Wednesday, November 05, 2008

Trading Update

Here are the Market Club Weekly and Daily charts for the QQQQ:


The Weekly chart above shows that the market is still on it's September 2, 2008 SELL Signal. Remember, I use the Weekly chart to determine the trend and for trading purposes. Since some traders prefer to trade in and out with the Daily charts, here is the Daily chart:

Note that today, the Daily Q chart triggered a SELL signal after standing aside from the previous BUY Triangle. All MC systems are now back aligned on the Short side of the market.

I found tonight's Weekly chart of Google of great interest and potential:



I've drawn in a wedge or triangle formation that has been developing over the past five weeks. Including after hours trading today, Google fell 10%. Is this a selling climax, or the beginning of a new leg down? A selling climax is defined as trading to a new intra-day low but closing up for the day. Clearly, Google's drop today was not a selling climax. That leaves one alternative, the beginning of a new leg down. Breaking and closing below that lower trend line in the annotated chart above would represent an extremely bearish pattern, suggesting new 52 week lows ahead for Google. That would be a drop to under $310 and probably well below $300.

There you have it, the market's recent counter-trend rally seems to have run it's course and path of least resistance is down.

A

43 comments:

Kat said...

Hi Allan - I read your blog with great interest and often, but this is the 1st time I have decloaked with a comment. I was just wondering how you put things together with your Elliot Wave analysis and the Market Club trading method. Do you use your EW analysis for long term trend thinking and then the MC signals as entry points? What if they conflict? For eg, the EW gives you a crash warning or a downtrend developing while the MC triangle shows a green arrow on the Q's? Do u then stand on the sidelines till they align? Also, how does Vincent Michael's Stockmarket video stand in the overall scheme of things? An additional trading tool? Tks for the great comments and introducing your trading tools to us.

Allan said...

Kat - it's nice to see you have been taking copious notes, boding well for your performance on final exams.

As for Vincent Michael, he presents the perspective of a pure technical analyst from which one could bounce their own trading strategy against as well as a great source of individual stocks that are breaking out or breaking down or are in some other way presenting a trading opportunity.

David said...

Allan, a week ago you wrote that you were expecting a wave 5 down to new lows that would see the Dow lose a couple thousand points. After yesterday and today's action we've lost over 900, so almost halfway there.

Just to clarify... this wave 5 is not going to carry us to the final bear market bottom but an interim bottom, right? From what I've read here you are expecting the final bottom to be much, much lower than the 7000's.

I'll look into the Vincent Michael service. I've seen the ads on CNBC but with those monkeys in the commercials I never took it seriously.

Allan said...

David, another good listener, I'm impressed. It is highly probable that we are in a bear market unlike any other bear market any of us have experienced in our lifetimes. All surprises will be on the downside and just about any short position should eventually be bailed out by this GC Bear (Grand Super-cycle Bear).

I don't know when nor how low the ultimate low will be, but suspect it will be years and thousands of DJIA points lower. Robert Prechter's targets are under 1000. Glenn Neely is not quite as bearish, but as this market is unfolding, he is getting closer to Prechter in damage forecasting.

Nonetheless, as with any bear market, there will be counter-trend rallies, fast and furious as we have just seen, before yielding to still lower lows. This will be a great few years to be trading both ways and thus a great time to sharpen your trading skills and open your mind to these esoteric pattern recognition tools (Elliott and NEowave.)

Finally, I would never knowingly subscribe to a service that uses monkeys in their ads. I was a subscriber to StockMarketVideoAlerts.com before I saw that monkey in the chair. By then, I learned that Vincent Michael was a talented technical analyst, who teaches as well as he stockpicks.

I have some other surprises coming in the months ahead and as I discover readers like David and Kat and others who are paying such good attention, I am persuaded to offer more of my tools, rather then less. So keep up the good work, stay tuned to this Blog and remember that profits are made both ways, up and down, so a trader shouldn't care whether Bull Market or Bear, as they both exist to be exploited and is exactly what we intend to do.

