Thursday, October 30, 2008

What have we learned today?

Here are three ideas that I hope every one of you has taken away from this blog. The idea is to empower you to make money trading. Without giving away all my secrets, I have shown you the path to profitability in three areas, leaving it to you embark upon your own individual journeys. I've tried to mix theory with practical, realism with hope and the technical with fundamental. So let us review, as these topics will be on your final exams, so be ready, be prepared and be forewarned.

(1) The Trade Triangles from Market Club (click on their advertisement somewhere around my photo) are an objective, mechanical way to trade short-term breakouts in indexes, stocks and futures. I tried to put up enough examples to prove that the concept works and that you can tweak the trading rules to fit your own trading style and emotional temperament.

(2) NanoViricides is our own lottery ticket to wealth. With much greater odds then the Powerball payoffs, this gem of a company has eight potential NDA's and an evolving pipeline that soon will be the envy of the entire biotechnology sector. It's selling at sixty-five frigging cents a share today. If only a couple of their products pan out, it's a $50 stock. Half the products, a $100 stock. All their products, $200. Their progress in the lab has been phenomenal. So why is it still a penny stock? Because their story is too good to be true. The bet here is that it is true. Every development, press release and periodic report to shareholders has been consistent with the claims being made. The time-line is a drag and the impatient have moved on. Those of us left standing with these shares will one day soon toast to them, to the bashers and to the unwashed detractors who have tried to loosen the grip of true believers on their shares from day one. It will be the most satisfying toast of our lives.

(3) The Crash introduced the concept of pattern recognition to our trading, specifically the eight wave fractal described in The Elliott Wave Principle. It has taught us that social mood drives society and our economy and that although invisible to the naked eye, social mood is manifested in the movement of the stock market, the collective psychology of society. These patterns can be measured in an empirical fashion through the use of Elliott Waves. Because these patterns can be identified and measured, because they are consistent, they are predictable. Because they are predictable, they can be an effective tool to wager on probabilities in the market.

The markets are on the precipice of another big move. It's not up. This little Wave 4 is playing out and when its done, Wave 5 to new lows will begin. The Dow will lose a couple thousand points. Be ready, be prepared and be forewarned.

A

24 comments:

Anonymous said...

Hello Allan, came across your blog years ago when you suggested NNVC at .10. Altho one of my smallest investments at a buy of .085, wish I had sunk my life savings into it obviously.Rode it up, rode it down numerous times, still hold, have added with the private and do believe as you that it will be the Super Bowl World Series World Cup rolled into one and will provide us with a MIRACLE CURE, saving the world and making us just a bit better off.Thanks again, Gary

Anonymous said...

Alan, how long could the little Wave 4 play?
Is there a chance that there will be no the new Wave 5 to the new lows?
andia

Allan said...

andia: time is not something thet enters in to my use of the EW concept (although Glenn Neely who has his own adaptation of EW does use time). is there a chance that there will be no Wave 5? Is there a chance this country will elect McCain?

Cruiseguy said...

So Allan, Currently your only long is NNVC? have you cleared out of any of your short positions to take profits or are you riding this bad boy out to the bottom?

Cruiseguy

Rawkstar Trader said...

On the afraidtotrade blog they went through this possible wave count:

"Ultimately, I feel we’re in an Elliott Wave 4 retracement up which is taking the form of a classic descending triangle formation (which isn’t technically the same as an Elliott 5-wave triangle).

It’s also quite possible - from an alternate count - that the recent wave 3 down ended at the spike down around October 13th, formed a sudden and violent wave 4 up to 1,050, and then formed a 5-wave (mini) impulse down into new price lows at 850. IF that is the structure, then we’re likely in a larger wave 4 up of the larger structure, but let’s not get too caught up in that for the time being."

You see the odds of a new low as 100%?

Allan said...

C

Allan said...

Crusieguy: I own NNVC and a handful of day-trades that my rules said to hold overnight. I have some parameters, thresholds, that if breached, will mean market has probably started next down leg. When that happens, I'll be all over it. NNVC is a keeper, no matter what.

Rawkstar: Been in this game too long to think anything is 100%. I've said it before, I'll say it again, this is a game of probabilities and the best we can do is stack the probabilities in our favor. Not all probabilities are created equal. Sometimes one comes by that is so stacked you can't believe it. These are the times to step on the gas. BTW, trades I post are usually in that category, a very high probability trade. "Crash Warning" was one of them. NNVC is one of them. There will be others, if yaw'll r nice.

