I was reading Dr. Brett the other day and he asked the musical question – what happens when the market (by this he usually means S&P 500) goes up 2 days in a row? He found that 3 days later the market is generally weaker than when compared to the average 3-day period. He then tested 2 down days in a row and found the exact opposite. (We could have told him that).
I thought about this for a bit and I said I could test this for individual stocks by using a simple filter. What I did was write a filter that simply looked for stocks selling between 15 and 35 where the close was higher than the day before on the last 2 days.
I then tested this using a 3-day holding period over the dates from 9/01/2006 to 12/15/2006. The return was $11500. (By this I mean starting with 100000 and ending with 111500).
I then switched the filter to two down days in a row and keeping everything else the same the return was 25100 (125100). Obviously you are better off going long off of two down days rather than two up days as a starting position if you are swing trading.
Something to think about - One of the problems with designing filters these days is that the market continues to go up so just about any filter you design and back test in the recent past will return a winning percentage. And that is not reality or at least not normal so be careful with your own screens. Understand that you have to take the results with a grain of salt.
Of course back testing in anything other than the recent past can also be problematic - so watch your step in any event.
Thursday, December 21, 2006
What!!??
Just read Seeking Alpha's recap of Cramer's mad money show last night - Cramer says that Circuit City is done for and that Best Buy is eating their lunch on the same product.
What he doesn't say is that the same products at Circuit City cost less than at Best Buy because these two stores are in direct competition with one another in the consumer entertainment market.
I know that the same product (exact make and model) costs less because I have comparison shopped using the net. I'm in the market for a large, flat screen television. I'm holding out because I believe that prices are going to come down hard during pre-Super Bowl - post Christmas bust out sales. In the meantime I've been comparison shopping across every venue known to man looking for the absolute rock bottom deal.
I use bizrate.com for such comparisons because I have found that they have a good search engine and manage to cover the marketplace like a carpet. Then they have a great comparison window too and when you make a selection they give you all the stores, both on-line and sticks and bricks within a 20 mile radius, whether the product is in stock, shipping costs and so on.
Anyway this is the problem with Cramer - he makes pronouncements out of his butt and people take it as gospel. Do your own DD but I wouldn't write CC off anytime soon.
I neither own nor plan to own CC shares either now or anytime in the near future.
What he doesn't say is that the same products at Circuit City cost less than at Best Buy because these two stores are in direct competition with one another in the consumer entertainment market.
I know that the same product (exact make and model) costs less because I have comparison shopped using the net. I'm in the market for a large, flat screen television. I'm holding out because I believe that prices are going to come down hard during pre-Super Bowl - post Christmas bust out sales. In the meantime I've been comparison shopping across every venue known to man looking for the absolute rock bottom deal.
I use bizrate.com for such comparisons because I have found that they have a good search engine and manage to cover the marketplace like a carpet. Then they have a great comparison window too and when you make a selection they give you all the stores, both on-line and sticks and bricks within a 20 mile radius, whether the product is in stock, shipping costs and so on.
Anyway this is the problem with Cramer - he makes pronouncements out of his butt and people take it as gospel. Do your own DD but I wouldn't write CC off anytime soon.
I neither own nor plan to own CC shares either now or anytime in the near future.
End Of Year
I don’t like the looks of the weekly charts. Everywhere I look I see brutally oversold indices (as represented by their ETF’s). For example here is the SPY one-year weekly chart with its 8, 21 and 90 period EMA.
Notice that in June it dropped below the 21 EMA and then fell all the way to the 90 EMA where it made a stand and then recovered. The problem right now is that the closing prices are too far away from the 8 EMA, the 8 EMA is too far away from the 21 EMA, and the 21 EMA is too far away from the 90 EMA. I think of this as being like pressure being put on a pot and eventually it has to release.
You can see on the left side of the chart where the MACD and its signal line are just sliding along together. That required a correction and you will very seldom see a correction up from that configuration – almost always the correction is down – which is good. It takes the pressure off the pot and the pot doesn’t explode. The point is we could possibly see that same effect over the next several months as the EMAs slowly converge and that might have a similar effect in mid-year as it did last year. The other possibility is that we have a couple of months of severe down turn to the 90 EMA.
I think that there is so much pressure that what we should see is a quick down turn to the 21 EMA, a bit of a fight there and then either a completion of the plunge to the 90 or a resumption of the “relentless plodding up turn.”
On the 2-year chart you can see the flattening I was talking about more clearly and in context. For almost six months this past year the market “meandered” and I think I heard that word to describe it over and over and … you get the point.
The Q’s are in much the same configuration except they have already begun flattening off at the top as a prelude to either a sideways slide or a bit of “kiss the 21” action.
Of course all of this is truly meaningless to those of us who trade on a short-term basis except maybe as a warning that there might be a few rocky weeks ahead. For the shortists it is probably going to be a feast time.
Just some thoughts – not advice – and certainly not a prediction – only the magic coin is predicting and it is smart enough not to tackle anything further out than tomorrow.
Notice that in June it dropped below the 21 EMA and then fell all the way to the 90 EMA where it made a stand and then recovered. The problem right now is that the closing prices are too far away from the 8 EMA, the 8 EMA is too far away from the 21 EMA, and the 21 EMA is too far away from the 90 EMA. I think of this as being like pressure being put on a pot and eventually it has to release.
You can see on the left side of the chart where the MACD and its signal line are just sliding along together. That required a correction and you will very seldom see a correction up from that configuration – almost always the correction is down – which is good. It takes the pressure off the pot and the pot doesn’t explode. The point is we could possibly see that same effect over the next several months as the EMAs slowly converge and that might have a similar effect in mid-year as it did last year. The other possibility is that we have a couple of months of severe down turn to the 90 EMA.
I think that there is so much pressure that what we should see is a quick down turn to the 21 EMA, a bit of a fight there and then either a completion of the plunge to the 90 or a resumption of the “relentless plodding up turn.”
On the 2-year chart you can see the flattening I was talking about more clearly and in context. For almost six months this past year the market “meandered” and I think I heard that word to describe it over and over and … you get the point.
The Q’s are in much the same configuration except they have already begun flattening off at the top as a prelude to either a sideways slide or a bit of “kiss the 21” action.
Of course all of this is truly meaningless to those of us who trade on a short-term basis except maybe as a warning that there might be a few rocky weeks ahead. For the shortists it is probably going to be a feast time.
Just some thoughts – not advice – and certainly not a prediction – only the magic coin is predicting and it is smart enough not to tackle anything further out than tomorrow.
Wednesday, December 20, 2006
My Favorite BLOG
Aside from this one, of course, would have to be Seeking Alpha. While the rest on my list are good - Seeking Alpha provides a trading education and more trading ideas per inch of column space each and every day of the week than all of those and then some put together. It is an aggregator and as such pulls in the writings from the best and the brightest on the web today - for example Trading Goddess has had a column on the site. Barry Ritholtz is a regular contributor as are a dozen or more other folks who's opinions I respect and admire.
It is a low key site with one small advertisement and the best part it is totally free. If you want to make comments you can register with the site but otherwise you can read everything on there for the cost of your time alone.
Those of you who are new to trading might not understand Alpha and Beta as it is used in this business. - Beta is the return of the benchmark index and your portfolio is said to be tracking Beta when its return is equal to the benchmark. Alpha is the return over and above Beta and thus it is what we all seek to achieve (otherwise we would just invest in an index fund and call it a day). When you are seeking Alpha you are looking for profits over and above the routine and that what the site helps you find.