A

david said...

You mean this crazy volatility could continue for years to come? That's the best news I've heard all week. I was just thinking this evening that it would be a little disappointing if this era of Dow 5% moves in one day were to come to an end. As you say, there is so much opportunity here both long and short. Truly a unique trading environment that should not be taken for granted!

As a new trader I'm trying to sharpen my skills and move up the learning curve as fast as possible. Thanks again for making this blog, looking forward to continue to learn from it. Now back to studying for the final exams... ;)

Tom D said...

http://screencast.com/t/WYdkvSmVa1

On the daily GOOG it looks like the selling climax bar was three weeks ago followed by a quick bar up and an Elliott flat. But mainly, if it felt like a crash and looked like a crash, which it did and does, so what happens after historic crashes?

After some of them (1998) the market goes right back up. After some of them (1987) it takes more time time off and lays around resting for months to a few years.

After some of them 1929-31) it rallies for 90 days or more and then crashes again.

That triangle or whatever it is isn't going to adress those issues since it's just a short term pattern. A historic crash pattern is a longer term deal with its own rules. jmoaicbw

Anonymous said...

Annal:

Your last post got me "Pep-Talk Pumped"! Like it's game time or something.

I love that we can make money on downturns. It's so exciting as some of our loses can be recovered through other loses.

With all the ups and downs thi is a great time to short and put everything we can.

Thanks as always.

PENN STATE Eric

Anonymous said...

Allan:

Oh man, I spelled your name sooo wrong and didn't catch it, my bad. It does make for a funny though, but I am indeed sorry.

PENN STATE Eric

Anonymous said...

Hey Allan, on our lottery ticket NNVC, do you have any time lines that may bring good news?

Thanks!

Allan said...

Re: NNVC Fireside Chat #3 in its final stages...should be up soon...can't comment on it till it's up and public.

Anonymous said...

Well NNVC better hurry before Congress pulls another fast one.

http://www.carolinajournal.com/exclusives/dems-target-private-retirement-accounts.html

david said...

Allan, off topic question here. I just listened to the trader interview you did last year. At one point you said one of the greatest compliments you've received was being called "the anti-Cramer".

I'm just curious as to why you don't like him. I'm relatively new to trading so I haven't officially formed an opinion on him yet. Thanks.

Allan said...

david: i'm way too tired tonight to give your good question the detailed response it deserves. suffice it to say that cramer's advice will decrease the size of your trading account and my advice should increase the size of your account. Thus, "the Anti-Cramer."

Tapan said...

Allan,
I posted a message here. Not sure if you got it. May be I will post again?
Tapan

Tapan said...

Hi Allan,
New to your site. Saw some signals (trading trianges) for QQQQ and others. How does one analyze if they are signaling to buy a stock or short one?
Is every green a buy and every red a short?

I would combine trading trianges with MACD, RSI indicators to give more accurate results.
Thoughts?
Thanks

Kat said...

Hi Allan - I took a paper trade short position on the Q's the day after you posted the triangles red concurrence on the weekly/daily chart. Entry price was $31.09, a little below the triangle price. The price now is $30.10 for a decent non-leveraged 3.2% return in less than a week. Sweet! At a time when talking heads are screaming "buy!", its nice to have an edge. I know, one trade does not show how a strategy performs, but certainly gives me the impetus to trial the triangles. Thanks again Allan!

Allan said...

kat: nice job of using the triangles in a low leverage - low risk methodology. Annualized, assuming about a 2 out of 3 win rate, your looking at 75-90% a year, versus whatever the money is doing now. thanks for sharing your results with us.

Allan said...

tapan: hit the "Market Club" icon on the right hand column and take the tour, it explains the triangles and has a lot of free stuff, no sign-up necessary. If you want to take them out for a spin, there is a 30 day free trial. I could explain it all, but just don't have the time and its all up there anyway.

Anonymous said...

Allan, I-BUYS seem to be increasing does this tend to put in more support or just a larger cliff?