Anonymous said...

Allan:

Excellent post summarizing your overall positions on everything and what you regard as important in your superb trading. I for one have made a great deal of money following your methodologies for years.

[For those of you newbies, Allan has been trading numerous methodologies successfully for decades. He was the one who pioneered the use of the “Double Stochastic” method back in the early 1990’s among many other things. What you are seeing now is the fruit of the natural evolution of “keeping on, keeping on” and getting better and more consistent all the time. I was there for all of this. He was very active on the internet BEFORE the internet- via the old “Prodigy” system where he was considered nothing short of an icon.]

Keep up the excellent work.

However, I am a bit concerned about the cultural and sports posts on this board.

Unlike your trading advice which is highly objective, the cultural and sports posts are heavily biased toward ice hockey and towards Michigan Football on the sports side and radical hippie music, four decades old, on the cultural side.

I think I speak for most readers that the 1980’s was the “Age of Pop Music” and would like to see a shift in the music posts to groups like Duran Duran, Debbie Gibson, Depeche Mode, The Alan Parsons Project, Journey, Styx, Loverboy, Survivor, Triumph, among many others.

As for sports, The Stanford Cardinal Sports program (and possibly Georgetown Basketball) clearly trumps all else and needs to be referred to. Perhaps a “fireside chat” ring with the athletic director at Stanford is in order?

Further, if you could get Ms. Gibson to be a guest blogger with a music-related post that would be great. It would help get us away from Paul Simon, Joan whoever, and "Woodstock" type music.When died about 30 years ago.

Regards and keep doing what you do best!

Professor John K. in DC

Anonymous said...

Did NNVC ever get that financial reporting mixup sorted out? They're still showing up as NNVCE on my system. What was the reason behind it?

Wayne said...

they were late filing but that's over. It's showing up this morning as NNVC (at least for me).

Wayne

Anonymous said...

an interesting read...you probably have read it already!!

http://www.clusterstock.com/2008/10/more-bearish-than-roubini

Anonymous said...

Allan, do you have idea why tdameritrade doesn,t allow to fill buy order for NNVC online. They say : The opening transaction for NNVC must be placed with broker.
Thanks
andia

Allan said...

andia - i've been buying this week online in both interactive brokers and schwab, no problems, although there might be some confusion with symbol, which just jettisoned it's "e" at the end to denote a tardy filing

Anonymous said...

Allan, If you have time pls read what aMERITRADE responded about online trading for nnvc.
I really dont understand when they say they want to protect interest of their clients. They do the oposite I think.
Its what they say:
"We regret that you have not been able to trade the listed stock on-line. It is our desire to make as many stocks as possible available to our clients for on-line trading. However, we also monitor trading activity for securities and may, as a business decision by TD AMERITRADE, act to restrict on-line trading of some securities. This does not imply that the restriction is done at the request of the company issuing the stock or any government regulator. This is solely a business decision made to protect the interest of our clients and TD AMERITRADE. We constantly monitor the stocks that are restricted from on-line trading and, if we believe it is in the best interest of our clients and TD AMERITRADE, on-line trading for a security may be restored at out discretion."

David said...

Allan, I have some questions. I'm very new to this so bear with me. I have been looking at the 8 wave fractal pattern. You suggest we are in one now, where Wave 1 up began in the bear market lows of 2002 and we are now in Wave C down. Ok, am I right in assuming Wave C is subdivided into 5 waves (3 down and 2 up), and you say were are now in Wave 4 (and up wave within Wave C)?

The thing is, on the weekly chart you posted a month ago you have Wave B ending in fall '07. But if that is the case and that is where Wave C began, then I can count the 5 waves within Wave C, and this count would indicate Wave C has completed.

But in looking at that chart, would I be wrong to suggest that the Oct 2007 peak was actually the end of Wave 5 up, and not Wave B? Because in the fractal sample you posted previously the 5 peak is higher than the B peak. In this scenario, Wave A down would have began then and carried us until March '08 when Wave B up began, and that would have run until May '08 when Wave C began. Now, for the 5 waves within Wave C that began in May08. Wave 1 down runs May 08 - Jul 08. Wave 2 up Jul08 - Aug08. Wave 3 down Aug08-Oct08. Wave 4 up Oct08-???.