It is a low key site with one small advertisement and the best part it is totally free. If you want to make comments you can register with the site but otherwise you can read everything on there for the cost of your time alone.
Those of you who are new to trading might not understand Alpha and Beta as it is used in this business. - Beta is the return of the benchmark index and your portfolio is said to be tracking Beta when its return is equal to the benchmark. Alpha is the return over and above Beta and thus it is what we all seek to achieve (otherwise we would just invest in an index fund and call it a day). When you are seeking Alpha you are looking for profits over and above the routine and that what the site helps you find.
Wrapping Crappy Wednesday
Man I’m getting sick of these boomerang days. Up we go, down we go – around we go – nobody knows where we want to go. I want the market to go down and go down hard. I want that to happen in the next 10 days. That will give us a good set-up for the next year. It won’t of course – don’t know if you’ve noticed or not but there just isn’t any volume in this market. All of the indices ETFs that we follow are at half speed if that.
I’m still holding SYMC although I wish I had sold this morning early and I picked up some DHI and was probably a day or two too early on that one. Dumped out of WFC – a 9-cent gain off a three-day hold. Could have had 9-cents after the first three minutes. Sometimes you just waste time although a profit is a profit. Sometimes they are so boring you just have to kick them out of the portfolio. WFC fit that profile to a T.
I took a day trade in CRVL. That chart's below – I took it on the fifth bar where it "kissed the 8" and dumped out right at 48 – that was my target and I had to go shopping again. Good thing – looks like everyone else had to go shopping too. MAMA would have been a great trade again today – as I mentioned in my post on cheap stocks – MAMA and MVIS both were showing some support on the monthly charts. MVIS hasn’t been doing much but MAMA has been running pretty well.
I’m getting sick of shopping. I read a column by Barry Ritholtz this morning on Seeking Alpha containing anecdotal evidence that the season is lacking in the retail sector and I’ve got to tell you – I agree. I’ve been out almost every day in December and in years past where I would have had problems with parking – no sweat this year. Also we have had some lines but nothing too difficult and an awful lot of stores just don't have anybody in them. Not the big boxes of course but a lot of the specialty shops. I don’t know what that means for certain but I think it bodes ill for the retail reports in January. That will mean a one-day market decline at best and then ho-hum up we go again. Adam on the Daily Options Report said it best – he called it “relentlessly plodding upturn.” That pretty much nails it.
I really thought we’d have a good day today – at least go up and stay up but there are a lot of profits from the “relentless upturn” and somebody is taking them. Possibly the funds – setting the end of year markers – the retail trade is too conditioned to wait for January to take profits and there are hardly any losses to take this year.
For tomorrow the up/down ratio went up to 48%, the new 20-day highs gained ground and the new 20-day lows lost ground. Everybody went red in the last hour except IWM. The small caps had a great day. The VIX slid back inside of 5% below its 10-day moving average.
This all sums up to a great big – I don’t know. I’m going to sit on my positions through the holiday and see where we go next week. I'll watch CRVL and MAMA and a couple of others to see if I can get a day trade but other than that I'm pretty set where I am.
The magician is now at 38 – 29 having called today correctly – I should have listened and not played DHI – oh well sometimes you have to believe your own stories. I still think homies are over-sold and I'll get 10 - 15% out of DHI yet. I'm looking for a about a buck-60 with no real downside risk. For tomorrow – magic says --- tails – more bear. Could be.
I’m still holding SYMC although I wish I had sold this morning early and I picked up some DHI and was probably a day or two too early on that one. Dumped out of WFC – a 9-cent gain off a three-day hold. Could have had 9-cents after the first three minutes. Sometimes you just waste time although a profit is a profit. Sometimes they are so boring you just have to kick them out of the portfolio. WFC fit that profile to a T.
I took a day trade in CRVL. That chart's below – I took it on the fifth bar where it "kissed the 8" and dumped out right at 48 – that was my target and I had to go shopping again. Good thing – looks like everyone else had to go shopping too. MAMA would have been a great trade again today – as I mentioned in my post on cheap stocks – MAMA and MVIS both were showing some support on the monthly charts. MVIS hasn’t been doing much but MAMA has been running pretty well.
I’m getting sick of shopping. I read a column by Barry Ritholtz this morning on Seeking Alpha containing anecdotal evidence that the season is lacking in the retail sector and I’ve got to tell you – I agree. I’ve been out almost every day in December and in years past where I would have had problems with parking – no sweat this year. Also we have had some lines but nothing too difficult and an awful lot of stores just don't have anybody in them. Not the big boxes of course but a lot of the specialty shops. I don’t know what that means for certain but I think it bodes ill for the retail reports in January. That will mean a one-day market decline at best and then ho-hum up we go again. Adam on the Daily Options Report said it best – he called it “relentlessly plodding upturn.” That pretty much nails it.
I really thought we’d have a good day today – at least go up and stay up but there are a lot of profits from the “relentless upturn” and somebody is taking them. Possibly the funds – setting the end of year markers – the retail trade is too conditioned to wait for January to take profits and there are hardly any losses to take this year.
For tomorrow the up/down ratio went up to 48%, the new 20-day highs gained ground and the new 20-day lows lost ground. Everybody went red in the last hour except IWM. The small caps had a great day. The VIX slid back inside of 5% below its 10-day moving average.
This all sums up to a great big – I don’t know. I’m going to sit on my positions through the holiday and see where we go next week. I'll watch CRVL and MAMA and a couple of others to see if I can get a day trade but other than that I'm pretty set where I am.
The magician is now at 38 – 29 having called today correctly – I should have listened and not played DHI – oh well sometimes you have to believe your own stories. I still think homies are over-sold and I'll get 10 - 15% out of DHI yet. I'm looking for a about a buck-60 with no real downside risk. For tomorrow – magic says --- tails – more bear. Could be.
Homies
The homebuilder sector has been on the down and out for awhile. I just finished reading in Seeking Alpha about Hovnanian’s “gruesome quarter” and indeed it was gruesome. The best part however was the way the CFO lowered expectations for the coming year. Now if they post any profit at all it will be a prelude to the second housing boom. That was the good news – they are at rock bottom, they can only go up, and they are positioned for some bad quarters ahead.
Then I looked at the chart – and you can see for yourself that we all should have been in housing for at least a month already if not more.
You see in November where on the weekly chart the candle bisected all three averages? That followed an obvious blow-off bottom the week before. Then the only thing that happened on the “gruesome quarter report” was that the stock “kissed the EMA 8” (as I call it) and rebounded smartly. All of this together suggests to me that these stocks (TOL, DHI, KBH, CTX and HOV) might actually develop some legs in the New Year. And if you don’t know which one to buy there is always XHB. The fact that its chart looks exactly like HOV’s is not a coincidence just a fact. The best part of this chart is the increasing volume since July. Brave souls would have bought on that indicator alone. Notice also the bisecting candle in mid-November.
Now I don’t particularly like “idea” stocks as in “my neighbor’s sister in law’s kid's best friend forever said that she doesn’t like this, that, or the other.” Those kinds of stocks always cost me money way back when. But I do like distressed stocks and the Homies have been distressed for a year. It might just be time to get some.
Now, of course, the last several weeks could be read as a rounding top and those steeples might mean a little more downside so if you do get involved stay awake, stay aware and be ready to get out if you can't take the pain.
As always this is not advice – just a guess – just like that bald guy on TV who is always foaming at the mouth and spitting at the camera – good ol’ what’s his name.
Then I looked at the chart – and you can see for yourself that we all should have been in housing for at least a month already if not more.
