru.com/content/blogcategory/23/53/
1. Learn to instantly recognize cyclical versus secular trends on any stock chart. Cyclical bulls and bears are much shorter-term compared to a secular market bull or bear. At the other end of the scale are the powerful but brief one-day sucker’s rallies. Those with short investment time horizons can still make money buying stocks during a cyclical bull within a secular bear market. However, cyclical bulls can be very expensive for those without clearly defined exit strategies. No matter what your time horizon, it’s important to be aware of the prevailing secular and cyclical trends and trade accordingly. Overstaying your welcome in a trade during a cyclical trend can be very costly for those who get it wrong when the secular trend resumes.
2. Short-term bear market rallies are much more powerful than shorter-term bull rallies. Relief rallies are extremely powerful and why selling short can be so dangerous. This is one big reason why traders such as Dan Zanger prefer long trades.
“You can make money in both bull and bear rallies, but it’s a lot tougher in bear markets. It’s important to remember that the max you can make shorting a stock is 100% and that is only if the stock goes to zero. You have a limited upside but unlimited risk if the trade goes against you,” opines Zanger. “But you can make thousands of percent during a strong bull rally and unless you’re trading on margin, the max you can lose is what you paid for the stock in the unlikely event that it goes bust.”
3. Relief rallies in bear markets generally lack follow through. This point is a subset of point 2. Unlike bull market rallies, powerful bear rallies are often followed by ugly down days. In other words, buying into a big bear rally can be even more expensive than trying to catch a falling knife, the dangerous habit of buying during a big correction. So even if you do make money initially buying a bear rally, the gain can become a loss in short order.
4. Buying volume is higher on up days in a bull rally. In a bear rally volume is higher on the down days. This is one way that a trader who’s been away from the market can quickly tell which kind of market he is in. Stock rises tend to occur on falling volume in a bear rally. If volume falls during an up move, it often signals that the rise is nearing an end. Don’t get caught.
5. Bullish pattern failures are more frequent in bear rallies. According to Zanger, a pattern failure can often be a powerful signal to reverse direction. He provides a detailed description of the most powerful chart patterns such as cup & handles, head & shoulders, flag and pennants and parabolic curves at http://www.chartpattern.com/understanding_chart_patterns.html If you are in a long trade and there is a pattern failure, it is an exit warning. Cyclical chart patterns also tend to have a shorter duration than the same patterns occurring in a secular market.
6. Market sentiment responds differently in bull and bear markets. Bull markets climb the proverbial wall of worry. Both bullish and bearish sentiment tends to be more muted with euphoria usually only occurring near the end of the move. Bear markets on the other hand, slide down the slope of hope and are generally accompanied by extreme highs in sentiment followed by extreme lows (highs in bearish sentiment) which is another reason why volatility is higher during bear markets. Hope is one big reason why relief rallies can be so powerful. Pent-up investor optimism causes investors to pile into stocks on positive news, whether it is real or perceived.
7. Volatility is higher during bear rallies. Large shifts in sentiment aren’t the only reason for increased volatility during bear markets. As we have witnessed in the last four years, there are a number of other factors. Institutional traders must quickly react to big swings by unloading large positions. Governments also get involved in markets, especially around election time, making changes in monetary policy that can have a large impact on stock prices like we saw on November 30, 2011 when central banks led by the Federal Reserve announced that it was opening the discount window to European banks. This was perceived as good news and caused the huge spike in stock prices.
8. Short squeezes occur more often and are more powerful during bear markets. This is one big reason that shorting can be so dangerous. A short squeeze occurs when those who have borrowed a stock to sell short get caught when unexpectedly good news temporarily propels the price higher. Those with short positions scramble to cover (buy back) their short positions and in the process help propel the stock price even higher. Unfortunately for these shorts, the price usually hits their selling target but only after they have been forced out of the trade.
9. Leadership isn’t clear during a bear market rally. Different stocks generally lead the next bull market than did during the last bull. During the tech bubble in the 1990s, Internet stocks were the dominant leaders but financials led the next bull rally in 2003. Changing leadership is further confirmation that a new bull rally has begun according to Zanger. However, if leaders are defensive stocks such as utilities, it usually indicates a countertrend rally, which is a shorter-term rally in the opposite direction of the larger trend.
10. If a rally is occurring below a previous high, it’s either a bear rally or cyclical bull until proven otherwise. A new secular bull trend in U.S. stocks in real terms won’t be confirmed until the S&P500 breaks well above the 2000 high of 1527 and the longer that takes to occur, the higher the confirmation threshold will be. Until that time, any rally will simply be a cyclical bull rally.
Putting It All Together
It is a key requirement that to be successful traders must learn to differentiate between moves that are potentially profitable and those that aren’t. Zanger relies on his stock market leaders to help him decide when the time is right to buy. He then uses chart patterns and volume to help him confirm the trade and then tell him when it’s time to get out. Assessing the strength and duration of the current rally is an essential requirement.
Tuesday, December 6, 2011
Market showing weakness or strength?
Clearly market is finding a lot of resistance at 200MA. Whenever market touched the 200MA, it sold off. But it also found out a lot of dip buying. Hence in the past three days, we see the market hanging around and going nowhere even though there are a lot of intraday volatility. Some continuing sideway move or retest 20ma is the best scenario for the market. In this way, it will gain investor's confidence. A lot of investors staying sideline now will see the market strength. Once they join in, we will see 200MA being overcome decisively. Maybe it will happen on this Friday when European banks gives out good policy or next Tuesday when FED comes out a QE3.
I hate to say I made another silly mistake again today. I made a very good trade into a losing trade. Yesterday I longed SWC at 11.20, then it went up to 11.80 in just one hour. Today I was stopped out at the lowest 11.00, then SWC flied without me to 11.65 again. It seems that I know when or how to long stocks with short term momentum, but I just cannot exit well. The day trading restriction really limit my trading activity. I do not want to use my day trade chance yesterday. It turned out to be so bad. I wish I had $25000 capital.
I was frustrated with myself today. Then I made a very risky trade. Even though it turned out to be very good, I am still quite fearful. I longed naked Dec SPY 125 call for $2.94 at 1:36pm around spy=126.30. The reason I did this is that I saw a lot of buying volume in the past half hour while very little selling. As I could monitor market closely this afternoon, I gave myself a try. After I bought it, the call went down as low as 2.81. I was about to cut loss. Then SPY formed a nice intraday cup and handle, then shoot up at 2:35pm. I feel lucky for this trade when I closed it at $3.30. At the beginning, I knew this was going to be a day trade. Hence I did not worry if keeping it overnight. From 3:15pm, market had a hard reversal sell off. It went down below my entry price. If I did not take profit to do day trading, another tragedy similar to SWC trade would happen. I would blame me myself again and again today. In today's market, people still did not trust market would go upside much. They played very cautiously. They buy in dip then sell at resistance. That is the current rule until market make decision move to either upside or downside.
Some long setup: CB CVBF HANS ONTY
RGLD PH LGF PXD COG
Short idea: TSO
I hate to say I made another silly mistake again today. I made a very good trade into a losing trade. Yesterday I longed SWC at 11.20, then it went up to 11.80 in just one hour. Today I was stopped out at the lowest 11.00, then SWC flied without me to 11.65 again. It seems that I know when or how to long stocks with short term momentum, but I just cannot exit well. The day trading restriction really limit my trading activity. I do not want to use my day trade chance yesterday. It turned out to be so bad. I wish I had $25000 capital.
I was frustrated with myself today. Then I made a very risky trade. Even though it turned out to be very good, I am still quite fearful. I longed naked Dec SPY 125 call for $2.94 at 1:36pm around spy=126.30. The reason I did this is that I saw a lot of buying volume in the past half hour while very little selling. As I could monitor market closely this afternoon, I gave myself a try. After I bought it, the call went down as low as 2.81. I was about to cut loss. Then SPY formed a nice intraday cup and handle, then shoot up at 2:35pm. I feel lucky for this trade when I closed it at $3.30. At the beginning, I knew this was going to be a day trade. Hence I did not worry if keeping it overnight. From 3:15pm, market had a hard reversal sell off. It went down below my entry price. If I did not take profit to do day trading, another tragedy similar to SWC trade would happen. I would blame me myself again and again today. In today's market, people still did not trust market would go upside much. They played very cautiously. They buy in dip then sell at resistance. That is the current rule until market make decision move to either upside or downside.
Some long setup: CB CVBF HANS ONTY
RGLD PH LGF PXD COG
Short idea: TSO
Sunday, December 4, 2011
20 Truths About the Stock Market From Ivanhoff
http://ivanhoff.com/2011/12/04/2-truths-about-the-stock-market/
1. Stock prices run in cycles. Periods of re-pricing are usually quick and powerful and then they are followed by trendless consolidation.
2. Stocks are very highly correlated during drastic selloffs and during the initial stage of the recovery.
3. Bull markets are markets of stocks, where there are both winner and losers. When the market averages consolidate, there are stocks that will break up or down, revealing the future intentions of institutional buyers.
4. In the first and the last stage of a new bull market, the best performers are small cap, low float, low-priced stocks.
5. Try to trade in the direction of the trend. It is not only the path of least resistance, but also provides the best profit opportunities. Have a simple method to define the direction of the trend.
6. Traders’ attention (market volume) is attracted by unusual price moves. Sudden price range expansion from a range is often the beginning of a powerful new trend.
7. Opportunity cost matters a lot. Be in stocks that move. Stocks in a range are dead money.
8. Big winners are obvious only in hindsight. Many other stocks shared the same characteristics when they tried to break out. Some failed. Some had a followthrough. Being wrong is not a choice. Staying wrong is. You can only control your risk and how long you will ride a winner.
9. The overall market conditions will never be perfect and when they seem so it is probably a good idea to decrease exposure and take profits. With that in mind, you don’t have to be in the market all the time. When you don’t see good setups, it just makes sense to watch from the sidelines.
10. Big institutions achieve outsized returns by rising strong trends for the long-term (long enough to make a difference). This is the only way for them. They can’t easily and often get in and out due to their size. Establishing small positions does not make sense for them as it would not make a difference for the bottom line. Big winners can make a difference when they are big positions. Big positions take time to accumulate and along the way institutions leave clear traces.
11. Small losses are often better than small gains. If I sell my position every time it shows me a small gain, I would never achieve a return high enough to make a difference and to cover the inevitable losses. Amateurs go bankrupt by not taking small losses. Professionals go bankrupt by taking small gains. It is absolutely true that a large number of consecutive gains could multiply returns substantially. The point is how big should be those gains. 4-5% is not going to help a lot. 15-20% gains is something completely different.
12. Prices change when expectations change, but sometimes expectations change when prices change. In other words, there are different types of catalysts that move stocks. In long-term perspective(years) stocks move based on the underlying social trend and the stage of the economic and liquidity cycle. In medium-term perspective (months), stocks move based on expectations for earnings and sales growth. In short-term perspective (weeks and days), stocks move based on price action primarily.
13. If you understand the incentives of the major market participants, you will be able to predict their likely behavior. Technical analysis is a lot about understanding incentives and recognizing intentions.
14. Your first loss will often be your best loss. No one is right all the time and you don’t have to be. There are market participants that are immensely profitable by being right only 30% of the time. It is good to have conviction in your investment thesis, but discipline should always trump conviction.
15. Optimism and pessimism in the stock market are contagious. Investors psychology often loses its logic and become emotional. The news media and the most recent price action play a particularly important role in developing moods of mass optimism or pessimism.
16. Declining stocks often reverse their downtrends near the end of the year, as selling for income tax purposes subsides.
17. Fair value is an illusive concept and hard to calculate. It it true that you don’t need to know the exact weight of a person to define if he is overweight, but knowing this philosophy is not going to help you in the stock market. Stocks constantly get overvalued and undervalued. This is the nature of the market. Warren Buffett says that Price is what you pay, value is what you got. I believe that value is what you think you got, price is what other people are willing to pay for it. Just as beauty, value is in the eyes of the beholder. (there are universally accepted measure too, of course)
18. Liquidity is cyclical. It constantly expands and contracts. When it contracts, capital flows to perceived safety – U.S. Dollars and Treasuries.
19. Rising P/E is an indicator of rising expectations and confidence in the future of the stock. The P/E ratio reflect the enthusiastic optimism or the gloomy pessimism of investors.
20. When you calculate the time you need to drive from point A to point B, you should always take traffic into account. It doesn’t matter how smart you are, how ingenious your idea is or how cheap your stock is – if the market does not agree with you, you will not get paid. Period.
1. Stock prices run in cycles. Periods of re-pricing are usually quick and powerful and then they are followed by trendless consolidation.
2. Stocks are very highly correlated during drastic selloffs and during the initial stage of the recovery.
3. Bull markets are markets of stocks, where there are both winner and losers. When the market averages consolidate, there are stocks that will break up or down, revealing the future intentions of institutional buyers.
4. In the first and the last stage of a new bull market, the best performers are small cap, low float, low-priced stocks.
5. Try to trade in the direction of the trend. It is not only the path of least resistance, but also provides the best profit opportunities. Have a simple method to define the direction of the trend.
6. Traders’ attention (market volume) is attracted by unusual price moves. Sudden price range expansion from a range is often the beginning of a powerful new trend.
7. Opportunity cost matters a lot. Be in stocks that move. Stocks in a range are dead money.
8. Big winners are obvious only in hindsight. Many other stocks shared the same characteristics when they tried to break out. Some failed. Some had a followthrough. Being wrong is not a choice. Staying wrong is. You can only control your risk and how long you will ride a winner.
9. The overall market conditions will never be perfect and when they seem so it is probably a good idea to decrease exposure and take profits. With that in mind, you don’t have to be in the market all the time. When you don’t see good setups, it just makes sense to watch from the sidelines.
10. Big institutions achieve outsized returns by rising strong trends for the long-term (long enough to make a difference). This is the only way for them. They can’t easily and often get in and out due to their size. Establishing small positions does not make sense for them as it would not make a difference for the bottom line. Big winners can make a difference when they are big positions. Big positions take time to accumulate and along the way institutions leave clear traces.
11. Small losses are often better than small gains. If I sell my position every time it shows me a small gain, I would never achieve a return high enough to make a difference and to cover the inevitable losses. Amateurs go bankrupt by not taking small losses. Professionals go bankrupt by taking small gains. It is absolutely true that a large number of consecutive gains could multiply returns substantially. The point is how big should be those gains. 4-5% is not going to help a lot. 15-20% gains is something completely different.
12. Prices change when expectations change, but sometimes expectations change when prices change. In other words, there are different types of catalysts that move stocks. In long-term perspective(years) stocks move based on the underlying social trend and the stage of the economic and liquidity cycle. In medium-term perspective (months), stocks move based on expectations for earnings and sales growth. In short-term perspective (weeks and days), stocks move based on price action primarily.
13. If you understand the incentives of the major market participants, you will be able to predict their likely behavior. Technical analysis is a lot about understanding incentives and recognizing intentions.
14. Your first loss will often be your best loss. No one is right all the time and you don’t have to be. There are market participants that are immensely profitable by being right only 30% of the time. It is good to have conviction in your investment thesis, but discipline should always trump conviction.
15. Optimism and pessimism in the stock market are contagious. Investors psychology often loses its logic and become emotional. The news media and the most recent price action play a particularly important role in developing moods of mass optimism or pessimism.
16. Declining stocks often reverse their downtrends near the end of the year, as selling for income tax purposes subsides.
17. Fair value is an illusive concept and hard to calculate. It it true that you don’t need to know the exact weight of a person to define if he is overweight, but knowing this philosophy is not going to help you in the stock market. Stocks constantly get overvalued and undervalued. This is the nature of the market. Warren Buffett says that Price is what you pay, value is what you got. I believe that value is what you think you got, price is what other people are willing to pay for it. Just as beauty, value is in the eyes of the beholder. (there are universally accepted measure too, of course)
18. Liquidity is cyclical. It constantly expands and contracts. When it contracts, capital flows to perceived safety – U.S. Dollars and Treasuries.
19. Rising P/E is an indicator of rising expectations and confidence in the future of the stock. The P/E ratio reflect the enthusiastic optimism or the gloomy pessimism of investors.
20. When you calculate the time you need to drive from point A to point B, you should always take traffic into account. It doesn’t matter how smart you are, how ingenious your idea is or how cheap your stock is – if the market does not agree with you, you will not get paid. Period.
