The path ahead

I post a lot of charts and trading ideas, some better then others and through it all we can easily lose sight of the bigger picture.  I shared some Weekly Trend Models with subscribers earlier this weekend and emphasized how important these charts were for the general path ahead. 

Here are three Weekly Trend Models all sharing the same pattern, characteristics and implications for the remaining months of 2010:

This isn't all that complicated.  The 6% pop in July notwithstanding, these markets topped out earlier this year and completed an initial wave lower.  Over July, that decline has been partially retraced. I put the Fibonacci retracement levels on the middle, SPX chart.  Although the retracement could go higher, it has fulfilled traditional price retracement behavior and the dominant trend, DOWN, can resume at any time. 

This fact has not gone unnoticed by the Trend Models, all of which require significant price strength before they can reverse back LONG.  The Daily Trend Models reversed LONG right after the July 4th weekend and remain LONG going into August.  Once the Daily Trend Models reverse SHORT, it's all over.  Of the three models shown above, the NASDAQ is the closest to reversing SHORT on its Daily chart and I expect that it will lead the other two indexes, if and when those reversals occur.

If the unlikely happens and these Weekly Models reverse LONG, then I will too.  Unless and until that happens, the big picture scenario is that of a fledgling downtrend that has taken a summer break and appears ready to resume it's path lower.


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VXX

Here is a chart of the VXX_240 Trend Model.  A friend of mine trades VXX exclusively because of what he considers it's very predictable behavior characteristics.  You can see the potential on the chart, three very good trades just using this model:

Notice the spikes higher in recent days, all followed by sideways consolidation, with each spike up making a new high.

If an extended back test supports it, I'll start reporting on this model in the subscription service.  An edge is an edge, no matter what the symbol.


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Edge

A simple trend line can expose a lot of truth about any market, index, etf or stock.  That is the concept underlying this Nasdaq_240m Trading Model:

True to the creed of this methodology, the less written the better.  Still, I can't help but point out that we are looking only for an edge in our trading.

edge 

 *A penetrating, incisive quality: "His simplicity sets off the satire, and gives it a finer edge" (William Hazlitt).

 *A margin of superiority; an advantage: a slight edge over the opposition.

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Father & Daughter

A trip to Sky Harbor Airport this morning and so ended a week's visit with my youngest daughter.  It's hard to focus on the stock market with tears in my eyes and sadness in my heart.    This time and place, the concert, the moment in our lives, will be forever chronicled in this simple photograph.  Some years from now, it will be pulled out and remembered.

I love you, sweetheart, I always will. 

I always will.

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ETF Trend Models

Here is a snapshot of the ETF Trend Models that are followed in the Trend Following Trading Model subscription service.  These numbers are as of the close July 26th and are updated for subscribers each day after the market closes. 

The idea here is to let a simple, objective, mechanical algorithm draw a trend line and then to be LONG when prices are above the trend line and SHORT when prices are below the trend line.  Here is an example, using SSO from the above table:

SSO Daily Trend Model

These Trend Models have beaten the pants off of my own analysis this past month, which says something about both my analysis and the Trend Models. Forecasting is easy when we are in sync, but much more difficult when we disagree.  Looking back over the past seven months, the Trend Models win hands down.  It looks from here that identifying a trend is a whole lot easier the forecasting one, a concept that from the looks of these results, can be taken to the bank.

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Past performance does not guarantee future results.

Emerging Opportunity

According to this wave count, the market is tracing out an ABC 4th wave, now into the 50% Fibonacci retracement window of the entire decline from late April and nearing the level of the previous 4th wave from mid-June. 

With the Advanced GET Elliott Oscillator back to the zero line and the False Bar Stochastic at a double top Sell signal pending, the market is setting up for another fall.   We have had several false alarms to the downside and maybe this is just another one of those.....but I doubt it.  That stochastic double top is a highly reliable trigger and should it issue a Sell signal (it hasn't done so yet) I intend to take it in conjunction with what should be some shorter-term trend model Sell signals. 

These are time tested indicators and price patterns.  They are not perfect, nor is anything else in market timing.  But I use them for a reason, i.e. they work more often then they don't.  

As an aside, I found this chart on another site and thought that since it dovetails nicely with the above analysis I would share it here:

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NNVC - trend model update

The Daily Trend Model for NNVC triggered a Sell on June 30 at about $1.83.  Sitting today down about 25% from that Sell signal, NNVC is firming and may provide some reversals LONG from these levels.

NNVC_240

The NNVC_240 Trend Model remains in SELL mode, but will reverse LONG on any four-hour close above $1.41.  