You see in November where on the weekly chart the candle bisected all three averages? That followed an obvious blow-off bottom the week before. Then the only thing that happened on the “gruesome quarter report” was that the stock “kissed the EMA 8” (as I call it) and rebounded smartly. All of this together suggests to me that these stocks (TOL, DHI, KBH, CTX and HOV) might actually develop some legs in the New Year. And if you don’t know which one to buy there is always XHB. The fact that its chart looks exactly like HOV’s is not a coincidence just a fact. The best part of this chart is the increasing volume since July. Brave souls would have bought on that indicator alone. Notice also the bisecting candle in mid-November.
Now I don’t particularly like “idea” stocks as in “my neighbor’s sister in law’s kid's best friend forever said that she doesn’t like this, that, or the other.” Those kinds of stocks always cost me money way back when. But I do like distressed stocks and the Homies have been distressed for a year. It might just be time to get some.
Now, of course, the last several weeks could be read as a rounding top and those steeples might mean a little more downside so if you do get involved stay awake, stay aware and be ready to get out if you can't take the pain.
As always this is not advice – just a guess – just like that bald guy on TV who is always foaming at the mouth and spitting at the camera – good ol’ what’s his name.
Tuesday, December 19, 2006
Tuesday Wraps
I’m still holding SYMC and WFC and both actually went up today. I managed to salvage most of my losses on ORCL this morning – I expected a small downside – not that steep drop but, as always with a mature company, the first drop is an overshoot and if you jump on board and double or triple up you can usually get out without losing your shirt – and that’s what I did. I wouldn’t do that for some no-name but I seldom play immature companies just for that reason – I really want to know how the trading community reacts to bad news or, as in this case, good news.
I jumped out on the rebound at .25 and only lost a 100 bucks in all. Considering I was a grand down at the start – not bad. I then took a solemn vow – I will never play ORCL again – this is the second time that it was traded out from under me for no good reason. It is now on my white board under the word “Never” along with 20 or 30 others that I will not play - mostly because they are empty pieces of junk that misbehave.
(start sermon)
Warning! Warning! Warning! If you try this on your next dump job and you lose don't blame me - it is not an approved method of trading. Never, never, never double up a losing position - Never! (end sermon)
In case you think I have forgotten my day trading skills I took a small position in MAMA off a new method that I have been testing. It seems to work but I’m going to tell you that the risk factor is high and you need to move quickly. I have found this to be an effective play in every time frame from 4 minutes through 15. Look at the chart below.
You can see what the new set-up is – if the first time increment encompasses all three of the EMA’s that I use then I buy it on the next open. I keep my mental stop at the EMA 21. Now I don’t know if this will work with other moving averages because I’m happy with it working with the three I use all the time. Interestingly, MAMA also had a classic set-up a bit later in the morning – but I was already in the trade.
If you don’t think this occurs very often – take a look here at WFC – also today.
And here is a counter-gap trade I wish I could have taken but I was back on the shopping detail this afternoon. I give you HANS.
Finally – I thought the markets had a good chance to go up today because the first hour PC ratio opened above yesterday’s first hour open and closed below yesterday’s first hour close. That was despite the fact that the FTSI 100 was down all day. As I mentioned yesterday - these are rules of thumb and not hard and fast "must be's".
Of course a lot of stocks did go up today – the up/down ratio is back at 45% but the new 20 day lows are still 200 more than the new 20 day highs and that is a good thing. The VIX is back at 5% below its 10 day moving average but the good news is that every major index we follow and GS finished the last hour with a strong red candle – there was a ton of selling going on. All of this leads me to believe that we will probably go up tomorrow. But as you know a good trader doesn’t care about the direction of the market because a good trader can make money regardless.
I’m giving Mr. Magic a pass for today since the market finished mixed which leaves him at 37 – 29. For tomorrow --- tails – bear in the air - - oh, who believes in magic anyway?
I jumped out on the rebound at .25 and only lost a 100 bucks in all. Considering I was a grand down at the start – not bad. I then took a solemn vow – I will never play ORCL again – this is the second time that it was traded out from under me for no good reason. It is now on my white board under the word “Never” along with 20 or 30 others that I will not play - mostly because they are empty pieces of junk that misbehave.
(start sermon)
Warning! Warning! Warning! If you try this on your next dump job and you lose don't blame me - it is not an approved method of trading. Never, never, never double up a losing position - Never! (end sermon)
In case you think I have forgotten my day trading skills I took a small position in MAMA off a new method that I have been testing. It seems to work but I’m going to tell you that the risk factor is high and you need to move quickly. I have found this to be an effective play in every time frame from 4 minutes through 15. Look at the chart below.
You can see what the new set-up is – if the first time increment encompasses all three of the EMA’s that I use then I buy it on the next open. I keep my mental stop at the EMA 21. Now I don’t know if this will work with other moving averages because I’m happy with it working with the three I use all the time. Interestingly, MAMA also had a classic set-up a bit later in the morning – but I was already in the trade.
If you don’t think this occurs very often – take a look here at WFC – also today.
And here is a counter-gap trade I wish I could have taken but I was back on the shopping detail this afternoon. I give you HANS.
Finally – I thought the markets had a good chance to go up today because the first hour PC ratio opened above yesterday’s first hour open and closed below yesterday’s first hour close. That was despite the fact that the FTSI 100 was down all day. As I mentioned yesterday - these are rules of thumb and not hard and fast "must be's".
Of course a lot of stocks did go up today – the up/down ratio is back at 45% but the new 20 day lows are still 200 more than the new 20 day highs and that is a good thing. The VIX is back at 5% below its 10 day moving average but the good news is that every major index we follow and GS finished the last hour with a strong red candle – there was a ton of selling going on. All of this leads me to believe that we will probably go up tomorrow. But as you know a good trader doesn’t care about the direction of the market because a good trader can make money regardless.
I’m giving Mr. Magic a pass for today since the market finished mixed which leaves him at 37 – 29. For tomorrow --- tails – bear in the air - - oh, who believes in magic anyway?
Never Letting It Go
I've held onto something for 40-years and it was the best investment I ever made - my bride and I celebrate our 40th this date. I won't bore you with the details - to her and I they were anything but boring - but to others they would appear to be just the mundane life of two young people learning to cope with the world and at the same time learning to cope with one another. In this transaction there are no charts to read, no candlesticks to analyze, no moving averages to bounce off of. Just two people in a sea of billions of people who found one another accidentally and then made a life together.
If you have a libation today please raise your glass to my beautiful bride - she is the one who gets the credit for this "trade". Me? - I'm going to hold this one forever.
Til death, darlin', til death.
If you have a libation today please raise your glass to my beautiful bride - she is the one who gets the credit for this "trade". Me? - I'm going to hold this one forever.
Til death, darlin', til death.
Letting Go - Or - When Should I Sell This Thing
A reader asks about USB – specifically why so volatile all of a sudden? I looked and can only say – dividend fever. The company increased its dividend by 21% and the world said – oh wowie – free money and piled on. I can think of worse reasons to buy a stock, can’t you?
Let’s face it folks - the traders out here are nuts – a couple of weeks ago they ran a road-kill removal company (PNTR) up 2000% based on 20 cents of earnings so why not run a respected business up a buck and a half on good news. I suspect there was a lot of fund interest in the dividend and after the x-date (December 29th) they will probably sell-off some of their holdings. The stock should go down a bit towards its 21-period EMA and then resume its upward, boring trajectory in no time at all.
