You might be a Trader if …. 4/19/14

The only cable channel number you know is CNBC

You might be a trader if you know that Head and Shoulders isn’t referring to a shampoo

You start referring to companies by their ticker symbol

If you know who Jim Cramer is

If you start seeing charts in your dreams

Last thing you look up before falling asleep is what the Asian markets are doing

You know who Fibonacci is

You celebrate your 61.8^th birthday

You know the difference between a Stochastic and a MACD

Your trading room has more monitors than your TV room.

You know what an iron condor is

You run to the nearest Starbucks or Panera Bread to close out your day trade when you lose power at your home

Only your charts know the market direction and you don’t

You know that an Elliott wave has nothing to do with Physics

Your best friends are from Mcubed….

You know what a Put/Call ratio is and you have forgotten Poisson’s ratio

You look at a mountain range and only see highs and lows

You bought two hundred shares of a company but you have no idea what it does

You trade what you see and not what you think

And finally a few serious words of wisdom if you are a trader wannabe…

"The key to successful trading is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught. What they can't do is give (people) the confidence to stick to those rules even when things are going bad." Richard Dennis, on Turtle Trading

Where is the Exit? 4/13/14

My last down signal capitulates and joins the other three that I posted last week… my ICE trading system on SPY (S&P500) fired off an exit long signal after Friday’s close. This is translated as a down signal in this system. That means I need to exit my mutual funds in my 401K with the exception of any that actually have an inverse relationship to the S&P500. The chart on Dow Jones 30 had already given a down signal and so had the chart on the Nasdaq 100 QQQ much earlier as well as my faster system on SPY.

I am headed for the door.

3 Down Signals with One exception 4/7/14

My regular trading systems on DIA and SPY both gave down signals tonight after the second consecutive steep down day. These systems tend to whipsaw me at times. There have been two signal changes within a week. Still, these down signals currently align DIA and SPY with QQQ - all in the down signal mode. 

The only remaining upward signal is my ICE system on SPY. The weight of signals is certainly burdening downwards now and I need to go into a more cautious mode. Still I will remain vested in my 401K in the long direction till ICE flips me although I will take a closer look at individual fund charts.

Here is a chart on the Q's - this one has been the first to show weakness... and last two data points show increasing volume. In certain cases after a sustained down move could signal a climax to a downward move but I don't think so in this case... Caution ahead!

401K Monthly Analysis – Confirming Signal 4/5/14

It is time for my monthly 401K analysis. The backdrop is very interesting. I see a second confirming up signal from my ICE trading system on SPY (S&P500). Since this is the system I use to decide whether to stay long in my 401K or not, I am invested in 401K although not at a 100% level due to my conservative nature…During the week, DIA (represents a tradable fund for Dow Jones 30) showed an up signal and Friday on the pullback I received a minor up signal. On the other hand recency data from Friday says the market turned down in an ugly manner particularly the Nasdaq 100 tech sector (QQQ). As I pointed out in a previous post, the Qs are showing a down signal and continue to move downwards. This is interesting as SPY and DIA are still up while the QQQs are tugging the market downwards. Unfortunately no one can really predict which side will win this tug-of-war. All I need to do is follow my rules and not over think this conundrum..

In my current employer’s 401K the top choices are Fidelity Large Cap, Spartan 500 Index, Fidelity Eq Income, while WFA SPL Midcap VL has been showing some recent strength again and is a good pick.

In my previous employer’s choices I see Domini Soc Eq, Vanguard Inst Index and Spartan Ext MKT as the top picks. Lazard Emerging Mkt is showing recent strength and is also a possible pick. However it is far more volatile and can go up or down much faster than the market.

Beyond these choices, Ford stock has given me a buy signal. Interestingly it has broken its downtrend line and MACT is also rising. I bought a position into it and will consider adding on a pullback. My call options on SU are doing well as SU has been on a fast track upwards since my buy signal on 3/25/14 and break upwards from the down trend line.... see chart below. Of course this cannot go on forever and a sharp pullback is in order. My thoughts are to sell half my call options now and buy back more on a pullback.

March Madness and My Stocks 3/28/14

My 200th post!! And NCAA college basketball fever is at a fever pitch. The Elite 8 will now fight it out for the Final Four and my favorite team Michigan State (MSU) is going all the way, so I hope. Warren Buffet threw out a Billion dollar challenge knowing that the odds of winning a perfect bracket are so low it is a sure bet that no one will win. In trading there are no sure bets. We try to place odds in our favor, cutting losses quickly and letting winners run. I am mindful of the saying “Sell in May and go away”. Coming back long in October or November is the best. Maybe the rich get hefty bonuses early in the year through April and then the buying dries up. I remind myself that mine is not to reason but to observe my charts and act based on the chart data. Let me start of by saying that my base trading systems are showing some sell signals on DIA (Dow Jones 30 ETF), SPY (S&P 500) and QQQ (Nasdaq 100). My tried and true ICE system on SPY is still long. I am showing a chart of SPY below. My trades for these is to sell vertical call options spreads for credit for the next month just above the resistance level, which represents the high over the last three months. Right now it is a slow grind. If the funds go sideways or go down in the next month, the vertical call spreads will end worthless and I would have taken advantage of time decay on the options. If the funds jump upwards, I may close them out and sell more further out as long as the directional signal remains down. 