NNVC_Daily

The NNVC_Daily Trend Model requires a daily close above $1.55 to reverse LONG.  The above 240_minute model gives an entry that is about 10% lower then the Daily Model, with a correspondingly higher risk of being whipsawed.  But we have seen this stock run up before and if there is enough price strength to move NNVC in to the $1.40's, it seems likely that the Daily threshold will also be hit.

Right now, with NNVC trading in the $1.30's, there isn't much to do.  Only in the event of a price rally will these models kick in on the LONG side. 

Weekly Trend Models

The view from West Hollywood

Here is the weekly SPX Trend Model and the reason that all of the shorter term Sell signals have carried so much weight:

SPX Weekly Trend Model

Respecting this chart is not about being a perma-bear.  It is about recognizing a major trend change in the past few months and trying to anticipate an acceleration of the developing new downtrend.  Unless and until this model reverses LONG, the opportunities for significant profits lay on the SHORT side.  The SPX is a couple of months into a sideways to up consolidation.  This too shall pass and according to EW patterns, it should end with a vengeance.

I am in LA  for a few days, to attend a Jackson Browne concert,  to just get out of the Arizona high desert heat, to refresh and renew, to gain new perspectives and to recharge for a heck of a market ride in the second half of this year. The view from West Hollywood is contained in this chart, in my words above, in my plans to stake out a fountain of profits in the months ahead.  You are invited to come along for the ride, if you are so inclined. 

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DJIA_240 Trend Model

Here is a follow-up of the DJIA_240 Trend Model posted earlier.  Note that prices have rebounded right to the trend line and as such are at resistance.

The next few bars should resolve the situation, either higher with a reversal LONG, or lower with a continuation of the current SHORT.


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NNVC - circa late July, 2010

I own NNVC from under 10c to over $2.  As I have written many times, I am a buy and holder of this stock, expecting it to be an investment of a lifetime.  I am willing to ride out the vagaries of day-to-day pricing for the potential fortune awaiting shareholders at the end of the journey.

That said:

NNVC reversed from LONG to SHORT on June 30 @ $1.83.  Notwithstanding my own trading (or lack thereof) of the stock, the Trend Model did a stellar job of getting out of the stock prior to its latest decline.

That said:

The Weekly Trend Model reversed SHORT about the same time, circa $1.65.  That's both Trend Models saying SELL at about the same time.

My enthusiasm for the company and its stock is at a multi-year high.  Read the series of news items just this past three months.  They are on track in their development of a paradigm changing anti-viral technology with a dozen practical applications with billions in potential market share.  On this fact alone the company is grossly undervalued. 

My personal bias to buy and hold NNVC should not be confused with a logical, objective, systematic trend following approach to managing stock positions.  The Trend Models work, but only if you let them.  I know many of my subscribers are indeed using the NNVC Daily Trend Model to move in and out of the stock. I also know many of you are not.  The tool is there, to use or not use and its never too late to start.

In the end, I expect all NNVC shareholders to be vindicated and in a big, big way, for their support and belief in the company.  A year from now, we will look back at these price levels with a slap of heads at what a great opportunity to add to positions at a deeply discounted price. The Trend Models will provide a more objective entry, eventually, if you are so inclined.

With this one, it is time to think big;  big picture, big opportunity. Some of the biggest paper losses in history, i.e. AAPL, GOOG, DNA, were best left alone, ignored and ridden out to blockbuster resolutions.  That's where I see NNVC, circa late July, 2010.

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Timing the Market, Part III

Extending the fascination with the 240 minute time frame even further, here are the 240 minute trend models of the VXX and DJIA covering the past six weeks:

Periods of pristine market timing like those shown above are often followed by periods of choppiness and whipsaws.  But the cycle re-asserts itself and good market timing statistically overwhelms the chop and longer term, losses pale in comparison to gains. 

As for current conditions, its easy to imagine a few whipsaws in our future, but the system says no, a trend is a trend until proven otherwise.


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Past performance does not guarantee future results.

Timing the Market, Part II

As a follow-up to Timing the Market, I wanted to share the following three Trend Following Trading Models.  In the prior article I highlighted the S&P 500 and today, the 240_Minute Trend Models of the Nasdaq, Value Line and Russell indexes.

Nasdaq_240

ValueLine_240

Russell_240

Note how effective these models have been in navigating through the past few months of market movement.  Every major swing is captured, albeit not from the absolute turning points but soon enough thereafter to make for profitable trading.  Note also that there are a few whipsaws, which apparently is a small price to pay for capturing the major swings.  