Anyway I got the idea that the reader who’s been holding this stock for awhile is thinking about letting it go – well certainly after the dividend check is in your pocket – that’s number 1. And number 2 – maybe hold it long enough to get the capital gains tax break. Sometimes making money is boring. You buy a stock - it begins to go up and there just isn’t any convenient exit. It becomes a matter of opportunity cost and utility and that varies with the individual.
For the day and swing traders out there – USB is a clinic – it began heating up at noon last Tuesday with a big drop followed by a crisp climb through the rest of the afternoon. All of this was based on the dividend announcement. Tuesday’s closing volume was almost twice the average. That was a good clue to put this stock on a watch list for Wednesday and maybe catch some of the up. (I didn’t – but I’m sure a lot of others did).
(Speaking of PNTR they had a news release regarding their guidance forward yesterday and some of the bag-holders started doubling up. – This stock will probably go up to 4 or 500 bucks before it’s all over and the laugh will be on me – just watch. – and I mean that seriously - just watch. And if you want to see something funny looking – go look at a one month daily chart of this beast).
Let’s face it folks - the traders out here are nuts – a couple of weeks ago they ran a road-kill removal company (PNTR) up 2000% based on 20 cents of earnings so why not run a respected business up a buck and a half on good news. I suspect there was a lot of fund interest in the dividend and after the x-date (December 29th) they will probably sell-off some of their holdings. The stock should go down a bit towards its 21-period EMA and then resume its upward, boring trajectory in no time at all.
Anyway I got the idea that the reader who’s been holding this stock for awhile is thinking about letting it go – well certainly after the dividend check is in your pocket – that’s number 1. And number 2 – maybe hold it long enough to get the capital gains tax break. Sometimes making money is boring. You buy a stock - it begins to go up and there just isn’t any convenient exit. It becomes a matter of opportunity cost and utility and that varies with the individual.
For the day and swing traders out there – USB is a clinic – it began heating up at noon last Tuesday with a big drop followed by a crisp climb through the rest of the afternoon. All of this was based on the dividend announcement. Tuesday’s closing volume was almost twice the average. That was a good clue to put this stock on a watch list for Wednesday and maybe catch some of the up. (I didn’t – but I’m sure a lot of others did).
(Speaking of PNTR they had a news release regarding their guidance forward yesterday and some of the bag-holders started doubling up. – This stock will probably go up to 4 or 500 bucks before it’s all over and the laugh will be on me – just watch. – and I mean that seriously - just watch. And if you want to see something funny looking – go look at a one month daily chart of this beast).
Monday, December 18, 2006
Monday's Wrapping Up
What a great day - beautiful weather - a nice round of golf - some cold beer on the patio after the round - life can't get much better. And yes there was a stock market going on today. And yes it went down and yes I'm happy. I'm happy because it appears as if tomorrow could be a booming day. But before we get to that I have some thoughts I'd like to share.
This morning before the market opened I was watching the NASDAQ pre-market trading as I usually do and I saw it going up, up, up. The problem is the FTSI 100 at the same time was going down, down, down. I've mentioned before that when the FTSI goes down the U.S. market usually has a weak day and today wasn't an exception.
After I got back to my office this afternoon the first thing I looked at was the PC ratio. The first hour is usually the critical hour and again it was no exception. I've found that whenever the PC ratio opens above and closes above the previous day's open and close in the first hour the market is usually going to go down. That looks like this:
Now these are "rules of thumb" which means some times they don't work as well as others but most times they are pretty good indicators of market activity for the rest of the day. So add the FTSI 100 and the pcratio to your box of tools and you will probably be better off for it.
I'm still holding SYMC, WU got stripped away in the heat of the afternoon - actually before I left this morning I reset the stop order too tight and lost it. That was a mistake because my stop was swept.
I bought ORCL and Wells Fargo (WFC) at the close. Oracle was bought off a distressed list and WFC was bought because it popped over its 21-period EMA. I've got a 30 cent loss or 60 cent profit on WFC. ORCL has a 50 cent loss or $1.00 profit target - or 4 days whichever comes first.
The up/down ratio is in a nice place at 30% which is very low. The new 20 day highs barely made it to 354 and that is almost half of what it printed on Friday. The new 20 day lows on the other hand a way up at 714 and that is twice what it printed on Friday. The market sentiment as measured by the five markers we follow, DIA, SPY, IWM, QQQQ and GS (which you know what that is by now) all finished with strong white candles in the final hour of trading. Barring catastrophe or news of either good or bad persuasion we might have a tradable market tomorrow.
Poor magic coin - 37 and 29 having called a bull market for today. For tomorrow it says --- heads again - the bull will be running - I think it's right.
This morning before the market opened I was watching the NASDAQ pre-market trading as I usually do and I saw it going up, up, up. The problem is the FTSI 100 at the same time was going down, down, down. I've mentioned before that when the FTSI goes down the U.S. market usually has a weak day and today wasn't an exception.
After I got back to my office this afternoon the first thing I looked at was the PC ratio. The first hour is usually the critical hour and again it was no exception. I've found that whenever the PC ratio opens above and closes above the previous day's open and close in the first hour the market is usually going to go down. That looks like this:
Now these are "rules of thumb" which means some times they don't work as well as others but most times they are pretty good indicators of market activity for the rest of the day. So add the FTSI 100 and the pcratio to your box of tools and you will probably be better off for it.
I'm still holding SYMC, WU got stripped away in the heat of the afternoon - actually before I left this morning I reset the stop order too tight and lost it. That was a mistake because my stop was swept.
I bought ORCL and Wells Fargo (WFC) at the close. Oracle was bought off a distressed list and WFC was bought because it popped over its 21-period EMA. I've got a 30 cent loss or 60 cent profit on WFC. ORCL has a 50 cent loss or $1.00 profit target - or 4 days whichever comes first.
The up/down ratio is in a nice place at 30% which is very low. The new 20 day highs barely made it to 354 and that is almost half of what it printed on Friday. The new 20 day lows on the other hand a way up at 714 and that is twice what it printed on Friday. The market sentiment as measured by the five markers we follow, DIA, SPY, IWM, QQQQ and GS (which you know what that is by now) all finished with strong white candles in the final hour of trading. Barring catastrophe or news of either good or bad persuasion we might have a tradable market tomorrow.
Poor magic coin - 37 and 29 having called a bull market for today. For tomorrow it says --- heads again - the bull will be running - I think it's right.
Shorts
Just for fun I thought I would whip up a contrarian filter – one that would deliberately lose money. The reason for this is that my back testing software only permits entering buy positions so in order to show how a short filter would work I have to have one that shows a loss.
Now this was really quick and only serves one purpose – to show how regression to the mean works. The important line in the filter below is the last one – the close is more than 18% greater than the 21-period EMA. This appears to be too much in many instances and the stock will fall back to be a little closer to its primary moving average.
show stocks where close is between 15 and 35
and average volume(90) > 50000
and ema(21) is more than 18% < close
I also tried the same filter on low price stocks and achieved even better results. I changed the first line to:
show stocks where close is between 2 and 10
For the first version we achieved losses (short gains) of about 28K. For the second we achieved losses (short gains) of about 44K. These are after holding for 4 days and selling automatically or sold as a result of hitting the 10% stop loss.
Once again if you are looking to enter a short position check the stock’s proximity to its primary moving average. I use the EMA 21 but you could use the MA 20 or any other average that you might feel comfortable with. On the other hand if you are thinking about going long a stock – you might want to wait till if falls back and kisses the primary moving average before you take your position.