I have selected a few stocks in diverse sectors and applied back testing with my top 30 trading systems. After carefully analyzing the results I am now trading these in their own pattern using the trading systems that yielded the best results. Which of these will be stars like MSU? Which ones will disappoint like Ohio State?

The US stock market has paused but we are still not sure whether it will move back up or tumble down for a correction. That means I will continue to trade the stocks I have pre-selected for quick in and out trading.

The first one I will show is GD General Dynamics. I had several good trades in a row. These are quick in and outs and trade duration is 3-8 days and typical gain is 1-3%. I have decided to only enter the long signals when I see a down trend with buy stops above the previous bar’s high. Otherwise in a typical long trending mode I enter market open next day, and I place my trades the previous night. See chart below.

Another one I am trading is SU (Suncor Energy). This one I am trading with straight put or call options as I have noticed that the options have a tight spread between bid and ask and I want to take full advantage of the directional move risking only the value of the options. I am currently showing a long signal so I am long call options that are at-the-money and about 3-4 months out.

March Madness… Florida Gators is looking strong, although I would prefer MSU, Michigan or Kentucky to win. How do I pick stock winners? Based on  their track record, back testing and with tried and true trading systems.

Fear of a Fall 3/14/14

We have had a nice run up over the last 5 years. For those who were able to get out early 2008 and then get back in March-April 2009, it was a bonanza. Now we worry if the Market will drop and take our profits away. So where does this leave us?

My current system on the Dow Jones 30 is reflected in the chart DIA which is an ETF comprising of all 30 Dow Jones stocks in the proportion to exactly copy the DJ30 index. It is a more active signal than my system on SPY, the S&P500 ETF, so it gives me more whipsaws but also earlier warnings. It flagged a down signal last week on 3/13. See chart below.

The chart on SPY remains undisturbed and still signals up. I would be concerned when SPY drops below 182 and the blue support line on the chart. The uncertainty in the Ukraine/Crimea and Russian region does give us cause for concern but the US economy is positive and still growing with low interest rates. Deficits are reducing and unemployment is steady and slowly dropping, although part of it is the baby boomer generation retiring in growing numbers every year. This will make unemployment look better than it actually is. Still, the stock market growth reflects the improvement in the economy following the end of the great recession.

I notice that GLD has been steadily climbing since my signal on 1/13/14 and my post “State of the Markets 1/18/14”.  I have gone in and out and made some money on NUGT and waiting for another buy signal. GLD remains the safe haven while even the USDollar keeps falling.. you would think the USDollar would strengthen as the US stopped printing money and looked at slowly raising interest rates…goes to show it is best to follow the charts – the collective wisdom of the market, far more powerful than all individuals high powered as they may be.

401K - Change in Direction for SPY 3/2/14

My ICE system has given me an entry signal on SPY (S&P 500)… this system is slow to change and has less whip lash. It is not perfect as no system is perfect, so I don’t want anyone reading this blog to think that  as nothing is guaranteed in the stock market. However this does mean that I will re-engage my positions in my 401K. My withdrawal and re-entry probably cost me about 1% in returns versus having stayed in; but I am willing to pay that price for keeping myself protected against severe pullbacks or full blown down turns.

See chart on SPY below

My monthly 401K analysis shows that for my current employer I should commit my monies into Fidelity Div Intl, Fidelity Large Cap and Fidelity Blue Chip Growth based on my momentum method. See charts below. It is interesting that my regular technical analysis signals on some of those charts are giving exit signals… so what do I do? I will enter partially. My momentum system has priority. Often it is situations like this that have frozen me from taking any action.

For my previous employer’s 401K, the selections are Domini Soc Eq, Spartan Ext Mkt and Fidelity Div Intl. Artisan MidCap Val Instl also shows up right after that.

My quick In-and-out trading system on stocks is working quite well. I see that my Rollover IRA has slowly crept upwards. I am not taking large positions with that. I intend to test drive it for a year in a 200 – 500 shares per trade mode till I feel comfortable with it. I like how it behaves on stocks like GD, HRS, RFMD, NUGT, X etc. I got a down signal on X and next when the minor down signal popped in, sold vertical call spreads on X. That was totally profitable and I am looking to close that position Monday on a limit order. 

I will write about that trade next week for those looking to use options to make money in the stock market.