Chart for Stockbee breadth ratio
Today I plotted the Nasdaq index with the Stockbee market monitor breadth from 2009 to December 1st, 2011. From the above chart, there are several things one can observe.
1. The bull market from March 2009 started with a big breadth thrust. The breath increased from less than 100 to around 1500 from April 2009 to June 2009. Every bull market should start with a consistent buying, which indicates by the spike in breadth thrust.
2. Look at several points on the chart --- Oct 2009, April 2010, November 2010. We can see that the spike is decreasing in magnitude, which indicated the buying pressure weakened over the long period. This is also a divergence chartist wants to see.
3. Then a lot of price/thrust divergence from December 2010 to April 2011. The price made a new high, but the thrust continued to decrease. This indicates the bull market is about to end. Then from April 2011 to July 2011 we see a V shape distribution. This is the last round bull attemped to try going higher.
4. As right now 12/04/2011, we can see from the chart that the thrust is not quite significant high. It is even lower than the November 2011 thrust high. If we will have another bull market, the thrust should continue going higher from what we have.
Why does the stockbee market monitor works? From the statistical point of view, it is because that the market monitor is highly linearly correlated with the index. There are a lot of market monitor tools to predict the direction of the market, but they all come to the same conclusion and the same cause.
Saturday, December 3, 2011
A lot of good setup
Today I am excited to see a lot of good setup. And I am regretted missing so many good long setup this week. Now I think the market maybe in a relative low volatility environment as the VIX index is close to its low at 27 area. Now it is a trader's market. Select strong stocks with good fundamental should be right strategy. From next week on, I will focus more on the individual stocks instead of index ETF.
Good long setup:
FST FFIV HAR XXIA CTCT KBH KFY TCBI SWC
Pullback play:
MJN PVX TRGP ZUMZ MBI
Short setup:
RIMM STX
I will add more into the list.
Good long setup:
FST FFIV HAR XXIA CTCT KBH KFY TCBI SWC
Pullback play:
MJN PVX TRGP ZUMZ MBI
Short setup:
RIMM STX
I will add more into the list.
No trade for the past few days
Market formed a V shape from the thanksgiving week to Friday this week. We saw a big up and down swing in the passed ten days. Things changed really quick.
I am losing my trading energy and momentum in the past few days. I stay in cash from Wednesday last week. I closed my short position on 11/18 and initiate a small long position in TNA. This long TNA position gave me a big draw down, which I closed on last Wednesday resulting a 12 percent loss. And I shorted SPXU and added TZA on last Tuesday after market. The big gap down on last Wednesday(11/23/2011) lighted me down. Initially I thought the thanksgiving week should be very bullish. But in turned out to be 4 down days in a single week. I was up 10 percent for my trading account initially, then I was down another 5 percent one week later. That was my big trading problem - I cannot hold my profit. To rest for a while in trading is my goal.
This week, SPX is up 7 percent, which is dramatically different from the thanksgiving week. Last week it is the hell for the bull, now bull cheers. I hate the big gap up and gap down these days. I am not good enough and do not have enough time to trade for intraday opportunities. Stay cash is my position.
This Friday my timing model initiate the long signal. The short position from 11/15/2011 was closed. The last short trade is still profitable ($COMP down 2.21%) given the great bull run this week. But if long TNA or FAZ from 11/15, it was a losing trade with 2.30 percentage down. The timing model is not perfect for the short trade. For the short trade, one needs to cover at the low to take profit quickly instead of waiting for the long signal to cover.
Haha, why the timing model works? Today I performed a statistical analysis on the timing model's input and output. I found out that the input and output of the model are highly linearly correlated, which gives p-value <0.0001. This explained why the timing model can be used as a predictive tool.
Will we see another gap up to pass 200MA decisively next Monday without a pullback? Let us see. I wish to see a modest pullback to retest 20MA.
Traderinterview with Mark Minervini
http://www.traderinterviews.com/free/2011-11-30_Mark-Minervini.php
Very good reading from the great trader.
Very good reading from the great trader.
Thursday, November 24, 2011
Oscillator vs trending environment
Many traders, especially beginners, are drawn to indicators, hoping
that an indicator will show them when to enter a trade. What they don't
realize is that the vast majority of indicators are based on simple price action,
and when I am placing trades, I simply cannot think fast enough to
process what several indicators might be telling me. Also, oscillators tend
to make traders look for reversals and focus less on price charts. These
can be effective tools on most days when the market has two or three reversals
lasting an hour or more. The problem comes when the market is
trending strongly. If you focus too much on your indicators, you will see
that they are forming divergences all day long, and you may find yourself
repeatedly entering Countertrend and losing money. By the time you come
to accept that the market is trending, you will not have enough time left
in the day to recoup your losses. Instead, if you were simply looking at a
bar or candle chart, you would see that the market is clearly trending, and
you would not be tempted by indicators to look for trend reversals. The
most common successful reversals first break a trendline with strong momentum
and then pullback to test the extreme, and if a trader focuses too
much on divergences, she will often overlook this fundamental fact. A divergence
in the absence of a Countertrend momentum surge that breaks a
trendline is a losing strategy. Wait for the trendline break, and then see if
the test of the old extreme reverses or if the old trend resumes. You do not
need an indicator to tell you that a strong reversal here is a high-probability
trade, at least for a scalp, and there will almost certainly be a divergence,
so why complicate your thinking by adding the indicator to your calculus?
that an indicator will show them when to enter a trade. What they don't
realize is that the vast majority of indicators are based on simple price action,
and when I am placing trades, I simply cannot think fast enough to
process what several indicators might be telling me. Also, oscillators tend
to make traders look for reversals and focus less on price charts. These
can be effective tools on most days when the market has two or three reversals
lasting an hour or more. The problem comes when the market is
trending strongly. If you focus too much on your indicators, you will see
that they are forming divergences all day long, and you may find yourself
repeatedly entering Countertrend and losing money. By the time you come
to accept that the market is trending, you will not have enough time left
in the day to recoup your losses. Instead, if you were simply looking at a
bar or candle chart, you would see that the market is clearly trending, and
you would not be tempted by indicators to look for trend reversals. The
most common successful reversals first break a trendline with strong momentum
and then pullback to test the extreme, and if a trader focuses too
much on divergences, she will often overlook this fundamental fact. A divergence
in the absence of a Countertrend momentum surge that breaks a
trendline is a losing strategy. Wait for the trendline break, and then see if
the test of the old extreme reverses or if the old trend resumes. You do not
need an indicator to tell you that a strong reversal here is a high-probability
trade, at least for a scalp, and there will almost certainly be a divergence,
so why complicate your thinking by adding the indicator to your calculus?
Thursday, November 17, 2011
Bears cheer
Lol, I am a happy bear now. Today the SPX index was down another 1.68 percent with a nice follow through. Technology leads the down momentum. It is very strange to me that the small cap was holding very well during these two days. If the small cap die, then the market will have a much quicker flush.
Some people like to avoid these kind of big crash and they do have methods or methodology to avoid the crash. But in my philosophy, why not to catch these kind of furious crash to make money. From this July, I witnessed the power of bear market and saw how quickly market could drop in a few days to wipe out previous snail-like gains. I think it is a very good environment to trade as long as the trader's method is momentum play. Faceincabs is my mentor to be a bear. Even though he does not know me and I have never contacted with him. I learned a lot a lot from his tweets and his blog during this bear market. My current philosophy is to earn big money in market crash instead of staying sideline to watch for fun.
Reflecting on my trades from Tuesday, I should say I only catched 50 percent of the drop. I did not anticipate how quick the drop is. I missed many good opportunities to add my shorts and closed some of my short positions too early. Moreover, I am impatient to enter initial short position a little bit early on Monday close. Based on my timing model, I should short right before Tuesday close. I was just afraid to miss the bear rally. There is still a lot a lot of room for me to improve. I need to polish my trend following skills.
Right now, I have closed all my short position. My trading plan is to open new short on any reflex bounce. Tomorrow I am inclined to the upside for the market. Because I see the divergence in SPY/IWM 10 minutes chart. I opened a small TNA long position after market. Hopefully I can see market up in the first half hour tomorrow.
Some people like to avoid these kind of big crash and they do have methods or methodology to avoid the crash. But in my philosophy, why not to catch these kind of furious crash to make money. From this July, I witnessed the power of bear market and saw how quickly market could drop in a few days to wipe out previous snail-like gains. I think it is a very good environment to trade as long as the trader's method is momentum play. Faceincabs is my mentor to be a bear. Even though he does not know me and I have never contacted with him. I learned a lot a lot from his tweets and his blog during this bear market. My current philosophy is to earn big money in market crash instead of staying sideline to watch for fun.
Reflecting on my trades from Tuesday, I should say I only catched 50 percent of the drop. I did not anticipate how quick the drop is. I missed many good opportunities to add my shorts and closed some of my short positions too early. Moreover, I am impatient to enter initial short position a little bit early on Monday close. Based on my timing model, I should short right before Tuesday close. I was just afraid to miss the bear rally. There is still a lot a lot of room for me to improve. I need to polish my trend following skills.
Right now, I have closed all my short position. My trading plan is to open new short on any reflex bounce. Tomorrow I am inclined to the upside for the market. Because I see the divergence in SPY/IWM 10 minutes chart. I opened a small TNA long position after market. Hopefully I can see market up in the first half hour tomorrow.
Wednesday, November 16, 2011
Short the market
We see a frustrating session for the bear. Today market gapped down and had a follow through to the downisde until 11:30AM. From the afternoon, we see a furious bullish movement go as high as 1264. Then the ugly sell off in the last half hour to wipe out 1 percent gain. Up to now, I still did not find the cause or news why the market bounced so strong in the afternoon. This market action really makes bull and bear strugguling. Right now it is a heavy battle between bear and bull. We will see the result very very soon once the index break out from the triangle.
I am in the bear camp now with 70 percent committed to the short side. I believe the index is going to break down from the triangle and I am planning to hold my short position for a few days. As I projected, my timing model gives the sell signal today. Hence the long position from 10/07/2011 is closed. Within this period, TNA gained 37.82%.
At the timing I am writing, future ES is down 10 points. Bear will win this battle!
I am in the bear camp now with 70 percent committed to the short side. I believe the index is going to break down from the triangle and I am planning to hold my short position for a few days. As I projected, my timing model gives the sell signal today. Hence the long position from 10/07/2011 is closed. Within this period, TNA gained 37.82%.
At the timing I am writing, future ES is down 10 points. Bear will win this battle!
Sunday, November 13, 2011
Year 1 trading self-reflection Part III
From October 2010 to January 2011 --- Lucky period
As a novice, usually one gets very lucky to win or succeed in the first few plays when doing things. For example, playing cards game, gambling, etc. I recalled I gained 1500 dollars in the first 3 visits to Atlantic City playing 21, then gave up all gains back to casino in the next month. This happens to my trading also.
From October 2010, I started serious trading. The first thing I did was to close all the positions I had. I wanted to have a brand new start - 50 percent off the initial portfolio.
My technical analysis learning is from a website called onlinetradingconcepts. I think this is a very good website for beginners. It talks about basics about technical indicator, Candlestick Pattern and Chart Patterns. From this website, I am amazed that there are so many indicators to give signal when to buy or when to exit. With technical analysis, a person is no longer a blinded man for trading. There are guidance, method, tools one can use.
I recall the first trade I had after learning the basics is to long AKAM. One day I notice that the MACD had a bullish crossover, which gave a buy signal. By holding AKAM for nearly one month, I had a 20 percent gain.
But in October 2010, my trading account did not grow. The reason I thought was I did not know what was a good setup, what kind of stocks I should trade, how to use different time frames for decision, etc. I noticed that even though I purchased stocks with signals like MACD bullish crossover, RSI overbought/oversold, stochastic crossover, a lot times stocks did not act like same way as the textbook said. Hence I think I need some teacher to teach me.
The best thing in October was that I found a lot of good trading blogs. They gave me bread and butt to learn about trading. To name some of my favoriate blogs at the beginning, they are afraidtotrade, Alpha Gobal Inverstor, art of trading, slopeofhope, samuraitrader. After following these traders for a while, I signed up the art of trading service in November.
Art of trading is maintained by Traderstewie, who is a very good trader and mentor. From Traderstewie, I learned a lot of new things for trading. Traderstewie sent out good long or short setup everyday. From these charts, I understand what kind of setup Traderstewie looked for. A lot of them were break out setup and support buy setup. Traderstewie was also showing how to use $NYMO as a tool to find out if market was in oversold or overbought zone. Hence I know there was market sentiment tool for market timing. To follow him, I signed up the stockcharts.com service to create my own charts, chart lists, scan tools.
I also trade earning playing in this period, and all of them were successful trades. LOL, that is what I call lucky. At each weekend, I check Samuraitrader's blog. He had a earning schedule for next weeks. I used the stocks in it for trading earning. Short ULTA before earning, long FNSR / LEN before earning. All turned to be winning trades. Only luck can explain this. Now I won't play earning any more.
The luckiest trade I had is the ARIA trade in January 2011. In the morning two days after I longed ARIA, I notice ARIA was up 25 percent in premarket due to some news like positive results for its study drug. I was totally not anticipating this thing to happen. Now ARIA is a 10 dollars stock instead of 5 dollar in January. Now I understand that the lucky event I encountered in January is an Episodic Pivot for ARIA. ARIA is the trend following stocks one should long.
As a novice, usually one gets very lucky to win or succeed in the first few plays when doing things. For example, playing cards game, gambling, etc. I recalled I gained 1500 dollars in the first 3 visits to Atlantic City playing 21, then gave up all gains back to casino in the next month. This happens to my trading also.
From October 2010, I started serious trading. The first thing I did was to close all the positions I had. I wanted to have a brand new start - 50 percent off the initial portfolio.
My technical analysis learning is from a website called onlinetradingconcepts. I think this is a very good website for beginners. It talks about basics about technical indicator, Candlestick Pattern and Chart Patterns. From this website, I am amazed that there are so many indicators to give signal when to buy or when to exit. With technical analysis, a person is no longer a blinded man for trading. There are guidance, method, tools one can use.
I recall the first trade I had after learning the basics is to long AKAM. One day I notice that the MACD had a bullish crossover, which gave a buy signal. By holding AKAM for nearly one month, I had a 20 percent gain.
But in October 2010, my trading account did not grow. The reason I thought was I did not know what was a good setup, what kind of stocks I should trade, how to use different time frames for decision, etc. I noticed that even though I purchased stocks with signals like MACD bullish crossover, RSI overbought/oversold, stochastic crossover, a lot times stocks did not act like same way as the textbook said. Hence I think I need some teacher to teach me.
The best thing in October was that I found a lot of good trading blogs. They gave me bread and butt to learn about trading. To name some of my favoriate blogs at the beginning, they are afraidtotrade, Alpha Gobal Inverstor, art of trading, slopeofhope, samuraitrader. After following these traders for a while, I signed up the art of trading service in November.
Art of trading is maintained by Traderstewie, who is a very good trader and mentor. From Traderstewie, I learned a lot of new things for trading. Traderstewie sent out good long or short setup everyday. From these charts, I understand what kind of setup Traderstewie looked for. A lot of them were break out setup and support buy setup. Traderstewie was also showing how to use $NYMO as a tool to find out if market was in oversold or overbought zone. Hence I know there was market sentiment tool for market timing. To follow him, I signed up the stockcharts.com service to create my own charts, chart lists, scan tools.
I also trade earning playing in this period, and all of them were successful trades. LOL, that is what I call lucky. At each weekend, I check Samuraitrader's blog. He had a earning schedule for next weeks. I used the stocks in it for trading earning. Short ULTA before earning, long FNSR / LEN before earning. All turned to be winning trades. Only luck can explain this. Now I won't play earning any more.
The luckiest trade I had is the ARIA trade in January 2011. In the morning two days after I longed ARIA, I notice ARIA was up 25 percent in premarket due to some news like positive results for its study drug. I was totally not anticipating this thing to happen. Now ARIA is a 10 dollars stock instead of 5 dollar in January. Now I understand that the lucky event I encountered in January is an Episodic Pivot for ARIA. ARIA is the trend following stocks one should long.
Reflection on two recent TNA trades
In summary, use 60 minutes MACD crossover to give entry/exit for TNA. Another important thing: this method works best in the range. Do not use it in the trending environment.