The emergence of the 240_Minute Trading Model as an almost ideal time period for capturing turning points for major market swings may be the most significant development since the inception of the Trend Following Trading Model. 

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Past performance does not guarantee future results.

Timing the Market

The single best stand alone indicator for timing this market during the past six months has been the SPX 240-minute Trend Model.  I can make a similar case for the 120 minute and Daily Trend Models, but the 240 minute does provide a very nice balance between the two and in fact, between intraday and end-of-day trading.

SPX_240 Trend Model

I've noticed that while overall performance is good across the board of my intraday/daily models, that at various times some individual models tend to be more prescient then others, i.e providing particularly accurate market timing.  In the spirit of what's working now, here are my back-tested statistics for the 240_minute model:

Period: February 3, 2010 - July 16, 2010

SPX = 1086 -> 1066 

Net = -20 SPX points

Trades:          21

Wins              12

Losses             9

Percent Winners: 57%

Net = +261 SPX points

The characteristics of this performance that stand out are that first, it is of recent price action, reflecting the personality and character of this market, although subject to change at any time; second, that even though almost half of the trades are closed out as losses, that the winners not only compensate for the losses but go on to provide stellar results. 

Finally, the characteristic that maybe is the most striking of all is that this is a purely objective, mechanical market timing methodology.  There is no subjectivity (read: stress) whatsoever in the trading system.

What does it take to trade something like this?

The jury is out.  Belief is certainly up there on the list, discipline too.  Maybe the elimination of ego is also critical to successful implementation.  All three seem to be essential, along with the simple algorithm that draws the trend line, which is updated throughout the trading day in my subscription service.

The model went SHORT on Friday.

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 Past performance does not guarantee future results.

Mechancial SELL

We've seen this work before.  Once prices break through the channels, the mechanical SELL is triggered as it is being confirmed by both the False Bar Stochastic and the Elliott Oscillator.   There is also a lot of confirmatory supporting evidence in the Intraday Trend Models, in particular the 240 minute models which have been navigating this market well over the past few months.

Even though the SPX_Daily Trend model doesn't kick in until 1061 is taken out, there are enough other weight of the evidence considerations to consider the short side now. 


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VXX update

Look how nicely the shorter term trend models for the VXX picked up on this decline, from late Wednesday into trading on Thursday:

60 minute

240 minute

The extent of the decline may very well rest on the Daily chart:

Daily

The double bottom on the Daily chart at about 25 on the VXX looks to be a key level for the markets going forward.  If 25 holds, it could become a catalyst for further strength in the VXX, which would not bode well for further market rally.  The bear case is alive and the next few weeks should reveal all.

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Everything else is just noise

Here are seven charts from my subscription service's nightly Trend Tables.  Three of these were highlighted as Trades of the Week last weekend. The simplicity and eloquence of trend following cannot be better stated then in these charts. 

Sometimes it helps to be reminded as to why we are here and what it is that brings us together.  This is all about making money in the stock market.  Everything else is just noise.


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Thank you, Apple Computer

Thank God for Apple Computer.  They let me in 90 minutes before regular store hours this morning and switched out my power cord, all for no cost and in about 15 minutes.  I'm back!

We might want to give the same thanks for the attached Trend Models.  If you put aside my own stubborn bearishness, after scalping about 8% on the downside, the models are up about 5% on the latest slew of Buy signals. 

 SPX_60 Trend Model

My commentaries notwithstanding, this is some excellent market timing.  The EW picture remains the same, this spike-up does not eliminate or ever alter the wave count, but as you can see, the market is not going to turn down until it is ready and the legions of bears are completely demoralized.  We are not there yet, but we're getting there.

SPX_240 Trend Model

NNVC - chart update

Here are three views of price action on NNVC.  Despite the fact that I am not trading NNVC,  the  Trend Models continue to be stellar in navigating in and out of the stock at opportune times and price levels.

The above hourly chart suggests that prices are near a completed five wave decline and are ready for at least a bounce, if not more.

Both the Daily and Weekly models have been simple and effective in managing positions. While the trends are decidedly bearish, the False Bar Stochastic at each time frame is situated to trigger long.  When and if the hourly trend model reverses, NNVC could begin a nice oversold pop to higher prices.


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Solar Stocks

Continuing on the theme from The Oil Volcano, the sun has been shining on solar stocks in recent days.   Here are three solar stocks that trend well and provide short-term trading opportunites:

All three are in Daily up-trends, which is all we need to know to trade in and out of them.  Nonetheless, that False Bar Stochastic is ominously close to a Sell signal.  My strategy would be to wait here, if the FBS goes into trend mode, then buy, or if alternatively the FBS triggers a Sell signal, go with the downside play. 