One other thought that is pertinent – the back testing software is set to select the highest volume stock of each day’s output for entry. So even at the top of its run volume should show on a stock going down.
In the future - (going to be 70 degrees here in the mid-Atlantic today so you all know where I'm going - no Mary Ellen Margaret - not shopping - golfing) I will try to work up a filter designed to more accurately predict the tops.
Now this was really quick and only serves one purpose – to show how regression to the mean works. The important line in the filter below is the last one – the close is more than 18% greater than the 21-period EMA. This appears to be too much in many instances and the stock will fall back to be a little closer to its primary moving average.
show stocks where close is between 15 and 35
and average volume(90) > 50000
and ema(21) is more than 18% < close
I also tried the same filter on low price stocks and achieved even better results. I changed the first line to:
show stocks where close is between 2 and 10
For the first version we achieved losses (short gains) of about 28K. For the second we achieved losses (short gains) of about 44K. These are after holding for 4 days and selling automatically or sold as a result of hitting the 10% stop loss.
Once again if you are looking to enter a short position check the stock’s proximity to its primary moving average. I use the EMA 21 but you could use the MA 20 or any other average that you might feel comfortable with. On the other hand if you are thinking about going long a stock – you might want to wait till if falls back and kisses the primary moving average before you take your position.
One other thought that is pertinent – the back testing software is set to select the highest volume stock of each day’s output for entry. So even at the top of its run volume should show on a stock going down.
In the future - (going to be 70 degrees here in the mid-Atlantic today so you all know where I'm going - no Mary Ellen Margaret - not shopping - golfing) I will try to work up a filter designed to more accurately predict the tops.
Sunday, December 17, 2006
Marlyn’s Three Methods
One of the things I learned many years ago when I was studying candlesticks is the rule of threes. Moves in the stock market have a tendency to happen in threes – three tops, three bottoms, three gaps up, three gaps down, three methods and so on. The rule of thumb is buy, buy, sell, and rest.
The first day the speculators come to the market place and buy. The second day the volume from the first day is noticed and the brokers join the speculators and continue to buy up. On the third day the retail trade figures it out and the speculators and brokers offload their inventory onto them. By the end of the 3rd day the speculators are out of the market. The morning of the 4th day dawns clear and then a storm develops - this is when the retail traders can’t find buyers at higher or even equivalent prices and begin to panic sell.
For swing trading I like buying distressed stocks off large volume (buying the dips as they call it) - then I either close the trade on the third day or first thing in the morning on the fourth. If the trade appears to be running I might leave it on but with a tight stop on the fourth day because I’m not giving up too much profit against the coming panic. Occasionally I’ll get a runner but I’m expecting them to drop so I’m ready to sell in an instant.
A filter such as “MACD Histogram is Negative” is ideal for this kind of approach because the negative histogram reflects a distressed stock. By staying with the top volume of the filter output I’m generally getting in at the end of the blow-off bottom which is normally accompanied by large volume. It also serves as a convenient set-up to a potential trending stock because almost all trending stocks start with a negative histogram.
You might keep some of these ideas in mind in your own trading.
The first day the speculators come to the market place and buy. The second day the volume from the first day is noticed and the brokers join the speculators and continue to buy up. On the third day the retail trade figures it out and the speculators and brokers offload their inventory onto them. By the end of the 3rd day the speculators are out of the market. The morning of the 4th day dawns clear and then a storm develops - this is when the retail traders can’t find buyers at higher or even equivalent prices and begin to panic sell.
For swing trading I like buying distressed stocks off large volume (buying the dips as they call it) - then I either close the trade on the third day or first thing in the morning on the fourth. If the trade appears to be running I might leave it on but with a tight stop on the fourth day because I’m not giving up too much profit against the coming panic. Occasionally I’ll get a runner but I’m expecting them to drop so I’m ready to sell in an instant.
A filter such as “MACD Histogram is Negative” is ideal for this kind of approach because the negative histogram reflects a distressed stock. By staying with the top volume of the filter output I’m generally getting in at the end of the blow-off bottom which is normally accompanied by large volume. It also serves as a convenient set-up to a potential trending stock because almost all trending stocks start with a negative histogram.
You might keep some of these ideas in mind in your own trading.
Cheap Stocks stay Cheap Stocks – Part Two
Ok – I wasn’t going to bother with this but my last cheap stock post generated a comment that I at first didn’t wish to argue but I think that I need to say something. First I don’t “assume” – I’m sure you know that when you “assume” you make and ass of you and me and I do not care to be in that calculus.
In the near term cheap stocks remain cheap. In the long term sometimes a cheap stock actually does something spectacular.
One problem – there is no way of determining the true market value for most cheap stock companies. Another problem that I consider even worse - many cheap stock companies were at one time expensive stocks (see MAMA and MVIS) that have fallen on hard times. Most stocks that fall on hard times seldom make it up the ladder again (and I’m not going the list the several hundreds in this category - you know them well). However, I will add that both MAMA and MVIS show some promising growth on the monthly charts coupled with rising volume so it is possible that they can go up more and may even become “home run stocks.” May.
I am not a long-term investor and I don’t think that my posts regarding day trading and day trading set-ups ever indicated that I am. The longest time I ever hold a stock is about 4 days. If visiting relatives and fish start to stink after 3 days - I believe that stocks absolutely reek after 4. And you can quote me on that. That is also my principal bias - short term trading.
Still I can justify my statement – Cheap stocks stay cheap – with a simple filter.
I looked for all stocks in the universe of those selling for $20 or more today that were selling for less than $10 and more than $1 one-year ago. I came up with 14 out of the 2384 that fit the constraint. Then I looked for all stocks in the universe of those selling for $40 or more today that were selling for less than $30 and more than $15 one-year ago. I came up with 76 out of the 2362 that fit the constraint. (I used 15 – 30 to make the starting batch about the same 2384 – 2362). Bottom line – 14 cheap stocks have been going up during a nearly year long bull market and 76 intermediate priced stocks went up during the same period.
Now I’m not going to say that I would have been able to pick those 14 stocks or these 76 stocks out of the over 4700 stocks involved in the test. All that I am saying is that it seems that the odds are a little better outside the universe of Cheap Stocks to find stocks going up significantly. Of course good TA would have picked up all 90 of those stocks since they leave nice trails behind them. The problem is good TA would have picked up several thousand others that didn’t go up significantly over the past year. TA is like that you know.
So let’s leave at this – I won’t play cheap stocks except for quick scalps on a day trade basis and I’ll be happy. You, of course, can play what you please. But don’t insult me by saying I “assume” since the only thing I “assert” is that nobody knows nothing. (And the universe of “nobody” includes, of course, you and me).
In the near term cheap stocks remain cheap. In the long term sometimes a cheap stock actually does something spectacular.
One problem – there is no way of determining the true market value for most cheap stock companies. Another problem that I consider even worse - many cheap stock companies were at one time expensive stocks (see MAMA and MVIS) that have fallen on hard times. Most stocks that fall on hard times seldom make it up the ladder again (and I’m not going the list the several hundreds in this category - you know them well). However, I will add that both MAMA and MVIS show some promising growth on the monthly charts coupled with rising volume so it is possible that they can go up more and may even become “home run stocks.” May.
I am not a long-term investor and I don’t think that my posts regarding day trading and day trading set-ups ever indicated that I am. The longest time I ever hold a stock is about 4 days. If visiting relatives and fish start to stink after 3 days - I believe that stocks absolutely reek after 4. And you can quote me on that. That is also my principal bias - short term trading.