Look at Case 1 and Case 2 for difference. In Case 1, 10/31 closed at the low, then gap down next day. While in case 2, 11/09 closed at the low, then gap up next day with immediate sell off. This tells us it is not a good entry to long either on 10/31 or 11/09 close. Even if gap up next day in case 2, the lesson is to sell the strength at open as the price has not consolidated well enough so that dip buyer will take profit for the gap up.
The right strategy is to hold off to next day and wait MACD histogram about crossing 0 from below. In Case 1, I bought TNA on 10/31 close and lose 10 percent the next day morning. As I have strong mind that the market will bounce based on the timing model signal, I did not cut loss. Instead I added some new position on 11/01 close and the higher low point on 11/02. I admit this is very risky as I add to my losing position. Very lucky I saved my losing trade and earn money on 11/03. If the market is in a down trend, I will not add in the losing position.
In case 2, I took the lesson from the case 1. I did not buy on 11/09 close but wait for one more day. On 11/10, the market did not close low. Instead it bounce in the last hour to form a mini double bottom. I notice the MACD histogram is about turning to 0. This is a very good setup for me to go long.
Why buy TNA these days, instead of using TZA to short the high? Because I believe the rule for the past two weeks is buy in dip as the market is in range bounce of an up trend. But from next week on, the rule will change to short the bounce. Hopefully we can see TRUNAROUND TUESDAY.
炒股经验 zz from Mitbbs
http://www.mitbbs.com/article_t/Stock/33989839.html
发信人: opiumsnow (鸦片教授), 信区: Stock
标 题: 炒股经验
发信站: BBS 未名空间站 (Sun Nov 13 00:31:32 2011, 美东)
一直都认为不错的经验：
一。心态。想要炒好股票，必须要有良好的心态，要有赚而不喜、亏而不忧的正确态度，不管是赚还是亏，都要及时总结经验和教训并牢记操作过程中的得与失。什么是真正良好的心态呢?比如某只股票符合你的买点，但能涨多少你并不清楚，只能知道个大概。买后它跌了些，这时很多人都会觉得自己买错了，内心会有一种挫败感和失望感。其实没必要紧张，而要认真观察它运动的过程，你应该多看看它的形态，5日均线和10日均线处于什么形态，量和量比是多少，内外盘的量是外盘大还是内盘大，一般说来，外盘大于内盘表示主动性买进的人多于卖出的人。你还应注意在成交过程中每笔交易量的大小，这些观察对于第二天的走势很重要。另外要多多观察分时k线中的5、15、30、60分钟k线形态以及技术指标所处于何种状态，若感觉图形还好，第二天操作要关注它开盘10分钟到20分钟是外盘大还是内盘大，若外盘大于内盘，走势自然较好，同时你还得把注意力集中在现价和均价线上，如在涨升过程中感到涨升无力，你就应及时了结，如果卖出后股价又超出了你的卖出价，千万不要后悔，只要总结自己错在哪里，这就是心态。
二、涨幅和回落的关系。不管你的买入价是多少，它从当天的高点回落超过3%，就应该引起注意，回落了3%以上的个股，当天走势往往不会太好，很难再创新高。但这不是绝对的，是卖还是留，还得看个股的形态、量、量能线、量比、内外盘以及换手率，还要看它已经涨了几天。
三、错误的理念。不少投资者有一种错误的投资理念，那就是手里持有几只或十几只股票，却不知在这动荡的股市中要守好几只乃至十几只股票是非常困难的，更不要说赚钱了，可以这样说，大盘向好时，你手中的股票也许有几只能赚钱，但由于你的看盘经验和能力有限，如果突然变盘，你很难在短时间内了结手中的所有股票。其实你完全可以把有限的精力放在一两只股票上，对其进行细心观察，符合买点就买，不符合就等待机会，只要行情不是太坏，有很多值得投资的股票会像春笋一样冒出来。
四、止损。止损说起来很简单，但要做到恰到好处是很难的，一般来说止损要看处于什么样的市道、个股的形态、涨升了多少、自涨升以来量的总和、换手率、每天的内外盘变化情况以及移动均线和k线的距离。如果有经验，一般可控制在3%以内，即使错了也能找到其他处于涨升段的个股。值得指出的是，止损和投资人的经验和心态有密切的关系。
五、学会预测明天大盘基本走势。如果说个股是跳舞演员的话，大盘就是一个大舞厅，舞厅里如果没人气，那些跳舞演员也会跳得很不起劲，只有几个敬业的演员在那里热身，此时你应该坐在大厅里观看，看他们是怎样练习和热身的，当某个敬业的演员越练越起劲并有继续练下去的意思，你就应该为其鼓掌(买进)。因为毕竟不是正式演出，你还得防止他因为没观众人气而突然息场。
六、不要单相思。有的投资人买股票时常常会片面看待个股的涨跌，一只股票跌了几天后，他会认为这只股跌得差不多了而买进，却不知在形态不好时它横盘几天后还会下跌。炒股不要单方面认为它何时是底，而应学会顺势而为，找那些刚启动又有量的个股，只看量还不够，还要看形态和量放大后其涨幅是否同步。选股是一个较为系统的工作，它涉及到一个人的心态、看盘的经验、对个股形态的理解和把握，还有大盘所处的位置以及量和价的关系等等。有些投资人选好的股票没敢买，怕跌，错过了第一买点，心慌意乱匆忙去追高买入，却没注意此时的现价和均价的关系，结果追了高。有些股票买错了又不肯认错，任其下跌，最后被迫长线投资。
七、顺势而为。顺势而为的含意就是顺着市道而为之，比如大盘刚由强势转入弱势并破位的头几天，你别急着买入，因为你再有看盘的经验和选股的经验，在大盘刚转入弱势时，你买入的股票有可能当天上涨，第二天很有可能跳空补跌，那样会得不偿失。一个真正有经验的投资者是不会乱冒风险的，待大盘下跌的风险释放差不多了时，虽然并没完全走好，由于前几天的下跌释放基本到了一个小的阶段，这时有符合买点的个股，你可以出击一下，但一定要设好止损位。就像游击战那样，打得赢就打，打不赢就走，保存实力是投资的首要之道。
发信人: opiumsnow (鸦片教授), 信区: Stock
标 题: 炒股经验
发信站: BBS 未名空间站 (Sun Nov 13 00:31:32 2011, 美东)
一直都认为不错的经验：
一。心态。想要炒好股票，必须要有良好的心态，要有赚而不喜、亏而不忧的正确态度，不管是赚还是亏，都要及时总结经验和教训并牢记操作过程中的得与失。什么是真正良好的心态呢?比如某只股票符合你的买点，但能涨多少你并不清楚，只能知道个大概。买后它跌了些，这时很多人都会觉得自己买错了，内心会有一种挫败感和失望感。其实没必要紧张，而要认真观察它运动的过程，你应该多看看它的形态，5日均线和10日均线处于什么形态，量和量比是多少，内外盘的量是外盘大还是内盘大，一般说来，外盘大于内盘表示主动性买进的人多于卖出的人。你还应注意在成交过程中每笔交易量的大小，这些观察对于第二天的走势很重要。另外要多多观察分时k线中的5、15、30、60分钟k线形态以及技术指标所处于何种状态，若感觉图形还好，第二天操作要关注它开盘10分钟到20分钟是外盘大还是内盘大，若外盘大于内盘，走势自然较好，同时你还得把注意力集中在现价和均价线上，如在涨升过程中感到涨升无力，你就应及时了结，如果卖出后股价又超出了你的卖出价，千万不要后悔，只要总结自己错在哪里，这就是心态。
二、涨幅和回落的关系。不管你的买入价是多少，它从当天的高点回落超过3%，就应该引起注意，回落了3%以上的个股，当天走势往往不会太好，很难再创新高。但这不是绝对的，是卖还是留，还得看个股的形态、量、量能线、量比、内外盘以及换手率，还要看它已经涨了几天。
三、错误的理念。不少投资者有一种错误的投资理念，那就是手里持有几只或十几只股票，却不知在这动荡的股市中要守好几只乃至十几只股票是非常困难的，更不要说赚钱了，可以这样说，大盘向好时，你手中的股票也许有几只能赚钱，但由于你的看盘经验和能力有限，如果突然变盘，你很难在短时间内了结手中的所有股票。其实你完全可以把有限的精力放在一两只股票上，对其进行细心观察，符合买点就买，不符合就等待机会，只要行情不是太坏，有很多值得投资的股票会像春笋一样冒出来。
四、止损。止损说起来很简单，但要做到恰到好处是很难的，一般来说止损要看处于什么样的市道、个股的形态、涨升了多少、自涨升以来量的总和、换手率、每天的内外盘变化情况以及移动均线和k线的距离。如果有经验，一般可控制在3%以内，即使错了也能找到其他处于涨升段的个股。值得指出的是，止损和投资人的经验和心态有密切的关系。
五、学会预测明天大盘基本走势。如果说个股是跳舞演员的话，大盘就是一个大舞厅，舞厅里如果没人气，那些跳舞演员也会跳得很不起劲，只有几个敬业的演员在那里热身，此时你应该坐在大厅里观看，看他们是怎样练习和热身的，当某个敬业的演员越练越起劲并有继续练下去的意思，你就应该为其鼓掌(买进)。因为毕竟不是正式演出，你还得防止他因为没观众人气而突然息场。
六、不要单相思。有的投资人买股票时常常会片面看待个股的涨跌，一只股票跌了几天后，他会认为这只股跌得差不多了而买进，却不知在形态不好时它横盘几天后还会下跌。炒股不要单方面认为它何时是底，而应学会顺势而为，找那些刚启动又有量的个股，只看量还不够，还要看形态和量放大后其涨幅是否同步。选股是一个较为系统的工作，它涉及到一个人的心态、看盘的经验、对个股形态的理解和把握，还有大盘所处的位置以及量和价的关系等等。有些投资人选好的股票没敢买，怕跌，错过了第一买点，心慌意乱匆忙去追高买入，却没注意此时的现价和均价的关系，结果追了高。有些股票买错了又不肯认错，任其下跌，最后被迫长线投资。
七、顺势而为。顺势而为的含意就是顺着市道而为之，比如大盘刚由强势转入弱势并破位的头几天，你别急着买入，因为你再有看盘的经验和选股的经验，在大盘刚转入弱势时，你买入的股票有可能当天上涨，第二天很有可能跳空补跌，那样会得不偿失。一个真正有经验的投资者是不会乱冒风险的，待大盘下跌的风险释放差不多了时，虽然并没完全走好，由于前几天的下跌释放基本到了一个小的阶段，这时有符合买点的个股，你可以出击一下，但一定要设好止损位。就像游击战那样，打得赢就打，打不赢就走，保存实力是投资的首要之道。
Saturday, November 12, 2011
“ORB” - opening range breakout/breakdown
From http://www.younggunstrading.com/2011/11/orb.html
It is a very good day trading setup - “ORB” or opening range breakout/breakdown. Some quotes from the author: This involves getting long a stock when it breaks above the opening range high (I use 15 minutes of price action for this level but you can use 30 min) or shorting when it breaks below the opening range low. In my opinion this trade offers some of the best risk/reward scenarios you will find on an intraday trading basis. Although I use 15 minutes to arrive at my price levels, in my experience the trade has better odds of success when the entry occurs between 10:00-11:00. This setup is ideal when the level is just below a key level on the daily chart as multiple time-frames align.
It is a very good day trading setup - “ORB” or opening range breakout/breakdown. Some quotes from the author: This involves getting long a stock when it breaks above the opening range high (I use 15 minutes of price action for this level but you can use 30 min) or shorting when it breaks below the opening range low. In my opinion this trade offers some of the best risk/reward scenarios you will find on an intraday trading basis. Although I use 15 minutes to arrive at my price levels, in my experience the trade has better odds of success when the entry occurs between 10:00-11:00. This setup is ideal when the level is just below a key level on the daily chart as multiple time-frames align.
Thursday, November 10, 2011
Last chance to buy-in-dip before correction
Today market had a big gap up early morning then sold off immediately to 10:30Am. People who bought the low yesterday close took the profit in the morning. If I were one of them I would do it also. We have seen many times the big gap up being sold off in the past two weeks. A lot of bottom fisher still see the dip as a bargin. Hence SPX had a nice bounce and choppy ride up in the afternoon session. In my point of view, this is the last buy-in-dip opportunity before the big correction. Market can have a nice bounce tomorrow and next Monday. Italy or Greece are evil to drag the market down, but the market sentiment will temporarily push the market up to trap some new fish into the pool. As it is said, market wants to hurt most people hard. Whoever short the market on yesterday close wishing to have a bear follow through got burned. This is not an easy market to play.
I am wiling to take the risk to go long here. I bought some TNA after market and QCOR before close. QCOR had good earning in the past few days with strong upside momentum. If the market set up to go up, QCOR should do well also.
I am wiling to take the risk to go long here. I bought some TNA after market and QCOR before close. QCOR had good earning in the past few days with strong upside momentum. If the market set up to go up, QCOR should do well also.
Wednesday, November 9, 2011
A very good site about Emini Trading
http://emini-watch.com/
A lot of good stuffs in this webiste, especially in the free stuff section. I am going to spend a lot of time digging this.
Timelysetup mentioned a Day Trading Plan Outline in his post, which is very interesting to read. The instrument he is using is the ES future. http://timelysetup.wordpress.com/2011/11/09/a-day-trading-plan-outline/#comments
A lot of good stuffs in this webiste, especially in the free stuff section. I am going to spend a lot of time digging this.
Timelysetup mentioned a Day Trading Plan Outline in his post, which is very interesting to read. The instrument he is using is the ES future. http://timelysetup.wordpress.com/2011/11/09/a-day-trading-plan-outline/#comments
Today market showed its true face
I have not traded yet for this week, as I said before I feel tired and confused about this volatile market. It goes up and down all by news. On this Monday and Tuesday, it is amazing that all the big drop in the morning were bought aggressively in the afternoon trading. Basically, the intraday chart for Monday and Tuesday looked identical. But today market showed its true action -- going down.
Today due to the news that Italy bond yield went above the critical level 7 percent, the US market had a big gap down in the morning from 1277 to 1250, then another round big sell off in the afternoon to 1229. I really do not like these kind of big overnight gap. If you were wrong about the direction, you got burned. Yesterday close I was thinking about shorting the market, but I was also afraid that market could have another gap up to 1300 then sell off. Hence I did not take the risk. I would rather want a good sleep even though this kind of trades can give big rewards.
This week I feel I am too cautious, not willing to take risk. Actually today's noon is a good timing to go short if I want to try. Anyway cash is a good position here.
Market went as I anticipate. It did test 200MA yesterday then sold off hard here. I am expecting the market will bounce around 1215 support then continue going up for the next 4 days to form a lower high (1260 zone). It will form a triangle wedge pattern. My timing model should give a sell signal on Tuesday close next week. If market go up from here to next Tuesday, I will all in to short this bounce. I think it should have good risk reward. In my point view, this rally from October is a bear market rally, which is leaded by beaten down stocks. It will fail eventually.
Today due to the news that Italy bond yield went above the critical level 7 percent, the US market had a big gap down in the morning from 1277 to 1250, then another round big sell off in the afternoon to 1229. I really do not like these kind of big overnight gap. If you were wrong about the direction, you got burned. Yesterday close I was thinking about shorting the market, but I was also afraid that market could have another gap up to 1300 then sell off. Hence I did not take the risk. I would rather want a good sleep even though this kind of trades can give big rewards.
This week I feel I am too cautious, not willing to take risk. Actually today's noon is a good timing to go short if I want to try. Anyway cash is a good position here.
Market went as I anticipate. It did test 200MA yesterday then sold off hard here. I am expecting the market will bounce around 1215 support then continue going up for the next 4 days to form a lower high (1260 zone). It will form a triangle wedge pattern. My timing model should give a sell signal on Tuesday close next week. If market go up from here to next Tuesday, I will all in to short this bounce. I think it should have good risk reward. In my point view, this rally from October is a bear market rally, which is leaded by beaten down stocks. It will fail eventually.
Saturday, November 5, 2011
Cobra's Long-term Investment Strategy
http://www.cobrasmarketview.com/a-simple-long-term-investment-strategy/
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show[s236230480]&disp=P
Nice post from Cobra always. Some key notes from it:
why choose Canada market instead of Europe or Japan or Emerging market, at least why not US?
