Monday, March 22, 2010

On Compasses and Trend Models

Compass:  An instrument for determining direction

Trend Model: A compass for determining market direction

DJIA Monthly


DJIA Weekly


DJIA Daily


This is not a perfect methodology, but it is better then nothing, in fact, it is better then just about anything else.    I think I can make it better with daily/weekly observations, with periodic analysis and with the addition of confirming indicators like the Vortex at the bottom of these charts.  

The issue is whether you want to get onto a trend before it starts, just after it starts, or in the middle and/or end of it?  This technique is designed to identify trends just after they have begun and conversely, just after they end.  

Rather then argue the merits here, I will let these charts speak for themselves.  

Same rule applies to my trading;

No arguments with trends.

Instead, strict adherence.


13 comments:

Anonymous said...

Interesting stuff here. With the algorithm, is there anyway your algorithm could become obsolete? How would you be able to tell if it no longer works? It is not I don't believe it works, just what if the markets change or the inputs no longer work?

I'm not trying to be difficult or doubt your work. Full disclosure I am quite ignorant on this subject so I don't quite know how an algorithm would work.

Allan said...

Should a shift in the persona of the financial markets shift to where this algorithm is no longer effective, we will know by its being no longer effective. A look at the Daily chart above should tell you that we are not there yet, not even close.

Anonymous said...

Did the algorithms work last year?

I seem to remember you predicting all during March and April last year of a big market crash in the second half of 2009.

You also suggested that "$20 oil" was coming. Wake me when that happens!

Allan said...

Where have you been? The Trend Models were born on November 9, 2009 with this post:

http://allallan.blogspot.com/2009/11/menage-trois-trading-system.html

Since then they have nailed this market. Welcome back, or at least, "Good Morning" if you are finally awake.

A

Anonymous said...

My instinct and greater desire is to enter a trend at the earliest signal,before it starts ,or right at the perfect beginning.
Being able to do that tells me my vision is right on.Thats the benchmark of vision I'm striving to develop.

Falling short of that entering just after it starts (ends) is probably the best for steady success.
keep up the good work.

t said...

Biotech stock update from...t
..........................
BTIM

it may be one of those biotechs on Allan's list,not sure, but I think it should be. It is on patrcick cox's list, a wimming story fundamentally. blasted up last week on great news.
Corrected to the reliable fibs last few days,and is at the 'buy zone' since last friday thru today.

key s/r points at the 6.40 area fibs at the 6.40 area
this could be the best bottom or there could be one more drop into the 6.00 area.

If you know the fundamental story,this one seems like a winner to me.
deserving of a core holding.
The cycle timing I follow is heading into a reversal timing zone at the end of this week. Any further drop into the end of this week could become a good entry set up to go long BTIM.
A drop from now to the 6.00 area could be a 'best current entry point' for price and timing.
standard fib correction is fulfilled already.
any further drop in price would be a gift.
end of week timing would be ideal if price can just slide on down into it.
..........................
On the one month chart /1 hour time frame....
BTIM sits snugly now supported by the 50 MA at the 6.40 area.
There is some key resistance above at the 6.60-6.65 area.

s/r points below are 6.00
5.90
5.80 areas
...........................

IF BTIM moves on down a little more into the end of this week ,or even if it just bounces around the zone between 6.35 and 6.65,and maybe makes a shake out drop quick at the end of the week,anywhere in the 6.30-6.00 zone..... this would be a good set up for entry long, or first buy core holding.

I own BTIM
I will buy more at the 6.00 area. I wont worry if it dips below 6 to the 5.90 area.5.85

If it drops to 5.00
I will buy more.
this is not advise for anyone. just my own investment plan. for BTIM,as a core holding.

current wave movement correction from the 8.40 high
BTIM hit low of 6.25,then 6.35,then 6.43

now at 6.55

resistance that could promote failure is at 6.65 area. a sideways abc completing and failing at 6.65 area could drop BTIM down further into the 6.00 zone ,for a better long entry set up at end of the week.
this would be the play I am watching for.

t said...

....since I gave the technical analysis a second ago, I wanted to be more precise about one detail....the overhead resistance that BTIM faces now, is in the zone of 6.60- 6.75

I had previously said 6.60-6.65. It could fail at 6.70-75 area. and then drop further to test down towards 6.00 and 5.80 for a bottom. inbetween is the fib zone of 6.25-6.50

Anonymous said...

Metallica live.

Whereas mostly contemporary in their significance (e.g., the US Peace dollar during US isolationism; and the confusing array of recent US circulating coins and notes), national coins are also portentous--omens of coming geopolitical and economic events of consequence.