Wayne said...

what's I-BUYS?

Allan said...

Re: i-Buys This refers to "Insider-Buys" which is a day-trading model that scalps initial pops in stocks for which the SEC has just received filings of significant insider buys.

I know of no correlation between i-Buys and overall market timing and since "Insiders" are people too, I suspect they are subject to the same psychological social mood swings as the rest of us, i.e. they are as liable to be bullish at the wrong time as anyone (except as to their individual Company stocks, sometimes)

Wayne said...

Hey Allen,

On the DJIA daily chart I think I'm seeing a "triangle" (in the Elliot sense), with the following endpoints defining the downtrending highs and the uptrending lows:


uptrending lo's:
10/10, 10/27, (today?)

downtrending hi's:
10/14, 11/04

Does your trading system incorporate this, and what do you think the probability is of a short-term bounce back to the top of the triangle?

Agree that the overall trend remains firmly down, but just wondering about possibly using this for shorter-term trades.

Thanks,
Wayne

Wayne said...

fyi here's a picture of the triangle:

http://www.freewebs.com/wmills/djia-daily-111208.bmp

Tapan said...

Hi Allan,
I understand. I also have a free trial with them right now. I first one with the methodology that all greens are buys and reds are sells (non shorting). I have seen that stocks without a trend did not perform well.
I used their suggested monthly indicators to see the direction and weekly for timing. Only a few stocks came out to be nicely signalled.
Did you have a similar experience?
TD

http://inquisitiveaboutfinance.blogspot.com

david said...

Got to give you props for the GOOG call, nice one.

I got skittish and closed out my short positions when the Dow dropped under 8000 today. I know that you are calling for new lows, and I should have held on, but I had nice gains and was willing to get out a little early because I think a spike up will be in the cards after we hit those new lows. In early Oct you made an EW chart and said when the Wave C completes expect one hell of a rally. This wave 5 down should be the final plunge of that C wave you talked of then, so I figure it's time to get ready for that rally. Would you agree? Thanks again,

Anonymous said...

THIS IS THE START OF A STRONG UPMOVE.

Mr Joshua

Anonymous said...

I can't speak to upmoves or downmoves.

I WAS in the boardroom of a large NYC investment bank last week. I cannot name it but the initials are "GS" and it is located on Broad Street.

The "talk of the meeting" was at least 50% related to the performance of the picks on this website and in Allan's hedge fund.


Phil in NYC.

Anonymous said...

BAILOUT:

It has been decided that the "Big Three" Automakers do NORT, repeat NOT need to be bailed out.

The bad news? The "Big Three" are now Mattel, Tonka and Matchbox.

John K. in DC

david said...

Looks like I picked the perfect time to get out of my short positions - wow!

So this blog is the talk of the Wall St big shots, eh? I guess I shouldn't be surprised. I'm sure those guys are as eager for any edge over the competition as is a rookie trader like me.

But still... can't help but think it's kind of funny that these Wall Streeters are reading stock blogs. I thought they were the experts. I wonder if they're members of Market Club as well?

david said...

Looks like I picked the perfect time to get out of my short positions - wow!

So this blog is the talk of the Wall St big shots, eh? I guess I shouldn't be surprised. I'm sure those guys are as eager for any edge over the competition as is a rookie trader like me.

But still... can't help but think it's kind of funny that these Wall Streeters are reading stock blogs. I thought they were the experts. I wonder if they're members of Market Club as well?

Wayne said...

congrats Dave!

Based on my earlier triangle post (see above) I pulled about 75% out of my short ETF's yesterday (but left some in, wasn't sure it wouldn't continue down today), and even put a small amount in DDM (ultra long) when the Dow reached 100 or so today. I'll keep a stop loss on it and play it somewhere north of the 9k mark and then take it out. Based on everything I've read here, we're heading down again real soon.

Good luck to all,
Wayne

Allan said...

tapan:I mostly use weekly triangles the my archives are full of examples that work beautifully. Keep using it, it will come to you.

Tapan said...