Two reasons: First of all, if you invest ETF that follows foreign index, it’s always hedged against that country’s currency, so you have to take the currency change into consideration. Secondly, Canada basically is resource related market, which is heavily related to inflation. Can you image a world without inflation? So as long as there’s inflation, Canada market is guaranteed to rise. Just check the link I give you, see SPX, it broke below the year 2002 lows in 2009 while TSX is far above it. Why? You now understand, because it’s inflation. So I think stick to Canada market is a better choice.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show[s236230480]&disp=P
Nice post from Cobra always. Some key notes from it:
why choose Canada market instead of Europe or Japan or Emerging market, at least why not US?
Two reasons: First of all, if you invest ETF that follows foreign index, it’s always hedged against that country’s currency, so you have to take the currency change into consideration. Secondly, Canada basically is resource related market, which is heavily related to inflation. Can you image a world without inflation? So as long as there’s inflation, Canada market is guaranteed to rise. Just check the link I give you, see SPX, it broke below the year 2002 lows in 2009 while TSX is far above it. Why? You now understand, because it’s inflation. So I think stick to Canada market is a better choice.
Year 1 trading self-reflection Part II
I started serious trading from October 2010. The reason is that at that time, my trading account lost 50 percent of its initial value. I felt that I needed to learn in order to recover from the big loss. Luckily I recovered all the loss three months later due to the bull run from Novermber 2010 to January 2011.
In the neolithic period of my trading, I have no knowledge for trading. I did not know what was moving average, what was support and resistance, etc. I should say I was very lazy at that time, wishing some guru giving me some good stcck picks, then I can earn money. I traded stocks mentioned by friends or some people at Mitbbs, no knowing why and when to exit.
I made 11 trades from November 2009 to October 2010, but losing 50 percent my trading account. 10 out of 11 are penny stocks whose price is less than 10. My biggest loss is AMNP trade, which I lost 92 percent. All these are big lessons to me. They triggered me to build trading weapons.
In the neolithic period of my trading, I have no knowledge for trading. I did not know what was moving average, what was support and resistance, etc. I should say I was very lazy at that time, wishing some guru giving me some good stcck picks, then I can earn money. I traded stocks mentioned by friends or some people at Mitbbs, no knowing why and when to exit.
I made 11 trades from November 2009 to October 2010, but losing 50 percent my trading account. 10 out of 11 are penny stocks whose price is less than 10. My biggest loss is AMNP trade, which I lost 92 percent. All these are big lessons to me. They triggered me to build trading weapons.
Friday, November 4, 2011
byebye了诸位（2013再见）zz from mitbbs
http://www.mitbbs.com/article_t/Stock/33963675.html
发信人: hatwin (傻就一个字), 信区: Stock
标 题: byebye了诸位（2013再见）
发信站: BBS 未名空间站 (Wed Nov 2 17:05:29 2011, 美东)
这天终于来了。呵呵
觉得是个时候歇歇了。退出股市这个想法由来已久，主要原因有两个：
第一，股市太不稳定了，这种不稳定随着帐户的增大越来越难以忍受了。
第二，股市里赚的钱是其他人亏的，谁亏的呢？恐怕无法知道，但是肯定是股市里的人
出的。因为公司每个季度的报表里没有显示给股市出过这个钱。大资金的庄家从图形上
以及各个股市手段，包括nX ETF, weekly option等等，可以看出越来越抠门了。大概
是大肥鱼越来越少，小鱼们的肉也越来越难得到。为了自己的利益，变得贪婪吝啬大概
是难以避免的了。像我这种靠接老虎牙缝的碎肉的人也很难得到点儿整肉了。
说句实话，股市并没有达到我的目标，现在退出完全是违背自己个人的意愿的，但是如
果说这些年从股市中学到一点的话，那就是个人的意愿在股市里完全没有任何意义。今
年7，8月份的图形走势彻底打消了我想达到目标以后再退出的念头。现在退出完全是执
行，制定的吃ER波的计划。现在计划已经基本达成。未来还是老话，股市不可预测。请
大家也不要纠结在预测对错上面，劳心劳神，不值得。
总结一下吧，我这个人的炒股生涯应该是很典型的。
我读书的时候第一次炒股，大概是始于2004年，那个时候完全是消息，新闻炒股法，每
天看信息，希望找到最快的得到消息的途径。上网，跟大牛，买卖完全是靠想。每时每
刻都盯在电脑前，周末度日如年，不买卖的时候就是幻想着什么时候赚大钱，脑子里都
是什么时候大捞一笔。结果炒了1年多，终于在贪婪的幻想指导下，投入的钱全部亏光
。买的股票被摘牌了。由于是学生，彻底歇菜了，可以安心学习毕业了。
第二次开始炒股是2007年毕业后跟随老婆的阶段，那个时候工作还没有着落，而且老婆
的公司恰好就是股票交易的公司，所有员工就是靠炒股票生活。我还记得第一次去她们
那里转悠，看着电脑屏幕刷刷刷的一条交易一条交易的，现在看来应该有相当的一部分
是高频交易吧。那些交易员其实什么都不做，就是看着电脑自动交易。她们的作用在于
monitor个个strategy的效果，如果发现亏损的strategy，及时的终止并从交易系统中
remove掉。她们公司待遇极好，每天饭菜饮料都是免费的，都是饭店送菜上门，隔一段
时间就发各种东西，连扫地的都有份，我们家曾经的电视就是她们公司发的。虽然我老
婆只在这家公司工作了几个月，这次经历对我而言是个极大的震撼，原来股市赚钱不是
看消息，就是买卖双方，没其他人什么事儿。然后才真正促使我走上TA路线，我的前几
本书都是老婆公司借来看的。那个时候对技术的追求真的是如痴如狂，加上mitbbs上恰
好是傻帮技术探讨非常流行的年代。呵呵，结果是拿着老婆的工资，按自己的技术炒股
，把曾经学生时期亏得钱都赚回来了。根本不看消息，完全是TA说的算，虽然本金很少
，但回报丰厚，骄傲的不得了，非常喜欢炫耀，NB烘烘的自认为牛的不得了。对自己的
技术水平那是傲呀，只恨资金少否则早超过巴菲特了。哈哈。结果是2008年破产了，由
于当时自己也工作了，不但把老婆的钱，自己1年多的工资亏进去了，还把借信用卡的
钱都搭进去了。结果当然不敢和老婆说，股票也不能炒了，每月发工资还要还债的。
过了相当的一段时间，才敢面对现实总结经验，结论是走技术路线是对的，但是心理上
没有进步，根本摆脱不了情绪和幻想的掌控。图形上的警告到了大脑就忽略了，贪心恐
惧没有得到控制，再好的技术都没有任何用。整天着急赚钱还是死路一条。
第三次开始炒股，从做软件交易开始，经过自己的总结发现技术没有问题，问题出在自
己身上，因此产生了软件交易的想法，这样可以就图论图的操作，而不是加上个人想法
，情绪。在老婆的帮助下，完成的很粗的版本，开始测试。测试了几个月，因为根本没
钱炒股票，也只能测试。呵呵
真正开始实战炒股票始于2008年12月，到2009年2月的时候以前亏得都赚回来了。由于
曾经炒股的经历，我知道个人的想法都是没有意义的，炫耀更是没有意义。那个时候已
经变得平静了，不再每天想着未来赚大钱什么的了，本来就是在股市中交易而已，只要
坐正确的事儿，结果自然来。根本没有幻想的存在必要。由于心情的平静，后来就开始
手动交易了。再过一段时间，虽然本意上已经没有炫耀的心理了，但是还是在赚到第一
个100万的时候在本版发了个BSO帖子，当然注明是最后一次。因为股市里面个人真的不
重要，凡是认为自己对的，自己可以预测股市的都不会走得太远。
再过一段时间，发现炒股票真的没有必要天天看，庄家的动量是不可抗衡的，没有必要
天天盯着，股票自然而然要达到自己的目标。然后开始中长线，直到2011年，也就是今
年，我最长的position hold超过两年，赚的钱是所有交易里最多的。最近几个月由于
市场大幅度的变动，也作了些swing trade。现在一切终于可以尘埃落定一段时间了。
我的帐户其始于swing trade,经历过day trade的试验，day trade真的是操卖白粉的心
，赚卖白菜的钱，加上曾经看过人家电脑day trading，散户那里是竞争对手。最后放
弃了。经历过long term investment，最后还是做了一些swing trades来结束我现在这
次炒股经历。
最后，几个深深改变我的经验：
1. 股市不可预测，因此万万不能靠预测赚钱。
2. 股市的钱来自于买卖双方，一方赚一方亏。一笔交易最终大资金方赚钱。散户只能
靠TA捕捉庄家的行为来制定自己的操作。其他全是忽悠，不论看起来，听起来多么真实
，可靠。
3. 长期投资TA不能有效把握，因为价格是量的推动，没有交易，没有价格变化，长期
量没有办法掌控，趋势不可能被TA掌握。
4. 坚持好的习惯，就是操作制定在买卖之前，包括：什么条件买，什么条件割肉，什
么条件卖都要在真正交易之前制定好。交易以后，不要预测，执行自己的操作就好了。
否则永远没有办法控制自己的贪心，恐惧和幻想。他们才真的是庄家的伙伴。我们一定
要摆脱每当要交易就开始想象这个坏习惯。没有position，就坐立不安的习惯也要争取
摆脱。总的来说就是股票赚钱要靠操作，心里上要有耐心和平静。
好了，就这么多吧。我2013年中的某个时间再来炒股。我将不再回帖了。咱们2013年再
见。
发信人: hatwin (傻就一个字), 信区: Stock
标 题: byebye了诸位（2013再见）
发信站: BBS 未名空间站 (Wed Nov 2 17:05:29 2011, 美东)
这天终于来了。呵呵
觉得是个时候歇歇了。退出股市这个想法由来已久，主要原因有两个：
第一，股市太不稳定了，这种不稳定随着帐户的增大越来越难以忍受了。
第二，股市里赚的钱是其他人亏的，谁亏的呢？恐怕无法知道，但是肯定是股市里的人
出的。因为公司每个季度的报表里没有显示给股市出过这个钱。大资金的庄家从图形上
以及各个股市手段，包括nX ETF, weekly option等等，可以看出越来越抠门了。大概
是大肥鱼越来越少，小鱼们的肉也越来越难得到。为了自己的利益，变得贪婪吝啬大概
是难以避免的了。像我这种靠接老虎牙缝的碎肉的人也很难得到点儿整肉了。
说句实话，股市并没有达到我的目标，现在退出完全是违背自己个人的意愿的，但是如
果说这些年从股市中学到一点的话，那就是个人的意愿在股市里完全没有任何意义。今
年7，8月份的图形走势彻底打消了我想达到目标以后再退出的念头。现在退出完全是执
行，制定的吃ER波的计划。现在计划已经基本达成。未来还是老话，股市不可预测。请
大家也不要纠结在预测对错上面，劳心劳神，不值得。
总结一下吧，我这个人的炒股生涯应该是很典型的。
我读书的时候第一次炒股，大概是始于2004年，那个时候完全是消息，新闻炒股法，每
天看信息，希望找到最快的得到消息的途径。上网，跟大牛，买卖完全是靠想。每时每
刻都盯在电脑前，周末度日如年，不买卖的时候就是幻想着什么时候赚大钱，脑子里都
是什么时候大捞一笔。结果炒了1年多，终于在贪婪的幻想指导下，投入的钱全部亏光
。买的股票被摘牌了。由于是学生，彻底歇菜了，可以安心学习毕业了。
第二次开始炒股是2007年毕业后跟随老婆的阶段，那个时候工作还没有着落，而且老婆
的公司恰好就是股票交易的公司，所有员工就是靠炒股票生活。我还记得第一次去她们
那里转悠，看着电脑屏幕刷刷刷的一条交易一条交易的，现在看来应该有相当的一部分
是高频交易吧。那些交易员其实什么都不做，就是看着电脑自动交易。她们的作用在于
monitor个个strategy的效果，如果发现亏损的strategy，及时的终止并从交易系统中
remove掉。她们公司待遇极好，每天饭菜饮料都是免费的，都是饭店送菜上门，隔一段
时间就发各种东西，连扫地的都有份，我们家曾经的电视就是她们公司发的。虽然我老
婆只在这家公司工作了几个月，这次经历对我而言是个极大的震撼，原来股市赚钱不是
看消息，就是买卖双方，没其他人什么事儿。然后才真正促使我走上TA路线，我的前几
本书都是老婆公司借来看的。那个时候对技术的追求真的是如痴如狂，加上mitbbs上恰
好是傻帮技术探讨非常流行的年代。呵呵，结果是拿着老婆的工资，按自己的技术炒股
，把曾经学生时期亏得钱都赚回来了。根本不看消息，完全是TA说的算，虽然本金很少
，但回报丰厚，骄傲的不得了，非常喜欢炫耀，NB烘烘的自认为牛的不得了。对自己的
技术水平那是傲呀，只恨资金少否则早超过巴菲特了。哈哈。结果是2008年破产了，由
于当时自己也工作了，不但把老婆的钱，自己1年多的工资亏进去了，还把借信用卡的
钱都搭进去了。结果当然不敢和老婆说，股票也不能炒了，每月发工资还要还债的。
过了相当的一段时间，才敢面对现实总结经验，结论是走技术路线是对的，但是心理上
没有进步，根本摆脱不了情绪和幻想的掌控。图形上的警告到了大脑就忽略了，贪心恐
惧没有得到控制，再好的技术都没有任何用。整天着急赚钱还是死路一条。
第三次开始炒股，从做软件交易开始，经过自己的总结发现技术没有问题，问题出在自
己身上，因此产生了软件交易的想法，这样可以就图论图的操作，而不是加上个人想法
，情绪。在老婆的帮助下，完成的很粗的版本，开始测试。测试了几个月，因为根本没
钱炒股票，也只能测试。呵呵
真正开始实战炒股票始于2008年12月，到2009年2月的时候以前亏得都赚回来了。由于
曾经炒股的经历，我知道个人的想法都是没有意义的，炫耀更是没有意义。那个时候已
经变得平静了，不再每天想着未来赚大钱什么的了，本来就是在股市中交易而已，只要
坐正确的事儿，结果自然来。根本没有幻想的存在必要。由于心情的平静，后来就开始
手动交易了。再过一段时间，虽然本意上已经没有炫耀的心理了，但是还是在赚到第一
个100万的时候在本版发了个BSO帖子，当然注明是最后一次。因为股市里面个人真的不
重要，凡是认为自己对的，自己可以预测股市的都不会走得太远。
再过一段时间，发现炒股票真的没有必要天天看，庄家的动量是不可抗衡的，没有必要
天天盯着，股票自然而然要达到自己的目标。然后开始中长线，直到2011年，也就是今
年，我最长的position hold超过两年，赚的钱是所有交易里最多的。最近几个月由于
市场大幅度的变动，也作了些swing trade。现在一切终于可以尘埃落定一段时间了。
我的帐户其始于swing trade,经历过day trade的试验，day trade真的是操卖白粉的心
，赚卖白菜的钱，加上曾经看过人家电脑day trading，散户那里是竞争对手。最后放
弃了。经历过long term investment，最后还是做了一些swing trades来结束我现在这
次炒股经历。
最后，几个深深改变我的经验：
1. 股市不可预测，因此万万不能靠预测赚钱。
2. 股市的钱来自于买卖双方，一方赚一方亏。一笔交易最终大资金方赚钱。散户只能
靠TA捕捉庄家的行为来制定自己的操作。其他全是忽悠，不论看起来，听起来多么真实
，可靠。
3. 长期投资TA不能有效把握，因为价格是量的推动，没有交易，没有价格变化，长期
量没有办法掌控，趋势不可能被TA掌握。
4. 坚持好的习惯，就是操作制定在买卖之前，包括：什么条件买，什么条件割肉，什
么条件卖都要在真正交易之前制定好。交易以后，不要预测，执行自己的操作就好了。
否则永远没有办法控制自己的贪心，恐惧和幻想。他们才真的是庄家的伙伴。我们一定
要摆脱每当要交易就开始想象这个坏习惯。没有position，就坐立不安的习惯也要争取
摆脱。总的来说就是股票赚钱要靠操作，心里上要有耐心和平静。
好了，就这么多吧。我2013年中的某个时间再来炒股。我将不再回帖了。咱们2013年再
见。
Thursday, November 3, 2011
wild range day - lucky it is up as I want
LOL, wide market action today. This is all due to the Greece. Greece killed a plan for a referendum today. At midnight 3am, I think the rumor came out. Then ES was up 30 points from 1213 to 1242 when I wake up this morning. Yesterday night, I feel very upset and puzzled about the overnight action. I have all in TNA yesterday after market. I feel TNA should be up based on the 6/10 system. Now what a relieve for me!! I sold TNA at the open using the market strength. This trade bothered me a lot overnight. I wish I would not do this kind of trade any more.