Still I can justify my statement – Cheap stocks stay cheap – with a simple filter.
I looked for all stocks in the universe of those selling for $20 or more today that were selling for less than $10 and more than $1 one-year ago. I came up with 14 out of the 2384 that fit the constraint. Then I looked for all stocks in the universe of those selling for $40 or more today that were selling for less than $30 and more than $15 one-year ago. I came up with 76 out of the 2362 that fit the constraint. (I used 15 – 30 to make the starting batch about the same 2384 – 2362). Bottom line – 14 cheap stocks have been going up during a nearly year long bull market and 76 intermediate priced stocks went up during the same period.
Now I’m not going to say that I would have been able to pick those 14 stocks or these 76 stocks out of the over 4700 stocks involved in the test. All that I am saying is that it seems that the odds are a little better outside the universe of Cheap Stocks to find stocks going up significantly. Of course good TA would have picked up all 90 of those stocks since they leave nice trails behind them. The problem is good TA would have picked up several thousand others that didn’t go up significantly over the past year. TA is like that you know.
So let’s leave at this – I won’t play cheap stocks except for quick scalps on a day trade basis and I’ll be happy. You, of course, can play what you please. But don’t insult me by saying I “assume” since the only thing I “assert” is that nobody knows nothing. (And the universe of “nobody” includes, of course, you and me).
Saturday, December 16, 2006
Pivot Point and the Q’s
Generating the pivot point is fairly simple – you sum the high, low and close of the day and divide by 3. We’ve discussed the pivot point before in regard to using it for determining entry and exits for trading. This information is widely available on the web and I don’t want to re-cover that ground at this time.
What I want to discuss today is a method for using the pivot point as a means of determining overall trend of the market and as a timing method. Shown below is the last 170 days or so of the QQQQ ETF annotated to show a variety of features. The fact that the blue line is the pivot point and the red line is the average of the pivot point shouldn’t bother you in the least.
You can see clearly that you can use the pivot point and the exponential moving average as a means to determine long term trend as well as using it for determining buying or selling points.
If you want to do major buy or sell events there are two things you need to watch for – first that the pivot point crosses the 20-period exponential moving average and second – that the 20-period EMA confirms by turning in the direction as the pivot point. Once the turn is made it stays in effect for quite some time. Sometimes areas of congestion can be related to earlier activity in the stock. These are shown by drawing lines from one side to the other. The reason for this is that battles have already been won or lost in these areas and wherever there is a lot of congestion there is generally a lot of volume. That means that sometimes people have been trapped in the trade for a long time and now just want to get out. Consequently a lot more buying or selling pressure is put on the market. The short side players can see this too and they begin to take advantage of areas of perceived weakness. Once the area is broken through however the shortists help in its ascension by panic covering.
One area is annotated as the primary support/resistance. That is because this is where the descent was made some months ago and it represents a near term high of the market. However once the QQQQ broke out of the area of primary support/resistance it began going into new territory for this year. In the last 20 days or so it has begun once more to congest and the 20-period EMA seemed to be getting ready to roll over again. The following diagram is a cut-out of the last 20 days.
Instead a bull pennant formed and it is possible that the last two days signify a breakout from the pennant. The 20-period EMA seems to have resumed its upward trend. I think that if you are short the Q’s at this time you might consider covering until the actual trend is revealed.
Why, you ask, use the pivot point? Simple enough I reply – it shows “bottoming” more clearly than does the raw close by itself.
Look at the area of the long term chart marked false turn. Then look at the area marked real turn. Market bottoms are most often characterized by higher highs and higher lows, but they are also periods of indecision. Note how the points cluster together in the real turn and how they remained fairly constantly spaced in the false turn. You can see this again in the top right corner. That’s why I say it is of the highest probability that the Q’s are going higher.
Remember nothing is certain in the stock market and any event good or bad can cause the bulls to scatter and the bears to appear.
What I want to discuss today is a method for using the pivot point as a means of determining overall trend of the market and as a timing method. Shown below is the last 170 days or so of the QQQQ ETF annotated to show a variety of features. The fact that the blue line is the pivot point and the red line is the average of the pivot point shouldn’t bother you in the least.
You can see clearly that you can use the pivot point and the exponential moving average as a means to determine long term trend as well as using it for determining buying or selling points.
If you want to do major buy or sell events there are two things you need to watch for – first that the pivot point crosses the 20-period exponential moving average and second – that the 20-period EMA confirms by turning in the direction as the pivot point. Once the turn is made it stays in effect for quite some time. Sometimes areas of congestion can be related to earlier activity in the stock. These are shown by drawing lines from one side to the other. The reason for this is that battles have already been won or lost in these areas and wherever there is a lot of congestion there is generally a lot of volume. That means that sometimes people have been trapped in the trade for a long time and now just want to get out. Consequently a lot more buying or selling pressure is put on the market. The short side players can see this too and they begin to take advantage of areas of perceived weakness. Once the area is broken through however the shortists help in its ascension by panic covering.
One area is annotated as the primary support/resistance. That is because this is where the descent was made some months ago and it represents a near term high of the market. However once the QQQQ broke out of the area of primary support/resistance it began going into new territory for this year. In the last 20 days or so it has begun once more to congest and the 20-period EMA seemed to be getting ready to roll over again. The following diagram is a cut-out of the last 20 days.
Instead a bull pennant formed and it is possible that the last two days signify a breakout from the pennant. The 20-period EMA seems to have resumed its upward trend. I think that if you are short the Q’s at this time you might consider covering until the actual trend is revealed.
Why, you ask, use the pivot point? Simple enough I reply – it shows “bottoming” more clearly than does the raw close by itself.
Look at the area of the long term chart marked false turn. Then look at the area marked real turn. Market bottoms are most often characterized by higher highs and higher lows, but they are also periods of indecision. Note how the points cluster together in the real turn and how they remained fairly constantly spaced in the false turn. You can see this again in the top right corner. That’s why I say it is of the highest probability that the Q’s are going higher.
Remember nothing is certain in the stock market and any event good or bad can cause the bulls to scatter and the bears to appear.
Friday - Wrap It Up
A good week all things considered. I didn't get the hard pullback I was looking for but as you will see from Marlyn's Curve later this weekend there are some momentum changes taking place which, unlike the weather here in the mid-Atlantic, are seasonal.
I decided to keep holding SYMC - mostly because there wasn't much else going on. (Truth, I'm doing my normal Christmas duties and running the wife all over here and gone shopping) (when I'm not playing golf that is).
I also added a half position on Western Union (WU) off the apparent blow-off bottom on Thursday (2-hour charts) - you know their motto - "Bailing out dead-beats for a 100 years." Oh go ahead and laugh - we've all used it for that purpose. Anyway it's a relatively new stock and I have a $23.95 target on it or a stop at 22.60 or there abouts.
For Monday - the up/down ratio is at .458, the new 20 day highs are at 688 and the new lows are at 357. This combination by itself says "more of the same" but let's see what else is going on in the prediction space.
The VIX has pulled back inside -10% but still remains lower than -5% so we could have a down day or two coming in the next week. Then again maybe just a weak sideways up which can also raise the VIX (it's sort of like raising the Titanic any more).
The best indicator (at least to me) is the fact that DIA, SPY, QQQQ, IWM and the proxy for the stock market of the 22nd century - Goldman Sachs (GS) all printed red spinners or red doji in the last hour. Last time this happened the market went up strong the next couple of days. I'm going out on a limb here and say that we have one more day of this weak rally then we go dormant until after Christmas. I think that is the fourth time I've said that but - eventually it will be Christmas and I'll stop saying it.