On the other hand, take a look at this private company, Nanosolar, which may have revolutionized solar energy with their proprietary thin film solar panels:

Named Best Invention of the Year 2008 by Time Magazine

There are countless ways to manufacture solar panels, but there's only one metric that counts: how the cost of solar power compares with that of electricity from fossil fuels. Until energy from the sun can beat energy from coal at the marketplace, solar will remain a niche player, adorning the rooftops of those who care more for their green reputation than for their bottom lines. Enter Nanosolar, a San Jose-based start-up that manufactures thin-film solar panels. Unlike the bulky silicon panels that dominate the solar market, Nanosolar thin-film technology is light and extremely cheap to make. The key is the manufacturing process: while silicon panels need to be baked in batches, Nanosolar's thin-film panels roll off the assembly line, as if from a printing press.

Keep an eye out for Nanosolar going public, or, some other back-door way to invest in it, i.e. owning shares of public companies that may have already taken stakes in Nanosolar. 

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The Oil Volcano - Update

I'm bringing the first link below forward from a Comment just posted in a prior blog.  It contains three You Tube videos that address some problems caused by the oil volcano and in particular, collateral damage that might be occurring as a direct result of the attempts to stem the oil contamination of the gulf.  The suggestions are that real damage to the environment, our food supply and the population is being caused by reckless use of the chemical Corexit.

 Gulf of Mexico: Marines evacuated, sea highly toxic

"The Oil spill has reached a point of no return, the damage is done. But not a lot of people are aware of the extent of the damage mainly because the use of oil dispersants that made the oil 'invisible' but left bigger problems."

"The dispersants Corexit, used made the problem so much worse that it has caused the oil to be able to evaporate into the air making the air toxic as well as the dispersants are being sprayed into the air and being picked up in the air currents carrying it unto land." 

Arsenic levels rise around Gulf of Mexico

BELEAGUERED energy giant BP was hit with further bad news this morning as it emerged dangerous arsenic levels have been found in seawater around the Gulf of Mexico.

This last one is a little out there, but it is a Sunday and if you recall, I am cut a little slack on Sunday's so what the heck:  There is no oil spill, its all an Illuminati "false lag" conspiracy to manipulate costs and use of oil and to implement population control.

Corexit global conspiracy

 
Weekend Update

I sent out my Weekend Update to subscribers yesterday.  Here is an excerpt:

Last week's strong rally does not erase the bearish potential for the market in the weeks ahead. Nonetheless, we must respect the plethora of market-buys in our trend models.  If these new buys get reversed quickly, take special note for what that may portend for the next major leg of price behavior.  Unless and until that happens, there are plenty of fresh signals to pick from if you chose to trade on the LONG side here. 

The problem most traders have is that the think too much. So my parting words to you this weekend are to not over-analyze the nuances of market movement too much and instead, trust the trend models.  They are the ones that we brought to this dance.
 

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For Traders Only

SPX 10 minute Trend Model

Fitting that monsoon season has started here in the desert just as we get a storm of buying on the stock exchanges.  Putting aside longer term perspectives, above is a simple 10 minute trading model for the SPX.

Does it get any better then this?

Let's see what the False Bar Stochastic does to the mix:

A couple things stand out on the above chart.  First, note all the black "false bars" warning the trader not to take any stochastic sell signals.  Next, look at the three places in the chart where the FBS triggered entries to the LONG side.  The first entry was near the close of trading on Tuesday, July 6th.  The second and third entries were mid-day Thursday.  That third signal is a double dip stochastic Buy and those have a very high probability of success.  

I realize that very few traders have access Advanced GET, the automatic wave counts and the  False Bar Stochastic.  So let's take one more look at the 10 minute SPX chart with just the Trend Model as a guide:

For at least the end of this past week, this chart did a stellar job of providing trading guidance.  Just four trades over three days.  

Does it get any better then this?


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For clarity and contemplation

The boldness of the bulls after just a few days of a low volume rally is simply staggering.  Whether the next decline starts this afternoon or next week, or in concert with the Cardinal Climax, it just doesn't matter.  I am re-posting this Weekly SPX chart as a reminder of where we have come from and are likely going in the not-too-distant-future:

SPX Weekly

By design, my shorter-term trend models will only kick in on the downside after the next wave down gets going.  Anything from Daily to Intraday is subject to market psychology and manipulation, but they are still tradable for anyone with the stomach for it. 

Below, the past ten years for clarity and contemplation:

SPX Monthly

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