The market sold off sharply from the open to 10AM. TNA dropped from 47.80 to 44.32 in just half an hour. Then it reversed to rally until the close to hit 49. I am all cash. I do not like to trade in this wield market. Stay sideline until I see better setup.
This time I trusted the timing model. From October, the only strategy for me is to buy the dip or break out trade, as I feel the market is in upper trend. It looks amazing to me that the system do not need to care about the news. The good or bad news just came out as the system indicates. I do not anticipate the Greece killing referendum. I just know the timing model says long, then I follow. I feel the underlying market breadth will anticipate future action including news.
The upside momentum of the market keeps weakening every day. So I am expecting market is going to form some kind of wedge pattern in the next few days. Maybe, go up to test 200ma on this Friday, sell off on early next week, then last round of buy-in-dip, finally market set up for a big bear drop similar to August action. Short term around 10 days, I am bullish. Intermediate term, I am bearish. At current stage, I feel we may not have a year end rally.
Wednesday, November 2, 2011
The after market drop
At the time I am writing this, the future ES is down 16 points from today's close. All today's gain is wiped out at night. Now I feel it is very strange. What event trigger the night sell off? Am I going to see ES down another 30 points when I wake up tomorrow morning? I hope ES can find support at 1208 to remain in a range.
The volatility is too high and it is too dangerous to carry overnight position now. I feel I need to stop trading in this environment. It is too tricky for me. My timing model still remains in the positive territory, but the price just still keep dropping. I am still lean to the long side based on my timing model.
The 60 minutes 6EMA/10MA buy signal for TNA is triggered today. With the likely big gap down tomorrow, what will happen to this long TNA position?
The volatility is too high and it is too dangerous to carry overnight position now. I feel I need to stop trading in this environment. It is too tricky for me. My timing model still remains in the positive territory, but the price just still keep dropping. I am still lean to the long side based on my timing model.
The 60 minutes 6EMA/10MA buy signal for TNA is triggered today. With the likely big gap down tomorrow, what will happen to this long TNA position?
To my readers who request to share document
Today my blog suddenly have a huge than normal volume of visit. And I received many request to share rhete's market monitor document. First of all, thank you for all the readers who come to visit my blog. I notice that the cause is that Sid at stockbee mentioned my blog at timeline. Then I guess a lot of stockbee members came to visit. Thank you, thank you for visiting.
To the readers who requested to share my document for the market monitor, I cannot share it, because the methodology of the market monitor is the same as the Stockbee's. Stockbee is a paid membership site. As I learn market monitor from Stockbee, I feel I cannot put it for the public assess. If you want to create you own market monitor, you can always check stockbee's post at his public blog, then implement in your own fashion. For me, I use both TOS and stockcharts.com to do the MM scan, then record in my document. I also record MM scan on Russel 2000 stocks. That is all for my document.
The intention of this blog is to record my trading learning curve and document any good trading articles I have read. I did copy many people's articles (links), especially stockbee members', onto my blog. Hope people will not be offended by that. If yes, please drop me an email then I will remove.
To the readers who requested to share my document for the market monitor, I cannot share it, because the methodology of the market monitor is the same as the Stockbee's. Stockbee is a paid membership site. As I learn market monitor from Stockbee, I feel I cannot put it for the public assess. If you want to create you own market monitor, you can always check stockbee's post at his public blog, then implement in your own fashion. For me, I use both TOS and stockcharts.com to do the MM scan, then record in my document. I also record MM scan on Russel 2000 stocks. That is all for my document.
The intention of this blog is to record my trading learning curve and document any good trading articles I have read. I did copy many people's articles (links), especially stockbee members', onto my blog. Hope people will not be offended by that. If yes, please drop me an email then I will remove.
Tuesday, November 1, 2011
Big gap down day for the first day of November
Today is a very negative session with a big gap down early morning. When I wake up this morning, I saw the ES was down 24 points. Gosh, that is too much. Yes, this is a news driven market. The Greece issue and MF financial bankcruptcy gave the market big down momentum.
With the big gap down, a lot of dip buyer came in, which give the market a nice bounce from the gap low untill 10:30Pm. After that, the market is in a range from 1215 to 1235. This indicates the bull and bear fighting each other closely. No one wins in today's session. I did not except the market would sell off so hard. What a joke is that almost everyone is very optimistic on last Thursday about the coming bull market. Now just after 2 session, the market looks huge different.
I subscribed email from some online guru about the market. He said his timing model triggered sell signal today and he started to short the market. Well, I do not think so. Yes, today is a very negative session with around 1000 stocks down 4 percent plus. But given the accumulation on October, the market will not die out so easily. There should be another counter trend rally to retest maybe 200MA. I manipulated my timing model to forcast for the future session. I get a feeling that there is another opportunity to buy in dip. If we see continuing sell off, the timing model should give me sell signal in about 8 sessions. At that time, it is good to short the market.
The market may bounce no later than Thursday. I will buy if market drop to 1210. Let us see.
With the big gap down, a lot of dip buyer came in, which give the market a nice bounce from the gap low untill 10:30Pm. After that, the market is in a range from 1215 to 1235. This indicates the bull and bear fighting each other closely. No one wins in today's session. I did not except the market would sell off so hard. What a joke is that almost everyone is very optimistic on last Thursday about the coming bull market. Now just after 2 session, the market looks huge different.
I subscribed email from some online guru about the market. He said his timing model triggered sell signal today and he started to short the market. Well, I do not think so. Yes, today is a very negative session with around 1000 stocks down 4 percent plus. But given the accumulation on October, the market will not die out so easily. There should be another counter trend rally to retest maybe 200MA. I manipulated my timing model to forcast for the future session. I get a feeling that there is another opportunity to buy in dip. If we see continuing sell off, the timing model should give me sell signal in about 8 sessions. At that time, it is good to short the market.
The market may bounce no later than Thursday. I will buy if market drop to 1210. Let us see.
Monday, October 31, 2011
Saturday, October 29, 2011
Year 1 trading self-reflection Part I
I am going to write a series about my one year trading activity and learning curve. I think it should be very beneficial for me to reflect on my personal weakness and try to improve.
I opened my first trading account on November 2009. But I started serious trading only from October 2010, which is one year ago. During this one year period, I spent a lot of time and effort trying to learn as much trading knowledge as I could. Even though I am losing a lot in my trading account which is the tuition I pay for, I feel I gradually improve and start to form my own trading philosophy and method. With probably another five years continuing learning and trading, I should be good.
I opened my first trading account on November 2009. But I started serious trading only from October 2010, which is one year ago. During this one year period, I spent a lot of time and effort trying to learn as much trading knowledge as I could. Even though I am losing a lot in my trading account which is the tuition I pay for, I feel I gradually improve and start to form my own trading philosophy and method. With probably another five years continuing learning and trading, I should be good.
Friday, October 28, 2011
a version of QE3 from Europe
A huge up day with around 1680 stocks with 4 percent plus day. It is considered to be a big accumulation day. Thanks to the Europe to give a new version of QE3.
How the market will behave in the next few days? sideway move or test 1260-1270 for support to see if it finds buyer again.
How the market will behave in the next few days? sideway move or test 1260-1270 for support to see if it finds buyer again.
Wednesday, October 26, 2011
first vertical spread traded today
Today, I have traded my first transaction for a bull spread. I used to do long call or put and short naked put, which are more risky instrument. My biggest down trade so far is a naked spy long call. I am starting to learn the option trading strategies and put into practice. I bought 2 SPY Nov 117/127 call spread for 6.57 today.
At current stage, I do not suspect the up momentum of US market, even though SPX sell off ugly to 1221 at 11AM. When SPX retest 1225 around 1pm, I feel very frustrated and desperate, asking myself what the hell the market is doing. No dip buyer? going to test 1200? I closed my brower and my cellphone, not want to care about what the fuzzy market was going to do. Luckily market had an unbelievable afternoon bounce. I do not think TA can predict this well. It is a day trading heaven. If I have enough capital to overcome the day trading restriction, I think I will be aggresive to trade this environment.
Tomorrow, the primary indicator should turn to positive, which is the first time since July 22nd. How long it will remain positive is a question. Last time it remained positive for two weeks with gradually distribution, then market sold off hard.
My take for the market is that we are going to continue going up for the rest of the week to touch 200MA (1260 zone). Then next week the market will be in a narrow zone for distribution. After that, the market will see a sharp sell off to test 1200-1220 zone again. It will become a critical time for the market after the selloff. If the market find the buyer again, we will overcome 200MA to have a year end rally. Otherwise, I feel another phase of bear sell-off period will come again.
I really hope the market will choose the first option instead of sell off.
At current stage, I do not suspect the up momentum of US market, even though SPX sell off ugly to 1221 at 11AM. When SPX retest 1225 around 1pm, I feel very frustrated and desperate, asking myself what the hell the market is doing. No dip buyer? going to test 1200? I closed my brower and my cellphone, not want to care about what the fuzzy market was going to do. Luckily market had an unbelievable afternoon bounce. I do not think TA can predict this well. It is a day trading heaven. If I have enough capital to overcome the day trading restriction, I think I will be aggresive to trade this environment.
Tomorrow, the primary indicator should turn to positive, which is the first time since July 22nd. How long it will remain positive is a question. Last time it remained positive for two weeks with gradually distribution, then market sold off hard.
My take for the market is that we are going to continue going up for the rest of the week to touch 200MA (1260 zone). Then next week the market will be in a narrow zone for distribution. After that, the market will see a sharp sell off to test 1200-1220 zone again. It will become a critical time for the market after the selloff. If the market find the buyer again, we will overcome 200MA to have a year end rally. Otherwise, I feel another phase of bear sell-off period will come again.
I really hope the market will choose the first option instead of sell off.
Tuesday, October 25, 2011
2 percent down day
From the TA point of view, why today is a big down day?
1. the EURO $XEU closed at 200EMA yesterday as a resistance. These days $XEU and $DAX are two primary indicator for the US equity. Euro news always create dramas.
2. $COMP closed a little above 200EMA yesterday. Usually the first touch is a fail.
3. the semiconductor $SOX closed right below 200EMA yesterday as a resistance.
4. $TNX 22.64 level act as a wall, which is 65EMA resistance. Yesterday $TNX looks like it was going to break out. But eventually had a 4.74 percent plunge down.
5. 13EMA of $NYAD closed at 800 yesterday, which is way too high. Last time it was at this level was on early July. The market had a five day down trend then.
Given the accumulation in the passed 15 days rally, I believe this rally still have a more leg up or retest Monday's high at least. The timing model is still in bullish teritory from Oct 7th, there is no need to adjust until the model gives sell signal.
1. the EURO $XEU closed at 200EMA yesterday as a resistance. These days $XEU and $DAX are two primary indicator for the US equity. Euro news always create dramas.
2. $COMP closed a little above 200EMA yesterday. Usually the first touch is a fail.
3. the semiconductor $SOX closed right below 200EMA yesterday as a resistance.
4. $TNX 22.64 level act as a wall, which is 65EMA resistance. Yesterday $TNX looks like it was going to break out. But eventually had a 4.74 percent plunge down.
5. 13EMA of $NYAD closed at 800 yesterday, which is way too high. Last time it was at this level was on early July. The market had a five day down trend then.
Given the accumulation in the passed 15 days rally, I believe this rally still have a more leg up or retest Monday's high at least. The timing model is still in bullish teritory from Oct 7th, there is no need to adjust until the model gives sell signal.
Sunday, October 23, 2011
Thursday, October 13, 2011
Market Breadth Pattern Analysis from Timelysetup
http://timelysetup.wordpress.com/market-analysis/market-breadth-pattern-guide
A more detailed explannation of the market breadth pattern from Timelysetup. Really good to read.
A more detailed explannation of the market breadth pattern from Timelysetup. Really good to read.
Wednesday, October 12, 2011
Observation and reflection for today
Market is having a strong rally from the Oct 6th low. The SPX index gained another 60points for this week. Every dip is bought. As it can be seen in the below chart, every touch of the lower trend is being bought. This really indicates a strong bullish environment. Hence the next dip must be a buy. Maybe around 50MA area.
I am amazed by the signal from the timing model. It looks me that it works very well in an volatile market. On last friday, the model gives the long signal. I admit that I was quite greedy at that moment. I wish to see a little more dip on this Monday to go long. But the market did not offer hesitator an entry. The market gapped up on Monday due to the Euro news and had a 3 percent run on Columbus day. I failed to trust the timing model again other than the Sep 16th signal. I guess one needs to trust a mechanical system once he fully understands the mechanics underneath. Yesterday, the buy signal from Vbbee system is striggered. But it looks so bad to go long before close yesterday. But people who trust the sytem is a winner today to get max 7 percent profit in TNA.
As a novice trader, I guess my shortcoming is common. I failed to let my winner run and late to cut loss. I made 13 trades from September. I am still break-even right now, even though there are 10 winners and 3 losers. My two big losses wiped out my other gains quickly. As a small fish with limited capital, I cannot do much day trading and cannot allocate capital to a lot of positions. I really need to plan the trade well and have good money management. Overtrade kills. If the condition is not too favored, do not enter position.
I feel a little frustated myself today. I sold 2 naked SPY OCT 116 put on Monday, but covered early on Tuesday. I completely missed today's run. And yesterday I entered TZA before close, which is now a losing position. The two puts could gave me additional 120 profit today, while the TZA gave me 250 down. That is a huge difference.
What about tomorrow? Clearly SPX is at resistance around 1220 zone and NDX is backtesting the old broken trendline and closed in red. Given the last 15 minutes sell off, I wish we could see some follow through sell off tomorrow. JPM release ER tomorrow morning. It should be a market mover event. I will not trade any earning until I fully understand PEAD.
I wish I could come back in my TZA trades.
I am amazed by the signal from the timing model. It looks me that it works very well in an volatile market. On last friday, the model gives the long signal. I admit that I was quite greedy at that moment. I wish to see a little more dip on this Monday to go long. But the market did not offer hesitator an entry. The market gapped up on Monday due to the Euro news and had a 3 percent run on Columbus day. I failed to trust the timing model again other than the Sep 16th signal. I guess one needs to trust a mechanical system once he fully understands the mechanics underneath. Yesterday, the buy signal from Vbbee system is striggered. But it looks so bad to go long before close yesterday. But people who trust the sytem is a winner today to get max 7 percent profit in TNA.
As a novice trader, I guess my shortcoming is common. I failed to let my winner run and late to cut loss. I made 13 trades from September. I am still break-even right now, even though there are 10 winners and 3 losers. My two big losses wiped out my other gains quickly. As a small fish with limited capital, I cannot do much day trading and cannot allocate capital to a lot of positions. I really need to plan the trade well and have good money management. Overtrade kills. If the condition is not too favored, do not enter position.
I feel a little frustated myself today. I sold 2 naked SPY OCT 116 put on Monday, but covered early on Tuesday. I completely missed today's run. And yesterday I entered TZA before close, which is now a losing position. The two puts could gave me additional 120 profit today, while the TZA gave me 250 down. That is a huge difference.
What about tomorrow? Clearly SPX is at resistance around 1220 zone and NDX is backtesting the old broken trendline and closed in red. Given the last 15 minutes sell off, I wish we could see some follow through sell off tomorrow. JPM release ER tomorrow morning. It should be a market mover event. I will not trade any earning until I fully understand PEAD.
I wish I could come back in my TZA trades.
Average True Range
http://www.mercenarytrader.com/2011/10/dm-part-v-average-true-range/
As the name implies, Average True Range measures the normal range of a stock, ETF, currency pair, or other security – over a standard unit of time. The indicator takes the high and low price points of each bar on a chart (adjusted wider if there is a gap) and plots the average of this number over a period of bars.