Allan, thanks. I used two methodologies monthly for direction and weekly for timing. I tried with one or two charts - eg EWS. - last 4 longs would have been negative if i followed the montly triangles for exit and entry. I observed the same in others as well.
UAUA is one example.

In my opinion, one should use other indicators - MACD, EMA, RSI , atleast a combination of one or two indicators.

Thoughts?

TD

abot said...

what is the advantage of the triangles over the PSAR? they seem so alike with some modification of the settings.

Allan said...

abot: Triangles work; tweaking PSAR is just data mining.

Allan said...

TD: The more indicator you consider, then less you will trade because they will almost never all line up perfectly and if they did, I would fade that trade. Most TA is bull; only analysis that has worked for me over the years has been pattern recognition and cycle analysis. If you have the discipline, you can make money with simple trendline breaks....much like the Triangles.

Anonymous said...

UP AGAIN TODAY.

My subscriptions are $4,500/month.

We are set up for the greatest bull market of all time.

Mr Joshua in Idaho.

Anonymous said...

BTW, according to all experts, these huge drops we are experiencing would be rallies had we elected McCain/Palin.


McCain/Palin in 2012

david said...

I've had some reservations about MC but I guess I should give it a spin. It's just that I've always been leery of most stock-picking or trade-signalling services, I figured most of them were just money-making ventures for those who seek to profit from people's desire for easy money. I've read about Livermore, Darvas, O'Neill, and others - most of them found success by coming up with their own personal trading models. My plan has been to study hard and accumulate as much knowledge as possible and eventually develop my own trading system. So I've always figured automated trade signal services such as MC would not be worthwhile. And if they were they'd quickly become too widely disseminated and thus less reliable, due to the efficient market hypothesis.

But I will try it on your recommendation, Allan. I always have trading ideas that I'm testing out and I'm interested in seeing how this could be incorporated into them.

Oh, by the way, after Thursday's action I was thinking to myself wow, maybe Allan was wrong about seeing new lows. But at the end of the day Friday, after the late day selloff, I just grinned and said well maybe not! ;)

Allan said...

david - nothing gets featured here that doesn't work in one sense or another. some things do work better then others, MC is one of them. The trigger is open box, you will figure it out soon enough and ask, why do i need this service when i can figure out the signals myself? because when the buy and sell arrows appear on your charts, you act. if you merely identified the same pattern, you think about it. maybe look for reasons not to take the trade, and eventually, talk yourself out of it. you don't need MC, but you want it.

there are a lot of professional system testers out there. they go from system to system, backtesting, paper trading, researching ways to tweak them, and when they are all done, they move on to the next system. MC is there to put you in the trading seat, right out of the box. there are enough variables to tweak if you want, but i suggest keeping it simple.

by definition, you will never miss, nor be on the wrong side of an intermediate trend. what is that worth? 30 days of a free trial? cause that's what it costs.

as for ms market, the trend remains down and all trades in the direction of the trend will eventually bail you out with profits. i think it's a law.

Allan said...

wayne - i missed your question and example of a triangle. you got it right and according to elliott triangles only occur in certain spot in an ongoing trend, which provides a very high probability trade at the completion of the triangle. the most difficult part is identifying the completion of the triangle and start of the predicted leg. that's where guys like prechter and neely come in handy, they offer their opinions and it's just easier to act knowing the elliott gurus are saying, "yes, now is the time."

Wayne said...

Thanks Allan!

fyi I took some short-term profits with the bouncing around, in the expectation that the dow climbs a little more and I get better ultra short re-entry prices.

I think once I get back in I'll leave (the major position) in, no sense in missing the resumption of the leg down, though I may take small hedge bets with DDM each time it hits the 8k support level.

regards,
Wayne

Anonymous said...

Wayne,
I for one enjoyed your triangle post. Thank you even though i sold my shorts too late only to see them shoot back up on friday. Like you i'm thinking of shorting again but am scared of timing this market. If you see another triangle i'd be happy if you shared. Thanks again.