The 2008 Australian Kookabura shows the national bird examining a spider web. "Oh what tangled, woven webs," might have mused later that year Wayne Swan, Australian Treasury Secretary. (Incidentally, the 2010 gold coin from Australia depicts combating kangaroos. A very different message than the gallant garoo of the 2009.)

Or the 1913 Russian Rouble "Romanov Dynasty", which depicts a troubled monarch with furrowed brow and a startled cardinal who sees what is coming in 1917.

Or the changing demeanor of the pandas on Chinese bullion coins. 2010's laughing pandas--US selling the rope ...

The redesign of the 2009 Lincoln penny. Planned a year ahead, its delivery mysteriously coinciding with the arrival of another Illinoisian thrasher of states sovereignty.

The 2009 US proof platinum Eagle, released at year's end and almost not produced at all. Most ominous its reverse: the diminution of the legally mandated eagle--reduced to a tiny privy mark. (American power shrinkage?)

And this week, just released from the US Mint:
Be Prepared

t said...

Oh Great post about the Coins ! very interesting.

..........................
(i'd already written my thing here so I have to send it...but interesting about the coins )
..........................

Can I offer one more stock watch update?

This is a homerun oil explorer stock.
the question for investors is WHEN to get in on it?
now that it has blasted off a few months ago from the .70 cent range.

It has been in a correcting pattern since the high of 1 month ago at 2.58....went down to 1.75 in an abc correction

From there in the last month has abc up to 2.25 and abc down again to 1.89

now it has played sideways around the 2.00 zone

I am not an expert at understanding all the detailed moves of penny stocks and these giant corrective bowls they make over many weeks. So I dont know if there will be further drop below the 1.75 area. long term charts of 6 months and 1 year chart show 200 MA at 1.00 area
I could almost guarantee you will Never see UPWRF at 1.00 ever again.

the fundamental story is too compelling. It is a multi billion dollar future profit enterprize owned by a penny stock company which sits on the leasing rights drilling rights to a giant oil find off the coast of Namibia.

Imagine petrobras as a penny stock explorer at the beginning of their oil discoveries.

the 50 Moving averages are at the 1.50 area....I even doubt price will see 1.50 although its more possible. If UPWRF drops to 1.50 I would call that a screaming buy.

Anyway, point being, that the chart looks to be trying to establish a base at 2.00 ,like it established a base at 1.00 a month and a half ago.

How do these penny stocks move like this.

Look at Jinshan Gold.
the days of 1 .00 and 1.50 are long gone. Do you think NNVC will revisit .50 cents now ? I dont.not now. once the geenie is out of the bottle its over.unless their research proves a total failure...like pfizers alzheimer drug that just failed tests.

So, with UPWRF, the question in my mind is when is the best entry time for a core holding or just to buy more.

the last bottom was 1.75
2.00 is being established as the next base.
it already made the big abc correction last month right after it popped.

It looks like its consolidating into a base at 2.00

Investors who own this stock, do so because they know what they are holding. an enormous black gold mine, that Byron King says is just the beginning.

I think if you can see the analogy to NNVC....UPWRF is the energy (oil) version of NNVC.

Psychologically, of course its hard to buy a stock at 2.00 when it was just at 1.00. or 1.00 when it was just at .60 cents.

But the logic of the investment is that IF you do the diligence and decide this is a winning story ,a wealth maker,as I do, then 2.00 will be a very cheap bargain looking back a few years from now.

I own UPWRF and would plan to buy more at 1.75 area. more at 1.50 area and IF it ever drops toward the 1.00 area (like from a market collapse)
I would triple my ownership.


cycle timing for the next 'reversal zone' could be end of this week and early next week.

any price drops this week into the end of week may create good set up. in my view. is how I am personally looking at things.

sorry ...I'm not trying to hijack the blog here,just wanted to be thorough in the analysis.

do yourself a favor and keep your eye on UPWRF.
Discover the story.

Anonymous said...

t, Appreciate your input. Keep up the good posting. Doug

Anonymous said...

MAYBE NAIVE?

There are periods when trend followers experience huge profitability (e.g. black swans)

However, I can't see Allan's algorithm ever failing miserably. The fact that he keeps it simple almost guarantees it's success vs. these long-term capital type money making schemes.

Go Johnny Go!!!

Lucky

t said...

thanks Doug.

...........................

I'mm also watching ISCO this week,as it sits at a key spot.... balancing at the 1.50 area.

If I understood cup and handle patterns and bull flag patterns better, could say what this chart looks like..... a pop above 1.70 could send ISCO to target 3.00 another nice double from here.

any experts out there with an eye on ISCO ??

Anonymous said...

Tuesday morning 3/23/2010

S+P is now forming a "triple top" hitting 1169 and change again.

"OH BOY" !?!? WHERE TO FROM HERE?

What shall it do for an encore the rest of this week.