Some very active daytraders may use ATR on a 60-minute or even 5-minute chart. Other long-term position traders may measure the “true range” on a weekly chart. For our purposes as swing traders, the 14-period ATR on a daily chart fits our trading approach well.
At its very basic level, the ATR measures the volatility of an individual security over a particular time period. This measurement helps us as traders to normalize individual positions based on the volatility of particular securities.
When we set up a potential trade, we use the ATR to determine what type of price movement should be considered “significant” compared to the daily “noise” of day-to-day trading. For a more volatile position, the higher ATR indicates that we can expect more fluctuation – and that our risk envelope should likely be wider.
A lower ATR gives us the opportunity to set up an entry with a smaller risk envelope (in terms of absolute dollar price) – which in turn can allow us to take a larger position in terms of share count.
Using ATR For Trade Entry Metrics
For most new positions, we use a stop / limit order to enter. The stop portion of the order ensures that the security is moving in our favor at the time of execution, and the limit portion protects us from receiving a poor fill.
When setting up these entry price points, we look at key technical points that the security must trade through to indicate it is trading in our favor. So for breakouts (long) we may set our buy-stop order above a previous high. For a continuation trade (short) we might set our sell-stop order just below a counter-trendline or consolidation point.
In both of these cases, we want the security to trade through a price point. ~But how far is enough? Do we put our stop 10 cents above the breakout point? More? Less??
The answer for us is based on the Average True Range of that particular security…
For major breakouts, we may require a stock to trade 0.5 ATR above the previous high to initiate a long position. This helps to ensure that the breakout is legitimate – and not simply a test of the previous high.
For volatile or high-priced securities, the breakout hurdle should be much greater in terms of actual dollar value. An active, high-priced stock like Priceline.com Inc. (PCLN) should breakout by several dollars to indicate that demand is truly pushing the stock through a resistance point.
On the other hand, a stock with more stability won’t have to move very far through a support area or trend line to indicate that a new dynamic is underway.
Using the ATR indicator allows us to objectively identify which types of trading moves are significant, and which fluctuations are more likely to be “noise.”
Using ATR for Risk Points
Before pulling the trigger on any new position, we always calculate the risk on the individual trade. Of course risk management entails a number of moving parts. (We’ll have a lot more to say about this in future installments.) But at the most basic level, we need to know how much capital is at risk with each individual position.
The ATR indicator plays an important part in determining where our initial risk points – or stop orders – will be placed.
As a general rule, we like to place our initial risk points within 1.5 to 2.5 ATR’s from our entry point. This gives our new position a little bit of wiggle room, and the amount of room is custom fit for the individual security’s volatility.
There are exceptions to this 1.5 to 2.5 ATR envelope, but for most trades, we are entering at a key inflection point and expect the trade to move quickly in our favor. If our entry point is correct, we don’t expect the price to move significantly against us – and if it does, we want to be out of the position sooner rather than later.
We also use support and resistance points on a chart to help identify key risk points. As with our entry inflection points, we want to be able to objectively determine how much of a move through a key inflection point is enough to justify exiting the position.
Once again, we use a multiple of the ATR to identify the specific price point at which we will be stopped out of at trade. A few examples include:
A risk point 0.2 ATR above a key swing point (for shorts)
A risk point 0.5 ATR below the 50 EMA (for a long trend position)
A risk point 0.5 ATR above the previous day high (for an extended short)
The ATR gives us a clear indication of what should be considered a “material price movement” as compared with more normal day-to-day fluctuations.
Many of our positions are entered with the goal of riding a major trend for many multiples of our initial risk envelope. But during certain market environments, it makes sense to take profits at pre-determined points along the way.
We’ll talk about this more in the next installment, but suffice it to say that the ATR indicator is very helpful in determining where these profit targets will be placed – and changes in the ATR level for a particular security can also help identify appropriate times to take profits off the table.
Cyclical Volatility – Enter Mild, Exit Wild
This brings up a key concept for how we use ATR in conjunction with open positions – or names that we continue to track on our watch list.
Most market academics will agree that volatility is a cyclical phenomenon. This is true on a big-picture level (just pull up a multi-decade chart of any major stock index) and is often true when looking at smaller time periods as well.
Take a look at the chart of Baidu Inc. (BIDU) below.
The ATR is the oscillating blue line at the bottom. You can see over the last few months, BIDU’s ATR has fluctuated between roughly $5.00 and $10.00 – a significant divergence during this time period.
As volatility expands and contracts, it has a material impact on how we structure our individual trades.
During wild periods, the Average True Range for most securities is significantly higher. This means that for new positions, we will usually allow a wider price envelope for our risk points.
So if we want to risk 50 basis points on a particular trade, we will be trading fewer shares to keep our absolute risk level in line.
Of course, when volatility dies down and the ATR indicator is lower, we have the ability to take much larger positions (in terms of share count) while still assuming the same amount of risk to our capital.
In mid September, we discussed the rise in market volatility – and the importance of “entering mild times” and “exiting in wild times.” Using a risk envelope based on the ATR creates a natural tendency to enter more aggressive positions during calm market periods, while scaling back on exposure during more volatile (risky) environments.
As the name implies, Average True Range measures the normal range of a stock, ETF, currency pair, or other security – over a standard unit of time. The indicator takes the high and low price points of each bar on a chart (adjusted wider if there is a gap) and plots the average of this number over a period of bars.
Some very active daytraders may use ATR on a 60-minute or even 5-minute chart. Other long-term position traders may measure the “true range” on a weekly chart. For our purposes as swing traders, the 14-period ATR on a daily chart fits our trading approach well.
At its very basic level, the ATR measures the volatility of an individual security over a particular time period. This measurement helps us as traders to normalize individual positions based on the volatility of particular securities.
When we set up a potential trade, we use the ATR to determine what type of price movement should be considered “significant” compared to the daily “noise” of day-to-day trading. For a more volatile position, the higher ATR indicates that we can expect more fluctuation – and that our risk envelope should likely be wider.
A lower ATR gives us the opportunity to set up an entry with a smaller risk envelope (in terms of absolute dollar price) – which in turn can allow us to take a larger position in terms of share count.
Using ATR For Trade Entry Metrics
For most new positions, we use a stop / limit order to enter. The stop portion of the order ensures that the security is moving in our favor at the time of execution, and the limit portion protects us from receiving a poor fill.
When setting up these entry price points, we look at key technical points that the security must trade through to indicate it is trading in our favor. So for breakouts (long) we may set our buy-stop order above a previous high. For a continuation trade (short) we might set our sell-stop order just below a counter-trendline or consolidation point.
In both of these cases, we want the security to trade through a price point. ~But how far is enough? Do we put our stop 10 cents above the breakout point? More? Less??
The answer for us is based on the Average True Range of that particular security…
For major breakouts, we may require a stock to trade 0.5 ATR above the previous high to initiate a long position. This helps to ensure that the breakout is legitimate – and not simply a test of the previous high.
For volatile or high-priced securities, the breakout hurdle should be much greater in terms of actual dollar value. An active, high-priced stock like Priceline.com Inc. (PCLN) should breakout by several dollars to indicate that demand is truly pushing the stock through a resistance point.
On the other hand, a stock with more stability won’t have to move very far through a support area or trend line to indicate that a new dynamic is underway.
Using the ATR indicator allows us to objectively identify which types of trading moves are significant, and which fluctuations are more likely to be “noise.”
Using ATR for Risk Points
Before pulling the trigger on any new position, we always calculate the risk on the individual trade. Of course risk management entails a number of moving parts. (We’ll have a lot more to say about this in future installments.) But at the most basic level, we need to know how much capital is at risk with each individual position.
The ATR indicator plays an important part in determining where our initial risk points – or stop orders – will be placed.
As a general rule, we like to place our initial risk points within 1.5 to 2.5 ATR’s from our entry point. This gives our new position a little bit of wiggle room, and the amount of room is custom fit for the individual security’s volatility.
There are exceptions to this 1.5 to 2.5 ATR envelope, but for most trades, we are entering at a key inflection point and expect the trade to move quickly in our favor. If our entry point is correct, we don’t expect the price to move significantly against us – and if it does, we want to be out of the position sooner rather than later.
We also use support and resistance points on a chart to help identify key risk points. As with our entry inflection points, we want to be able to objectively determine how much of a move through a key inflection point is enough to justify exiting the position.
Once again, we use a multiple of the ATR to identify the specific price point at which we will be stopped out of at trade. A few examples include:
A risk point 0.2 ATR above a key swing point (for shorts)
A risk point 0.5 ATR below the 50 EMA (for a long trend position)
A risk point 0.5 ATR above the previous day high (for an extended short)
The ATR gives us a clear indication of what should be considered a “material price movement” as compared with more normal day-to-day fluctuations.
Many of our positions are entered with the goal of riding a major trend for many multiples of our initial risk envelope. But during certain market environments, it makes sense to take profits at pre-determined points along the way.
We’ll talk about this more in the next installment, but suffice it to say that the ATR indicator is very helpful in determining where these profit targets will be placed – and changes in the ATR level for a particular security can also help identify appropriate times to take profits off the table.
Cyclical Volatility – Enter Mild, Exit Wild
This brings up a key concept for how we use ATR in conjunction with open positions – or names that we continue to track on our watch list.
Most market academics will agree that volatility is a cyclical phenomenon. This is true on a big-picture level (just pull up a multi-decade chart of any major stock index) and is often true when looking at smaller time periods as well.
Take a look at the chart of Baidu Inc. (BIDU) below.
The ATR is the oscillating blue line at the bottom. You can see over the last few months, BIDU’s ATR has fluctuated between roughly $5.00 and $10.00 – a significant divergence during this time period.
As volatility expands and contracts, it has a material impact on how we structure our individual trades.
During wild periods, the Average True Range for most securities is significantly higher. This means that for new positions, we will usually allow a wider price envelope for our risk points.
So if we want to risk 50 basis points on a particular trade, we will be trading fewer shares to keep our absolute risk level in line.
Of course, when volatility dies down and the ATR indicator is lower, we have the ability to take much larger positions (in terms of share count) while still assuming the same amount of risk to our capital.
In mid September, we discussed the rise in market volatility – and the importance of “entering mild times” and “exiting in wild times.” Using a risk envelope based on the ATR creates a natural tendency to enter more aggressive positions during calm market periods, while scaling back on exposure during more volatile (risky) environments.
Monday, October 10, 2011
2B Reversal (a variation of the Trader Vic 1-2-3 reversal)
http://www.trading-naked.com/2b-reversal.htm
"In an uptrend, if prices penetrate the previous high but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. The converse is true for downtrends."
[Vic Sperandeo in "Trader Vic: Methods of a Wall Street Master"]
The 2B principle gets its power from the large number of stop-loss orders in the area of the X. Many traders who bought the breakout will have their stop-loss orders there, so if prices fall below the blue line those stops will be hit, driving prices back down with thrust. If you enter a short as the breakout traders are bailing out of their positions, the burst of selling can propel your trade into the green so quickly that, before you can enter your stop-loss order, prices have moved far enough in your favor to set your initial stop-loss at break even. The inverse is equally effective for 2B bottoms.
Another name for the 2B is "spring." Imagine the blue line in the graphic as a rubber band. The bigger the poke above the blue line, the stronger the reversal potential if the breakout fails. This same principle works on failed triangle breakouts and failed trendline breakouts. If you were unfortunate and bought the breakout, instead of putting just a stop loss at the X, consider making it a stop-and-reverse. This pattern occurs at the tops and bottoms of consolidations as well as at major reversals.
https://docs.google.com/viewer?url=http://www.surinotes.com/Tradestation/articles/suri2B_TJDec2007.pdf&pli=1
"In an uptrend, if prices penetrate the previous high but fail to carry through and immediately drop below the previous high, the trend is apt to reverse. The converse is true for downtrends."
[Vic Sperandeo in "Trader Vic: Methods of a Wall Street Master"]
The 2B principle gets its power from the large number of stop-loss orders in the area of the X. Many traders who bought the breakout will have their stop-loss orders there, so if prices fall below the blue line those stops will be hit, driving prices back down with thrust. If you enter a short as the breakout traders are bailing out of their positions, the burst of selling can propel your trade into the green so quickly that, before you can enter your stop-loss order, prices have moved far enough in your favor to set your initial stop-loss at break even. The inverse is equally effective for 2B bottoms.
Another name for the 2B is "spring." Imagine the blue line in the graphic as a rubber band. The bigger the poke above the blue line, the stronger the reversal potential if the breakout fails. This same principle works on failed triangle breakouts and failed trendline breakouts. If you were unfortunate and bought the breakout, instead of putting just a stop loss at the X, consider making it a stop-and-reverse. This pattern occurs at the tops and bottoms of consolidations as well as at major reversals.
https://docs.google.com/viewer?url=http://www.surinotes.com/Tradestation/articles/suri2B_TJDec2007.pdf&pli=1
Follow-Through Day concept developed by William O’Neil of Investors Business Daily
http://www.momentum-trader.com/index.php/momentum-trader-report-100911/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Momentum-tradercom+%28momentum-trader.com%29&utm_content=Google+Reader
The Follow-Through Day is a concept developed by William O’Neil of Investors Business Daily, and explained here by IBD.com:
From the beginning of any attempted rally during a definite downtrend, a ‘follow-through’ day is identified when the index closes up 1.7% or more for the day on a significant increase in volume from the day before. The first two or three days of a rally are normally disregarded as it has not yet proven it will succeed and ‘follow-through’ with power and conviction. ‘Follow-through’ days therefore generally occur the fourth through seventh day of the attempted rally. They serve as a confirmation that the market has really changed direction and is in a new uptrend
The follow-through day doesn’t always predict a new rally, it only predicts a new rally 1/3 of the time. However, no rally has ever occurred without one, which makes this method one of the best in calling a new market rally. The most recent bull market started in March of 2009 with a follow-through day, and I recall some traders questioning IBD’s labeling of the follow-through day at the time, but it proved correct.
The Follow-Through day provides a green light to start looking for and buying stocks as they break out of sound bases. New leaders should emerge first.
The Follow-Through Day is a concept developed by William O’Neil of Investors Business Daily, and explained here by IBD.com:
From the beginning of any attempted rally during a definite downtrend, a ‘follow-through’ day is identified when the index closes up 1.7% or more for the day on a significant increase in volume from the day before. The first two or three days of a rally are normally disregarded as it has not yet proven it will succeed and ‘follow-through’ with power and conviction. ‘Follow-through’ days therefore generally occur the fourth through seventh day of the attempted rally. They serve as a confirmation that the market has really changed direction and is in a new uptrend
The follow-through day doesn’t always predict a new rally, it only predicts a new rally 1/3 of the time. However, no rally has ever occurred without one, which makes this method one of the best in calling a new market rally. The most recent bull market started in March of 2009 with a follow-through day, and I recall some traders questioning IBD’s labeling of the follow-through day at the time, but it proved correct.
The Follow-Through day provides a green light to start looking for and buying stocks as they break out of sound bases. New leaders should emerge first.
Sunday, October 9, 2011
Saturday, October 8, 2011
HOW TO TRADE THE 52 WEEK FRIDAY RULE
http://club.ino.com/trading/2011/10/as-we-discussed-yesterday-has-this-market-put-in-a-bottom/
HOW TO TRADE THE 52 WEEK FRIDAY RULE:
Here are the three rules you need to trade “The 52-week new highs on Friday rule”
These are the exact rules that Bill used to make millions
Rule number 1: On a new 52-week high, when the market closes at or close to its high on a Friday, buy long and go home long for the weekend.
Rule number 2: Exit the long position on the opening the following Tuesday.
Rule number 3: If the market opens sharply lower on Monday, exit the position immediately.
There you have it. These are the only three rules you need to trade with “The 52-week new highs on a Friday rule” successfully.
“The 52-week new highs on a Friday rule” works extremely well in futures and in the Forex markets. This rule can be reversed for “The 52-week new lows on a Friday rule” if you are so inclined to trade the short side of the market. The same rules apply.
HOW TO TRADE THE 52 WEEK FRIDAY RULE:
Here are the three rules you need to trade “The 52-week new highs on Friday rule”
These are the exact rules that Bill used to make millions
Rule number 1: On a new 52-week high, when the market closes at or close to its high on a Friday, buy long and go home long for the weekend.
Rule number 2: Exit the long position on the opening the following Tuesday.
Rule number 3: If the market opens sharply lower on Monday, exit the position immediately.