As always I don't "know" I just "guess" just like that guy from TV you follow so slavishly. - "Good jumpin' jiminy Sarah-Mae - he's filthy rich - he just hasta know what he's doin'!" - Oh yeah lemme buy summa dat. (sarcasm off)
But now for someone who does know - someone, who but for a few measly cents yesterday and a new Dow record could have been something special, coulda been a contenda - but instead is 37 - 28 having blown the call (and we all know how that feels too - don't we sports fans?) for Monday says .... heads - going to be a bull market.
We'll see - Later this weekend, if I can get off the shopping detail long enough, a post on wither the majors using Marlyn's curve; a reprise of my Cheap Stocks Stay Cheap rap - and no, Annie-Mae, I'm not going to say I'm sorry; and, maybe a couple of other posts depending how creative I'm feeling. I've been playing around with the 4 day swing trade method I use and I want to share some tests I've done with you.
Till then - tah.
I decided to keep holding SYMC - mostly because there wasn't much else going on. (Truth, I'm doing my normal Christmas duties and running the wife all over here and gone shopping) (when I'm not playing golf that is).
I also added a half position on Western Union (WU) off the apparent blow-off bottom on Thursday (2-hour charts) - you know their motto - "Bailing out dead-beats for a 100 years." Oh go ahead and laugh - we've all used it for that purpose. Anyway it's a relatively new stock and I have a $23.95 target on it or a stop at 22.60 or there abouts.
For Monday - the up/down ratio is at .458, the new 20 day highs are at 688 and the new lows are at 357. This combination by itself says "more of the same" but let's see what else is going on in the prediction space.
The VIX has pulled back inside -10% but still remains lower than -5% so we could have a down day or two coming in the next week. Then again maybe just a weak sideways up which can also raise the VIX (it's sort of like raising the Titanic any more).
The best indicator (at least to me) is the fact that DIA, SPY, QQQQ, IWM and the proxy for the stock market of the 22nd century - Goldman Sachs (GS) all printed red spinners or red doji in the last hour. Last time this happened the market went up strong the next couple of days. I'm going out on a limb here and say that we have one more day of this weak rally then we go dormant until after Christmas. I think that is the fourth time I've said that but - eventually it will be Christmas and I'll stop saying it.
As always I don't "know" I just "guess" just like that guy from TV you follow so slavishly. - "Good jumpin' jiminy Sarah-Mae - he's filthy rich - he just hasta know what he's doin'!" - Oh yeah lemme buy summa dat. (sarcasm off)
But now for someone who does know - someone, who but for a few measly cents yesterday and a new Dow record could have been something special, coulda been a contenda - but instead is 37 - 28 having blown the call (and we all know how that feels too - don't we sports fans?) for Monday says .... heads - going to be a bull market.
We'll see - Later this weekend, if I can get off the shopping detail long enough, a post on wither the majors using Marlyn's curve; a reprise of my Cheap Stocks Stay Cheap rap - and no, Annie-Mae, I'm not going to say I'm sorry; and, maybe a couple of other posts depending how creative I'm feeling. I've been playing around with the 4 day swing trade method I use and I want to share some tests I've done with you.
Till then - tah.
Thursday, December 14, 2006
Thursday Wraps
Well I got that one wrong - I really don't know why a couple of thousand fewer people claiming unemployment benefits should have such an impact on the market but it seems to have done the trick. The DIA and the SPY had great set-ups today but the Q's and IWM both gave up after the first hour. I don't like the looks of the Q's because every single hourly candle had a tall neck (or what I call a steeple and you know what the steeples mean - end of trip).
I managed to get out in the fresh air today and play some golf so I didn't do much except dump my ORCL shares at COB. I dumped them for the simple reason that given an NDX run up by 19+ points it round- tripped to dead even. I am now holding some SYMC. I think that I'll close that position tomorrow and in fact go flat through the end of the year. We'll see.
The up/down ratio sits at 56% which is neutral but trending towards the bear. New 20 day highs are up to 811 and new lows are down to 270. These are not good numbers for an upwardly mobile market. The VIX is now 12% below its 10-day moving average and is back in single digits again. The Q's, IWM and GS all printed red candles in the final hour. But DIA and SPY didn't. So a mixed message there. And tomorrow is expiration day. Generally there isn't much volatility on expiration day so I expect tomorrow to be quiet. But you never know.
The magic coin gets to 37 and 27 having hit today square and for tomorrow --- tails - bear market. I think I agree.
I managed to get out in the fresh air today and play some golf so I didn't do much except dump my ORCL shares at COB. I dumped them for the simple reason that given an NDX run up by 19+ points it round- tripped to dead even. I am now holding some SYMC. I think that I'll close that position tomorrow and in fact go flat through the end of the year. We'll see.
The up/down ratio sits at 56% which is neutral but trending towards the bear. New 20 day highs are up to 811 and new lows are down to 270. These are not good numbers for an upwardly mobile market. The VIX is now 12% below its 10-day moving average and is back in single digits again. The Q's, IWM and GS all printed red candles in the final hour. But DIA and SPY didn't. So a mixed message there. And tomorrow is expiration day. Generally there isn't much volatility on expiration day so I expect tomorrow to be quiet. But you never know.
The magic coin gets to 37 and 27 having hit today square and for tomorrow --- tails - bear market. I think I agree.
Three Tweezer Bottom
Last week I showed you that KKD on the 8th had a 4-tweezer bottom on the 2-hour charts (12/07). I mentioned that the tweezer bottom is often used as a significant point - no lower than here (for a close).
Over the next three days KKD again printed a tweezer low on the daily charts - each day closing higher than the tweezer bottom on the 7th.
Then yesterday it gapped up and closed up significantly. Do we know our tweezers or what?
I mentioned that I watched for tweezer bottoms and tops and used them as significant turning points in a stock's price. They are a warning or guidance and you should watch for them also.
Over the next three days KKD again printed a tweezer low on the daily charts - each day closing higher than the tweezer bottom on the 7th.
Then yesterday it gapped up and closed up significantly. Do we know our tweezers or what?
I mentioned that I watched for tweezer bottoms and tops and used them as significant turning points in a stock's price. They are a warning or guidance and you should watch for them also.
Wednesday, December 13, 2006
Wrapping Wednesday
This is as funny as it gets - here is what I said about the magic coin yesterday evening - "But for tomorrow ... landed on its edge - just kidding - tails - bear market. Dumb coin" And damn if the market didn't wind up on the edge today. Way to go coin!
I followed the plan - on the jump I sold the half position of ORCL I bought yesterday afternoon for a little gain. Then I dumped ALTR for a little loss - wash out. And this afternoon I doubled up on SYMC for tomorrow.
I spent most of the morning watching MAMA (among others) trying to find a set-up but one never came - everything I was watching stayed as flat as the rest of the market. There were some nice ones that I saw this afternoon but they weren't on my radar this A.M. Oh well - looks like we'll rest now into the week after Christmas when there will be a little rally and then about the middle of January the money will start flowing again.
Anyway the up/down ratio is neutral at 43%, there were 523 new 20 day highs (a slight increase) and 443 new 20 day lows (a slight decrease) and the VIX is 10% below its 10 day moving average. The 4 major indices (DIA, SPY, QQQQ, IWM) we follow all finished the last hour strong white and GS, the proxy for the stock market for the 22nd century, finished with a doji. And, believe it or not, but it looks like a blow-off bottom for GS. As I said earlier I'd be surprised to see much more than the same as today for tomorrow.