I can't come to this count if I assume Wave B ended in Oct 07, but I can if I have Wave B ending Mar 08. I get confused because there's obviously a degree of objectivity here, and I don't know when I'm taking too many liberties in my interpretations. Could you give some clarification?

Also, thanks for making this blog. I only discovered it a couple of months ago but it's been a great help. I've become a stock market junkie since I discovered investing 6 months ago so I appreciate being able to get advice from a seasoned vet. Cheers!

in the mountains said...

The problem with Elliott Wave (EW) is that there are usually so many alternate counts. The stock market today is a good example.

IF the preferred count is correct, then we will have a 5th wave down after this 4th wave completes, and that 5th wave will LIKELY take us to new lows. Notice I said "if" and "likely take us to new lows".

Consider these possible alternate counts:
1) The count could be incorrect and the 5th wave may have completed on October 10th
2) The October 10th low was indeed the bottom of the 3rd wave, but the 5th wave began from the high on October 14th and completed at the low on October 28th as an Ending Diagonal and a 5th wave failure.
3) The 4th wave is still unfolding, but the 5th wave may play out as a failure. This would take us below current prices for sure, but would not take us to a new low below the October 10th low.

My point is that with EW, nothing is ever certain. EW probabilities favor new lows ahead, but don't bet the farm on it.

Allan said...

Moutains: I love this, EW isn't perfect, so what good is it? Yes, all of your scenarios could unfold and not violate any EW rules or guidelines. So what? EW gives us a few differing scenarios and also provides a most likely scenario among probabilities. If you want certainty, go figure your taxes. If you want most likely, there isn't much out there better then EW pattern recognition.

Allan said...

david: there's nothing more tedious then an argument about differing wave counts. I take mine from two of the preeminent wave theorists of our time, Robert Prechter and Gleen Neely. When they diverge, I go with whichever one makes most sense to me. They both agreed that October would be nasty, so it was an easy call. They differed a bit on this last rally, but both are in sync again about what is coming next.

CruiseGuy said...

ALLAN, you just give us CRASH WARNING # 3 and I know exactly what I will be doing with my money...Hyperinflation seems to be a high probability...you looking at some commodity plays? Or is the 5th wave going to bring with it even more deflation?

Cruiseguy

Allan said...

Cruiser: All assets are in bearish trends, there isn't a single one that looks better then cash. If trading, that means all trades on the short side will work, or eventually be bailed out by this bear market.

in the mountains said...

That's exactly my point, Allan, that EW does not and cannot give us certainty, only probabilities. I posted because this statement reads like certainty to me:

"The markets are on the precipice of another big move. It's not up. This little Wave 4 is playing out and when its done, Wave 5 to new lows will begin. The Dow will lose a couple thousand points. Be ready, be prepared and be forewarned."

Allan said...

Mountaineer: Yes, I am certain the market is headed lower. My certainty is based in relevant part on EW analysis, but also my own chart analysis. In other words, EW says we may or are likely to go down here, I say we are going down.

in the mountains said...

Very cool! You have found the holy grail of trading. So you CAN bet the farm!

Just kidding... I agree with you that we will very likely see lower prices. What I am not sure about is WHEN those lower prices will come. If the 5th wave down is already complete and we are in the beginning phase of a counter-trend rally, then the market is likely to head up into the 1100 range on the SPX, maybe even 1200. This could take weeks or months. After that, we are likely to have another leg down of the big bear and this leg would likely take us to lower lows. So that's one way we get to lower lows, but if that way plays out, those lows won't come in for at least a few months, maybe not till after the middle of next year.

The other way which is still the most likely EW possibility is that in only a few days, or maybe a week or so, the 4th wave completes and the market heads south.

So I think the odds are in your favor that we'll see new lows. The part I'm not so sure about is whether those new lows come in in a few weeks or a few months.

Nice blog you have here, by the way, I've enjoyed reading it. And thanks for the tip re NNVC!

Good luck to you.

Anonymous said...

looks like VCSY.OB could be a good play! Microsoft just settled a patent infringement suit with VCSY. Settlement is confidential but people are expecting some info in their coming 10Q filin on 15 or 19th Nov. Both their patents are blockbusters relating to Cloud computing. Do DD...may be of Value. GL