There you have it. These are the only three rules you need to trade with “The 52-week new highs on a Friday rule” successfully.
“The 52-week new highs on a Friday rule” works extremely well in futures and in the Forex markets. This rule can be reversed for “The 52-week new lows on a Friday rule” if you are so inclined to trade the short side of the market. The same rules apply.
Friday, October 7, 2011
Normal pullack at resistance - wild intraday action
Today the market gapped up on nonfarm employment news. Usually on this kind of employment news out date, the market open high then close at low, or open low then close at high. Clearly it is the first case today. In the premarket today, SPY goes as high around 117.80, and TZA lowered to around 43.10. As I said yesterday, I would add TZA position on this kind of gap up. I did add some positions which turned out to be profitable.
Market failed at the resistance, but it does not mean that it will drop hard from today's high. Given the big accumulation in the past three days. I believe this kind of pullback is healthy for the market and market will continue going high. This rally must have another up leg.
Today my timing model gives the long signal. The short position from 09/16/2011 is closed, and a long position starts at today's close. If long TZA on 09/16 and sell it today, the return is 17.30 percent. If we can sell it on Monday, the profit is much better. I am happy to see that the timing model so far generates 118 percent compounding return year to date by using 3x ETF.
Trading plan for next week: buy the dip. Monday we may see a further weakness to 114 zone. I believe this is a good entry point for long. And we may close in green on Monday.
Market failed at the resistance, but it does not mean that it will drop hard from today's high. Given the big accumulation in the past three days. I believe this kind of pullback is healthy for the market and market will continue going high. This rally must have another up leg.
Today my timing model gives the long signal. The short position from 09/16/2011 is closed, and a long position starts at today's close. If long TZA on 09/16 and sell it today, the return is 17.30 percent. If we can sell it on Monday, the profit is much better. I am happy to see that the timing model so far generates 118 percent compounding return year to date by using 3x ETF.
Trading plan for next week: buy the dip. Monday we may see a further weakness to 114 zone. I believe this is a good entry point for long. And we may close in green on Monday.
Thursday, October 6, 2011
Index at resistance
Today SPX had a consective three day rally to 1164.97 with 1.88 percent gain leaded by the financial sector. It is not surprise that the rally in the passed three days. In the weekend post, I said a short term reflex bounce is very close. Unfortunately, I did not take any advantage of this rally. This is a lesson for me: When the MM says the market is really oversold, place money in 401K funds, palce money in the long ETF, even though it can gap down to a lower level, but the bounce is due and can be very very powerful.
Commodity are up today with silver up 5.19 percent. The euro FXE was up to 134 with lower volume. If FXE starting to pullback tomorrow, equity will follow also. Or FXE may go up 20MA, 135 zone?
Today most of the index are backtest their broken trendline, 20MA, 61.8 fibonacci retrace zone. I think this is a fairly strong resistance zone. As in the above overnight ES daily chart, I saw that ES broke the triangle formulation on last week and now backtesting the lower trendline.
The best case is that the index pullback a little for one to two days to 1140 zone to form a higher low, then it can go further up. The first dip must be a buy. I will long it this time. My timing model also suggests a continuing rally after a small pullback. It should give me a long signal in next week.
In my chart, I see small cap is backtesting the broken trendline at 670 zone. I am shorting RUT by TZA before the close. The market may further go up tomorrow. I will add more if we can hit 117.30. I think a pullback should come.
Jesse Livermore
http://www.jesse-livermore.com/
Time Magazine described Jesse Livermore as the most fabulous living U.S. stock trader.
His progress from office boy to Wall Street legend - his trading lessons - his triumphs and disasters - is probably the most fascinating of any of Wall Street's stories.
Even today, many stock and commodity traders owe Jesse Livermore a deep debt of gratitude for sharing his experiences in Reminiscences of a Stock Operator.
The techniques he made public have endured through many decades; his trading rules earned him millions of dollars, provided he stayed faithful to them.
Livermore also lost his entire fortune on more than one occasion, when he ignored his trading rules.
Time Magazine described Jesse Livermore as the most fabulous living U.S. stock trader.
His progress from office boy to Wall Street legend - his trading lessons - his triumphs and disasters - is probably the most fascinating of any of Wall Street's stories.
Even today, many stock and commodity traders owe Jesse Livermore a deep debt of gratitude for sharing his experiences in Reminiscences of a Stock Operator.
The techniques he made public have endured through many decades; his trading rules earned him millions of dollars, provided he stayed faithful to them.
Livermore also lost his entire fortune on more than one occasion, when he ignored his trading rules.
Wednesday, October 5, 2011
a good follow through day and Steve Jobs
SPX closed at 1140.04 up 1.79 percent today. Every dip today was bought. This action is very similar to the action in August for the bounce. Hence it is not a good entry for short. I set aside to watch all day. One thing I observed today is that small cap is lagging the big cap stocks. When SPX and COMP was up 1 percent in the morning, RUT was in red or at the same level as yesterday. In the later afternoon, RUT begin to pick up, which pushed the SPX another up wave. Is this situation similar to later September, when money following into big cap stocks which makes nasdaq to pass previous high, while small cap did not up too much? I guess this is a bearish sign to watch closely.
Today a sad news came out around 7:40pm. Steve Jobs passed away at age of 56. I feel very pity about losing such a great legend in our times. My first apple product is the iphone 4, which I bought last December. I love my iphone and am amazed by the goodness of apple product. As it is said, "Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve,"
"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose,"
Steve Jobs' 2005 Stanford Commencement Address
http://www.youtube.com/watch?v=UF8uR6Z6KLc
Today a sad news came out around 7:40pm. Steve Jobs passed away at age of 56. I feel very pity about losing such a great legend in our times. My first apple product is the iphone 4, which I bought last December. I love my iphone and am amazed by the goodness of apple product. As it is said, "Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve,"
"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose,"
Steve Jobs' 2005 Stanford Commencement Address
http://www.youtube.com/watch?v=UF8uR6Z6KLc
Tuesday, October 4, 2011
Last hour bounce
Today market had a big gap down in the early morning and headed lower to 1075, then have a nice bounce to 1102 area, which becomes the resistance. The resitance hold as a wall and SPX started a straight down trend to 1080. Within this period, I thought I was missing a good short. Then after 3pm, we saw a big swing up from 1080 up to 1123 in just one hour. It looked like everyone wanted to buy afraid of missing the bounce. Actually when spx break through 1102, it was a good long entry. Anyway I missed the rally.
Market did have a bounce but not in the way I wish. I entered long position one day earlier. If I did not long yesterday, I would definitely long the gap down today. Since I did not want to take the risk of averaging down, I did not add my losing position at the open. In the morning, even SPX and COMP down 2 percent, but small cap holding very well (down only 0.5 percent). That is a good sign that small cap is hitting a temporary bottom (600) and will lead the bounce. I closed my UPRO position at 12pm when SPX hitting 1100 resistance for a tiny loss. I thought I did well from 12pm to 3pm when seeing the market tanking. But obviously I did not benefit from the last hour rally.
Question for today: In this kind of the oversold extreme condidtion, is it better to long index ETF or long beaten down stocks? Look at AKAM, ENTR, ZAGG, TZOO, FMCN, etc. They started bouncing in the early morning even when the index going down. And they did not push back much during afternoon. I observed that similar situation existed when market tanking, these stocks also leaded. I guess long or short these kind of stocks have better rewards than long or short ETF. But the strategy is to pick up the right stocks.
What about tomorrow? No idea for me. Look at Aug 9th and Aug 10th, a big hammer day followed a big red drop day. I think it could happen tomorrow. I wish a small up tomorrow to confirm the new up trend by forming bullish engulfing. Or down hard to give me some long entry. But I will watch closely $RUT to back test the broken trendline around 670 area. If small cap can lead the market up, it can also lead market down hard. I think the best way to play the market now is staying in cash.
Market did have a bounce but not in the way I wish. I entered long position one day earlier. If I did not long yesterday, I would definitely long the gap down today. Since I did not want to take the risk of averaging down, I did not add my losing position at the open. In the morning, even SPX and COMP down 2 percent, but small cap holding very well (down only 0.5 percent). That is a good sign that small cap is hitting a temporary bottom (600) and will lead the bounce. I closed my UPRO position at 12pm when SPX hitting 1100 resistance for a tiny loss. I thought I did well from 12pm to 3pm when seeing the market tanking. But obviously I did not benefit from the last hour rally.
Question for today: In this kind of the oversold extreme condidtion, is it better to long index ETF or long beaten down stocks? Look at AKAM, ENTR, ZAGG, TZOO, FMCN, etc. They started bouncing in the early morning even when the index going down. And they did not push back much during afternoon. I observed that similar situation existed when market tanking, these stocks also leaded. I guess long or short these kind of stocks have better rewards than long or short ETF. But the strategy is to pick up the right stocks.
What about tomorrow? No idea for me. Look at Aug 9th and Aug 10th, a big hammer day followed a big red drop day. I think it could happen tomorrow. I wish a small up tomorrow to confirm the new up trend by forming bullish engulfing. Or down hard to give me some long entry. But I will watch closely $RUT to back test the broken trendline around 670 area. If small cap can lead the market up, it can also lead market down hard. I think the best way to play the market now is staying in cash.
Monday, October 3, 2011
Reflex bounce tomorrow?
Today the stock market get a hit. SPX closed at 1099.23, which is lower than Aug 8th low(1101.54). In the morning, there is a relatively small gap down, comparing to the wide gap in the passed several days. This gave me a positive sign. I was thinking we could start bouncing from today. At 10am, the index bounced to 1139 due to the good news for the ISM data. But it faded away very quickly. Face gave a nice call to short around 113.4 area. Since I was quite optimistic for a bounce, I did not take to short the market. Obviously, I was wrong. The market was tanking by the lead of small cap. TNA was down 15.49% percent today. What a hit! Now nearly all the major indexes are breaking the previous support, which indicates the bearish situation.
The Euro FXE reached a new low at 131.55(-1.44%). The dollar UUP had a clear break out. 10 year yield $TNX was down 7.22% at 17.85. But gold Gld was up 1.84%.
Today my timing model turned to be more negative than the passed three days. Previously I thought it would not turn to be more negative. Clearly after today's action, my prediction for the bull run in October is unlikely to happen. Today's action gives me a big question and push me to think seriously: How to develop an effective trend following system? Look at so many bull run or bear run, if one can catch most of the trend, while giving back a little in the range market, the profit can be huge. I missed the 10 percent gain for SPXU today. Too bad! My timing model gave me signal to short the market on 9/16/2011 close and the signal is still on. Clearly I did not follow it. What a big miss! If I short the COMP by SQQQ on 9/16/2011 for 21.69. It would be 32% percent gain for today (SQQQ closed at 28.77 today). My next goal is to learn to develop trend following system in the coming months.
In the bear market, the broken support can be a bear trap, while short a 2 to 3 days reflex bounce is a better risk-reward strategy. Today there are around 1600 stocks down 4 percent, only 120 stocks up 25 percent quarterly, and around 2500 stocks down 25 percent quarterly. It is more extreme than last Friday. I am expecting for a reflex bounce tomorrow. Or the market gap down tomorrow morning then bounce? I am a little impatient to buy UPRO for a bounce right before close. That is a little bit rush. With the good liquidity for UPRO, I should enter after market to get a much better price, given that the negative momentum will likely be carried from the last five minutes before market close. That is a lesson learned today. I have to keep my position small for this bounce as I am not confident. Hope things work for this kind of extreme.
The Euro FXE reached a new low at 131.55(-1.44%). The dollar UUP had a clear break out. 10 year yield $TNX was down 7.22% at 17.85. But gold Gld was up 1.84%.
Today my timing model turned to be more negative than the passed three days. Previously I thought it would not turn to be more negative. Clearly after today's action, my prediction for the bull run in October is unlikely to happen. Today's action gives me a big question and push me to think seriously: How to develop an effective trend following system? Look at so many bull run or bear run, if one can catch most of the trend, while giving back a little in the range market, the profit can be huge. I missed the 10 percent gain for SPXU today. Too bad! My timing model gave me signal to short the market on 9/16/2011 close and the signal is still on. Clearly I did not follow it. What a big miss! If I short the COMP by SQQQ on 9/16/2011 for 21.69. It would be 32% percent gain for today (SQQQ closed at 28.77 today). My next goal is to learn to develop trend following system in the coming months.
In the bear market, the broken support can be a bear trap, while short a 2 to 3 days reflex bounce is a better risk-reward strategy. Today there are around 1600 stocks down 4 percent, only 120 stocks up 25 percent quarterly, and around 2500 stocks down 25 percent quarterly. It is more extreme than last Friday. I am expecting for a reflex bounce tomorrow. Or the market gap down tomorrow morning then bounce? I am a little impatient to buy UPRO for a bounce right before close. That is a little bit rush. With the good liquidity for UPRO, I should enter after market to get a much better price, given that the negative momentum will likely be carried from the last five minutes before market close. That is a lesson learned today. I have to keep my position small for this bounce as I am not confident. Hope things work for this kind of extreme.
Sunday, October 2, 2011
Wild prediction - we are close to be bottomed
By doing the weekend research on the charts and my market timing model, I come to the conclusion that the intermediate bottom is very close. The market could act similar to the summer 2010. It could have a final retest of 1100, or go down 1100 by 7 points to 1090 area, then start a new bull move up to end of October, or even end of year. I feel it is very possible. Next week is the key. Need to see next week close in green. I am eager to see if my prediction will come true or not. I am not a short term bear any more.
I find out some people are also not so bearish about October.
Jeff Hirsch: October is a Bear Killer
I find out some people are also not so bearish about October.
Jeff Hirsch: October is a Bear Killer
Saturday, October 1, 2011
Expect a short term bounce very soon
I guess a lot of people are thinking that the market is going to drop hard next week. But I believe that it could not happen without a short term bounce. The market is quite oversold and the first day of October is historically bullish. There are only 193 stocks up 25 percent quarterly, and 2097 stocks down 25 percent quarterly, which is considered to be extreme. I feel we need to have one to three days bounce to relieve the oversold, then do further down. We could see bounce as early as Monday morning. Note that On Saturday, the Chinese PMI number is released. The number is better than expected, which indicates China is still growing. It can be an impetus for a bounce.
I have repurchased some SPXU position on Friday, which I sold on Thursday close to reduce my risk exposure. I closed all my SPXU position after market.
Actually I am not too bearish for October. If spx could retest 1100, or go down touching 1090 zone, the market can have a huge reflex bounce. Do not underestimate the power of the bull. We are seeing consistent buying when spx gets to 1120 area for a couple of times.
I will long the market if it is closed in green on Monday. Let us see.
1010 is not so easy to be reached. 2011 is not 2008.
I have repurchased some SPXU position on Friday, which I sold on Thursday close to reduce my risk exposure. I closed all my SPXU position after market.
Actually I am not too bearish for October. If spx could retest 1100, or go down touching 1090 zone, the market can have a huge reflex bounce. Do not underestimate the power of the bull. We are seeing consistent buying when spx gets to 1120 area for a couple of times.
I will long the market if it is closed in green on Monday. Let us see.
1010 is not so easy to be reached. 2011 is not 2008.
The Long T Theory 40 Year Cycle
http://ttheory.typepad.com/files/longwavecycles2010pdf-2.pdf
A very interesting reading. Are we going to expect a long recession for the next 10 years?
The nominal 40 Year Oscillator Cycle: Cyclical studies of the blue Momentum Oscillator below suggest the longest equity cycles produces major lows at approximately at 4 decade intervals as indicated by the periodic words 'Low' . T Theory expects the next low Zone in the 2010-2020 period. Midway between these Oscillator Lows are the 'High's, marking potential high zones for the Dow.
A very interesting reading. Are we going to expect a long recession for the next 10 years?
The nominal 40 Year Oscillator Cycle: Cyclical studies of the blue Momentum Oscillator below suggest the longest equity cycles produces major lows at approximately at 4 decade intervals as indicated by the periodic words 'Low' . T Theory expects the next low Zone in the 2010-2020 period. Midway between these Oscillator Lows are the 'High's, marking potential high zones for the Dow.