The magic coin gets a bye for yesterday as I don't consider that either bullish or bearish more like dovish. So it stays 36 and 27 and for tomorrow .... authoritatively a head - bull market. Might happen - we'll see.
I followed the plan - on the jump I sold the half position of ORCL I bought yesterday afternoon for a little gain. Then I dumped ALTR for a little loss - wash out. And this afternoon I doubled up on SYMC for tomorrow.
I spent most of the morning watching MAMA (among others) trying to find a set-up but one never came - everything I was watching stayed as flat as the rest of the market. There were some nice ones that I saw this afternoon but they weren't on my radar this A.M. Oh well - looks like we'll rest now into the week after Christmas when there will be a little rally and then about the middle of January the money will start flowing again.
Anyway the up/down ratio is neutral at 43%, there were 523 new 20 day highs (a slight increase) and 443 new 20 day lows (a slight decrease) and the VIX is 10% below its 10 day moving average. The 4 major indices (DIA, SPY, QQQQ, IWM) we follow all finished the last hour strong white and GS, the proxy for the stock market for the 22nd century, finished with a doji. And, believe it or not, but it looks like a blow-off bottom for GS. As I said earlier I'd be surprised to see much more than the same as today for tomorrow.
The magic coin gets a bye for yesterday as I don't consider that either bullish or bearish more like dovish. So it stays 36 and 27 and for tomorrow .... authoritatively a head - bull market. Might happen - we'll see.
Tuesday, December 12, 2006
Cheap Stocks Stay Cheap
There is a reason why cheap stocks are cheap stocks – nobody wants them. And for every AAPL there are 2209 others that languish on the sidelines waiting to be called – like the little kid at the sandlot ball game.
For those of you who suffer from attention deficit disorder, AAPL sold for less than 9 bucks just 3 and a half years ago. And the number “2209” is not made up either – that happens to be the number of stocks selling between 1 and 9 dollars yesterday. And for each of those 2209 stocks there is one hell of a story. Believe me – I’ve heard most of them.
Now take a close look at this chart of AAPL that I have laboriously annotated for your viewing pleasure. Soak in the many lessons to be found on the chart. It is a cheap stock clinic. If you see similar set-ups on the monthly basis in your favorite cheap stock you can be pretty certain that it isn’t going to stay cheap for long. But if you are buying because it’s an “idea” stock (as in - I have an “idea”) you better be using “mad money.”
Don’t get me wrong – every once in awhile one of these guys catches a bid and takes off, you just never hear about the other 1000 that didn’t.
My advice (which is free so you get what you pay for) – leave the cheapies to the dreamers and the fools (and I’m not talking about the Motley ones either). If the stock sets-up go for the home run – otherwise remember rule 1 – nobody knows nothing – including me.
For those of you who suffer from attention deficit disorder, AAPL sold for less than 9 bucks just 3 and a half years ago. And the number “2209” is not made up either – that happens to be the number of stocks selling between 1 and 9 dollars yesterday. And for each of those 2209 stocks there is one hell of a story. Believe me – I’ve heard most of them.
Now take a close look at this chart of AAPL that I have laboriously annotated for your viewing pleasure. Soak in the many lessons to be found on the chart. It is a cheap stock clinic. If you see similar set-ups on the monthly basis in your favorite cheap stock you can be pretty certain that it isn’t going to stay cheap for long. But if you are buying because it’s an “idea” stock (as in - I have an “idea”) you better be using “mad money.”
Don’t get me wrong – every once in awhile one of these guys catches a bid and takes off, you just never hear about the other 1000 that didn’t.
My advice (which is free so you get what you pay for) – leave the cheapies to the dreamers and the fools (and I’m not talking about the Motley ones either). If the stock sets-up go for the home run – otherwise remember rule 1 – nobody knows nothing – including me.
Wrapping Tuesday
Except for the fact that I'm actually carrying a small portfolio for swing trade purposes I welcome a down day. Now despite the blah blah blah from the bobbleheads on bubblevision (I don't watch I just read the headlines) it really wasn't because of the Fed or because of Best Buy or even because Oil went up or down or the dollar went somewhere or the trade deficit which last month caused the market to collapse because it went up this month caused the market to collapse because it went down. Whew - did I get it all in? I hope so. The reason why the market has been a little weak lately is because - are you ready Chuckles? - because there isn't anything to buy and most of the buyers are on the normal - ain't gonna do nothin' between now and Christmas/Chanukha/ Festival of F'in Lights or what have you because I'm on my out of pocket vacation. I.E. I'm screwing off because that's what we do between now and January 1st. Besides its options expiration week. What do you expect?
I had to get out of CTXS today because I couldn't stand the pain any longer and that one was hurting me. I probably sold too soon and if it starts going back up anytime soon I might reacquire - although for the life of me I don't know why. Replaced it with some GLW although that is probably going to prove to be a mistake as well - we'll see. At least it didn't go down. I also doubled up on my ORCL position this afternoon at close of business. If we get a good bounce tomorrow morning I'll sell off that portion for a quick profit. If not I'll sell the original half tomorrow at COB which was my plan anyway. ALTR and SYMC didn't do much either way today which is fine.
The VIX remains more than 5% but less than 10% below its 10 day average but the good news is that the up/down ratio is at 35%. There were 483 new 20 day highs and 506 new 20 day lows. The first time in 11 days the new lows outpaced the new highs. The 4 indices we track DIA, IWM, QQQQ, and SPY (actually the ETFs of indices) all finished the last hour strong. Only GS, off a report of extremely strong profits, finished the day down. That's normal - there is no place for GS to go now but down they've made all the money there is to make in the entire world (sarcasm off).
Put all of this together and I think there will be a small rally tomorrow and Thursday then a flat Friday (expiry day)and a weak week next week.
Old magic coin blew it today and starts the downward slide again - 36 and 27 - I smell a TV contract coming soon - isn't that how bubblevision rewards ostentatious mediocrity? But for tomorrow ... landed on its edge - just kidding - tails - bear market. Dumb coin.
I had to get out of CTXS today because I couldn't stand the pain any longer and that one was hurting me. I probably sold too soon and if it starts going back up anytime soon I might reacquire - although for the life of me I don't know why. Replaced it with some GLW although that is probably going to prove to be a mistake as well - we'll see. At least it didn't go down. I also doubled up on my ORCL position this afternoon at close of business. If we get a good bounce tomorrow morning I'll sell off that portion for a quick profit. If not I'll sell the original half tomorrow at COB which was my plan anyway. ALTR and SYMC didn't do much either way today which is fine.
The VIX remains more than 5% but less than 10% below its 10 day average but the good news is that the up/down ratio is at 35%. There were 483 new 20 day highs and 506 new 20 day lows. The first time in 11 days the new lows outpaced the new highs. The 4 indices we track DIA, IWM, QQQQ, and SPY (actually the ETFs of indices) all finished the last hour strong. Only GS, off a report of extremely strong profits, finished the day down. That's normal - there is no place for GS to go now but down they've made all the money there is to make in the entire world (sarcasm off).
Put all of this together and I think there will be a small rally tomorrow and Thursday then a flat Friday (expiry day)and a weak week next week.
Old magic coin blew it today and starts the downward slide again - 36 and 27 - I smell a TV contract coming soon - isn't that how bubblevision rewards ostentatious mediocrity? But for tomorrow ... landed on its edge - just kidding - tails - bear market. Dumb coin.
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