Friday, September 30, 2011
ECRI Leading Indicator
http://www.businesscycle.com/reports_indexes
http://www.advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
Read from Zerohedge.com : ECRI's Achutan Says US Is "Entering A New Recession"
http://www.zerohedge.com/news/ecris-achutan-says-us-entering-new-recession
Last year the ECRI index was the bete noir leading indicator of the market: while the index clearly indicated the US had entered a recession, its creator Lakshman Achutan consistently refuted the findings of the index, instead pushing a contrary view that the US was in fact growing. Then came QE2 and with it s 9 month suspension of reality. That time is over, as is Achutan's ongoing attempt to deny facts. As of a minutes ago, the ECRI's head told Bloomberg Radio that the U.S. is "tipping into a new recession." "He added: "We don’t make these calls lightly. When we make them, it’s because there’s an overwhelming objective message coming out of our forward-looking indicators. What is going on with the leading indicators is wildfire; it’s not reversible.” As Zero Hedge first said months ago, when it finally extracts its head from between its gluteui maximus, we expet the NBER to proclaim the re-recession as having started in June/July.
http://www.advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
Read from Zerohedge.com : ECRI's Achutan Says US Is "Entering A New Recession"
http://www.zerohedge.com/news/ecris-achutan-says-us-entering-new-recession
Last year the ECRI index was the bete noir leading indicator of the market: while the index clearly indicated the US had entered a recession, its creator Lakshman Achutan consistently refuted the findings of the index, instead pushing a contrary view that the US was in fact growing. Then came QE2 and with it s 9 month suspension of reality. That time is over, as is Achutan's ongoing attempt to deny facts. As of a minutes ago, the ECRI's head told Bloomberg Radio that the U.S. is "tipping into a new recession." "He added: "We don’t make these calls lightly. When we make them, it’s because there’s an overwhelming objective message coming out of our forward-looking indicators. What is going on with the leading indicators is wildfire; it’s not reversible.” As Zero Hedge first said months ago, when it finally extracts its head from between its gluteui maximus, we expet the NBER to proclaim the re-recession as having started in June/July.
Thursday, September 29, 2011
What a super volatility day! Window dressing effect?
Big gap up, fade away to break yesterday low, then huge come back in the last hour trading after the $TNX close. What a volatility. I really hate the market action here. Before 3pm, it looked like we are going to close low and have potential to break the H&S shoulder in the next two days. Now there is a lot of uncertainty to me. In the 60 minute chart, it looks like a falling wedge which is about to break up. I guess bull has the potential to test the falling 50MA again. But if we close in red tomorrow, I will initiate some short position again.
Yesterday Cobra mentioned buy yesterday close and we close in green today based on the ISEE index. Wa, it wins again for the 7th time, which still keeps the 100 percent winning rate. I thought it would fail in the intraday. Now I am amazed!
I have given up 5 percent gain in the last hour. Lucky that I am not a late short, otherwise I would be burned in the last hour. Lesson learned today.
1. Pay attention to 3PM, when $TNX closes. A lot of dramas happen from here.
2. When having good profit, set trailing stop to protect profit no matter what. Half profit is greater than a tiny profit and lose.
3. Pay attention to the fibonacci. 114.14 is the 23.6 number. Yes, we have big bounce from there.
Wednesday, September 28, 2011
DOJI at TOP: Pattern to Burn in Your Head (zz)
From Sid: going to spend time to read and understand it.
http://bigbullandbigbear.blogspot.com/2011/05/doji-at-top-pattern-to-burn-in-your.html
http://bigbullandbigbear.blogspot.com/2011/05/doji-at-top-pattern-to-burn-in-your.html
The Bradley siderograph
http://www.marketmulticycles.com/marketmulticycles9.htm
The Bradley siderograph was developed in the 40ies by Donald Bradley to forecast the stock markets. Bradley assigned numerical values to certain planetary constellations for every day, and the sum is the siderograph. It was originally intended to predict the stock markets. The noted technical analyst William Eng singled out the Bradley as the only 'excellent' Timing Indicator in his book, "Technical Analysis of Stocks, Options, and Futures" (source: Astrikos).
It is crucial to understand what the siderograph is about since almost all traders (and even financial astrologers!) misunderstand it. Over the decades it has been observed that the siderograph can NOT (!!!) reliably predict the direction but only turning points in the financial markets (stocks, bonds, bonds, commodities) within a time window of +/- 4 calendar days (in a few cases up to +/- 7 days). Inversions (i.e. a high instead of a low and vice versa) are quite common. Also, it is not a timing tool for short-term trends but rather for intermediate-term to longer-term trends because the turning window is rather wide.
The Bradley siderograph was developed in the 40ies by Donald Bradley to forecast the stock markets. Bradley assigned numerical values to certain planetary constellations for every day, and the sum is the siderograph. It was originally intended to predict the stock markets. The noted technical analyst William Eng singled out the Bradley as the only 'excellent' Timing Indicator in his book, "Technical Analysis of Stocks, Options, and Futures" (source: Astrikos).
It is crucial to understand what the siderograph is about since almost all traders (and even financial astrologers!) misunderstand it. Over the decades it has been observed that the siderograph can NOT (!!!) reliably predict the direction but only turning points in the financial markets (stocks, bonds, bonds, commodities) within a time window of +/- 4 calendar days (in a few cases up to +/- 7 days). Inversions (i.e. a high instead of a low and vice versa) are quite common. Also, it is not a timing tool for short-term trends but rather for intermediate-term to longer-term trends because the turning window is rather wide.
ISE Sentiment Index
http://www.ise.com/WebForm/viewPage.aspx?categoryId=126
The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios.
This ISEE index is similar to the CBOE put/call ratio ($CPCE, $CPC in stockcharts.com).
Based on Cobra's backtest: When ISEE index <60, buy at close, sell at the next day since the last 2,000 trading days, the winning rate is 100% (total 6 trades).
http://cobrasmarketview.blogspot.com/2011/09/09282011-market-outlook-lower-low-ahead.html
Today, the ISEE index is 53. Are we going to have a bounce tomorrow? I guess could be. The best case to me tomorrow is gap down, then dip buyer coming to push the index to be green. Currently I have some short position using SPXU from 19. Wish tomorrow the market acts as I wish.
The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios.
This ISEE index is similar to the CBOE put/call ratio ($CPCE, $CPC in stockcharts.com).
Based on Cobra's backtest: When ISEE index <60, buy at close, sell at the next day since the last 2,000 trading days, the winning rate is 100% (total 6 trades).
http://cobrasmarketview.blogspot.com/2011/09/09282011-market-outlook-lower-low-ahead.html
Today, the ISEE index is 53. Are we going to have a bounce tomorrow? I guess could be. The best case to me tomorrow is gap down, then dip buyer coming to push the index to be green. Currently I have some short position using SPXU from 19. Wish tomorrow the market acts as I wish.
TBP’s 30 Most Influential Finance Sources (zz)
http://www.ritholtz.com/blog/2011/09/tbps-30-most-influential-finance-sources/
There is a list of the most influential managers, thinkers, traders and strategists. I see a lot of names I admire. Cheers.
Asset Managers Researcher/Strategists Media/Blogs
1. Jeremy Grantham James Grant Naked Capitalism
2. Jim Rogers Robert Shiller John Mauldin
3. John Hussman Lakshman Achuthan Paul Krugman
4. George Soros Marc Faber ZeroHedge.com
5. Hugh Hendry David Rosenberg Calculated Risk
6. Bill Gross Chris Whalen Jesse’s Café Américain
7. Felix Zulauf Gary Shilling Mish
8. Seth Klarman James Montier Peter Brandt
9. Bill Fleckenstein Louise Yamada Robert Prechter
10. Howard Marks Nouriel Roubini FT Alphaville
There is a list of the most influential managers, thinkers, traders and strategists. I see a lot of names I admire. Cheers.
Asset Managers Researcher/Strategists Media/Blogs
1. Jeremy Grantham James Grant Naked Capitalism
2. Jim Rogers Robert Shiller John Mauldin
3. John Hussman Lakshman Achuthan Paul Krugman
4. George Soros Marc Faber ZeroHedge.com
5. Hugh Hendry David Rosenberg Calculated Risk
6. Bill Gross Chris Whalen Jesse’s Café Américain
7. Felix Zulauf Gary Shilling Mish
8. Seth Klarman James Montier Peter Brandt
9. Bill Fleckenstein Louise Yamada Robert Prechter
10. Howard Marks Nouriel Roubini FT Alphaville
Friday, September 23, 2011
Quotes
In a crash situation, the market isn’t waiting for buyers to come in, it’s waiting for sellers to run out. Very few want to buy in a panic. Only after everyone is done selling and the strongest hands remain can the market start to work higher. -- from Dynamic Hedge.
Using Market Breadth Statistics to Differentiate Counter Trend Move vs Trend Change From Timelysetup (zz)
http://timelysetup.wordpress.com/2011/09/23/using-market-breadth-statistics-to-differentiate-counter-trend-move-vs-trend-change/
A very well written document from Timelysetup about the market monitor. Today I know Timelysetup is also a stockbee member. Wa, there are so many good traders in stockbee community, which sparks trading ideas and knowledge.
____________________________________________________________________________
Perhaps one of the most stressful and difficult challenge for momentum trader is to identify whether counter trend move against us represent a change of trend or just a pullback move which stop all newbies out of the market before the trend continues its march.
Fortunately, we have market breadth statistics to help us do just that in the stock market. The premise is that market trend requires participation of all common stocks. Market trend cannot be sustained by trending move in just a handful of highly capitalized stocks.
In a bull market, money flows to the stock market as risk appetite grows and ultimately reach lower quality stocks. When risk appetite is not that great, only the best quality of them will continue to rise.
Near the end of a bear market, less and less stock participate in its march down. Higher quality stocks which were sold during the panic will be accumulated by those in the know. As a result, participation to the downside diminish. Before the market return to bull market, though, participation from lower quality stocks is needed before a bull market can be sustained. Often, this start with bang! There will be repeated days with high number of stocks being accumulated without high number of stocks being distributed in between.
Now assume there is a tendency for the market to move in a manner necessary to frustrate the majority of players. Short lived counter trend move is one such way for the market to frustrate the majority of us because it will turn our profitable position quickly into a loss and leave us behind before the market move in our favor again — but without us. Nothing is more frustrating than this. Money will flow from the accounts of these frustrated newbies to those few with more experiences.
Now, what is the most cost effective way for a counter trend rally in the market indexes to happen? Yes, move the few stocks with the most influence in the indexes. These are usually highly capitalized and liquid stocks. Being liquid, the transaction cost of moving them is minimal. Being highly capitalized, its move significantly affect the index. This operation cannot be done in less liquid small cap stocks. This is the key to the success of market breadth statistics in separating real trend change versus counter trend move in market indexes.
Thus, trend change requires wide participation among common stocks to significantly move in the same direction while counter trend move is associated with sharp move in market indexes without wide range participation from common stocks.
This concept applies to both intermediate (weeks to months) as well as intraday horizon.
Let’s have a look at intermediate horizon which is suitable for Swing trader and Position trader. Below is my latest reading of raw breadth statistics up to 22 Sept 2011. Look at the 7th row where I put three circles there. This row count the number of range-bound stocks which are being accumulated or distributed with high volume. Notice that the green up bars (accumulation) during reflect bounce is dwarfed by the magenta down bars (distribution) during down leg. Perhaps you noticed this yourself when you hardly found many swing trading setups. What I saw here convinced me that the bounce where just counter trend rally. Indeed, my mechanized timing system haven’t issued a single bullish signal since 27 July 2011.
Pay closer attention to 27 July. You notice very huge spike in Magenta down bar (range bound stocks being distributed), more than double what you have seen prior to that day in 2011. This is a very bearish sign as it occurs after a series of smaller sized Magenta bars in the preceding two weeks. Once such day happen, usually two sequence of events take place: (1) selling tapper off as there is enough bottom fishers, or (2) a chain of selling events compounded as stops were hit until exhaustion takes place — not much different from atomic chain reaction where the explosion gets larger until the mass are all converted into energy. Following 27 July, the second scenario unfold. When this happen, you should look for the end of it… Where the stops are all hit. Where the mass in the chain reaction are all used up. In this case, you look at the 6th row. This shows the number of down trending stocks which were distributed on high volume (dark red bar) or the number of up trending stocks which were accumulated on high volume (dark green bar). Soon after 27 July, the dark red bars just explode day by day. Until it stops on 9 August. This is where you should have identified the end of panic selling. From here, another down leg or consolidation might occur. Same process can be observed in 2002 and 2008.
We should not preempt the end of panic selling by looking at some statistics dropping into certain pre-defined level as oversold. Whatever that statistic, it can go much lower and much longer. Instead, we wait until the selling has really ended.
A very well written document from Timelysetup about the market monitor. Today I know Timelysetup is also a stockbee member. Wa, there are so many good traders in stockbee community, which sparks trading ideas and knowledge.
____________________________________________________________________________
Perhaps one of the most stressful and difficult challenge for momentum trader is to identify whether counter trend move against us represent a change of trend or just a pullback move which stop all newbies out of the market before the trend continues its march.
Fortunately, we have market breadth statistics to help us do just that in the stock market. The premise is that market trend requires participation of all common stocks. Market trend cannot be sustained by trending move in just a handful of highly capitalized stocks.
In a bull market, money flows to the stock market as risk appetite grows and ultimately reach lower quality stocks. When risk appetite is not that great, only the best quality of them will continue to rise.
Near the end of a bear market, less and less stock participate in its march down. Higher quality stocks which were sold during the panic will be accumulated by those in the know. As a result, participation to the downside diminish. Before the market return to bull market, though, participation from lower quality stocks is needed before a bull market can be sustained. Often, this start with bang! There will be repeated days with high number of stocks being accumulated without high number of stocks being distributed in between.
Now assume there is a tendency for the market to move in a manner necessary to frustrate the majority of players. Short lived counter trend move is one such way for the market to frustrate the majority of us because it will turn our profitable position quickly into a loss and leave us behind before the market move in our favor again — but without us. Nothing is more frustrating than this. Money will flow from the accounts of these frustrated newbies to those few with more experiences.
Now, what is the most cost effective way for a counter trend rally in the market indexes to happen? Yes, move the few stocks with the most influence in the indexes. These are usually highly capitalized and liquid stocks. Being liquid, the transaction cost of moving them is minimal. Being highly capitalized, its move significantly affect the index. This operation cannot be done in less liquid small cap stocks. This is the key to the success of market breadth statistics in separating real trend change versus counter trend move in market indexes.
Thus, trend change requires wide participation among common stocks to significantly move in the same direction while counter trend move is associated with sharp move in market indexes without wide range participation from common stocks.
This concept applies to both intermediate (weeks to months) as well as intraday horizon.
Let’s have a look at intermediate horizon which is suitable for Swing trader and Position trader. Below is my latest reading of raw breadth statistics up to 22 Sept 2011. Look at the 7th row where I put three circles there. This row count the number of range-bound stocks which are being accumulated or distributed with high volume. Notice that the green up bars (accumulation) during reflect bounce is dwarfed by the magenta down bars (distribution) during down leg. Perhaps you noticed this yourself when you hardly found many swing trading setups. What I saw here convinced me that the bounce where just counter trend rally. Indeed, my mechanized timing system haven’t issued a single bullish signal since 27 July 2011.
Pay closer attention to 27 July. You notice very huge spike in Magenta down bar (range bound stocks being distributed), more than double what you have seen prior to that day in 2011. This is a very bearish sign as it occurs after a series of smaller sized Magenta bars in the preceding two weeks. Once such day happen, usually two sequence of events take place: (1) selling tapper off as there is enough bottom fishers, or (2) a chain of selling events compounded as stops were hit until exhaustion takes place — not much different from atomic chain reaction where the explosion gets larger until the mass are all converted into energy. Following 27 July, the second scenario unfold. When this happen, you should look for the end of it… Where the stops are all hit. Where the mass in the chain reaction are all used up. In this case, you look at the 6th row. This shows the number of down trending stocks which were distributed on high volume (dark red bar) or the number of up trending stocks which were accumulated on high volume (dark green bar). Soon after 27 July, the dark red bars just explode day by day. Until it stops on 9 August. This is where you should have identified the end of panic selling. From here, another down leg or consolidation might occur. Same process can be observed in 2002 and 2008.
We should not preempt the end of panic selling by looking at some statistics dropping into certain pre-defined level as oversold. Whatever that statistic, it can go much lower and much longer. Instead, we wait until the selling has really ended.
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