BIDU

BIDU Weekly Trend Model

BIDU is one of the stocks that is followed in my private email subscription service.  The above Weekly Trend Model is why.  It reversed LONG the first week in March, 2009 @ 17.26 and is up 356% in 18 months.  As the chart suggests, a weekly close below 73.50 will reverse the model to SHORT.  A weekly close below 73.50 will also break the double bottom formation put in over the past two weeks at 76.00.

BIDU is also worth watching as a bellwether for NASDAQ, the Technology sector and China.  In other words, this is one to keep an eye on for lots of good reasons. 

Past performance is not a guarantee of future results.

US Dollar - UUP

I continue to like the US Dollar trending models and in particular, the UUP Daily Trend Model:

UUP Daily Trend Model

I'm not going to even pretend to know what global financial currents affect currency trends, but I can recognize a well trending trading vehicle when I see it and this one speaks for itself.  Looking at the recent historical performance of this trading model, it appears that about 2 out of 3 trend signals work for gains of between 5-10%, while the losers drop maybe 2% before getting stopped and reversed.  

For what it is worth Prechter is very bullish on the US Dollar, suggesting a surge higher in the coming months.  The above trend model isn't so prescient, suggesting only that the trend is up and that should be good enough for now.  

It is.

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Far away from now

Won't you look down upon me, Jesus
You've got to help me make a stand
You've just got to see me through another day
My body's aching and my time is at hand
And I won't make it any other way

I've seen fire and I've seen rain
I've seen sunny days that I thought would never end
I've seen lonely times when I could not find a friend
But I always thought that I'd see you again

Funny, isn't it?  Looking back at all of the people that have crossed paths with us in our lifetimes, how many of them disappeared from our lives entirely, never to see them again? At the time we last were together, neither one of us knew that it was the last time.  The last time we would catch each others eyes,  the last time we would be sharing even a sliver of each other, a time, place and memory forever fixed, so final, finished, the closing chapter of a book too brief, a narrative so fleeting and it was gone before we could grieve.

A lover, an ex, a best friend, a parent, it doesn't really matter, does it?  Time closes all that we have been, whoever we were and whatever life we were living.  Relentless, dogged, unforgiving.

I went dancing last night.  My partner held me close and though the small dance floor was elbow to elbow and tush to tush, we stood alone, caught in an embrace that will live with us forever.  When will this one pass?  When will paths divert, our lives move on, or now, in these years, just end?

Who are you missing tonight?  A first friend, first love, first spouse, first wonderful taste of the sweetness that rained down from our first companion in intimacy?

I miss the girl on the dance floor last night.  Though just a few feet down a hallway, I miss the way she was with me last night, buoyed by tequila,  the loud music and crowded dance floor, we found a space and time where we stood alone, a forever moment to be remembered, then missed, one day far away from now.

Shorter term trends - Gold & Silver stocks

Back in early June I posted an analysis of Gold and select Gold & Silver stocks.  Below is my third recap of my Trend Following Trading System, this time Gold & Silver stocks.  There are three differences in these stocks from the previous two "Shorter term trends" installments.

First, for these stocks I use a lower volatility setting for the trend algorithm.  Gold and silver stocks trend much better with lower volatility thresholds.

Second, a few of the "Buy" signals in the table were generated before I sent out the Gold & Silver Basket to subscribers.  But I think its a better view of performance of the algorithm to see the signals from inception.  The basket of gold and silver stocks was sent out on June 19th, so all performance is real time since Monday, June 22nd.

Third,  I'm including the Weekly Signals because they have been so good that trading them should be a material consideration for anyone with a longer term time horizon.

Finally, as with the previous two installments, past performance is not a guarantee of future results and that the reversal thresholds do change so the reversal levels shown above are only applicable at the time of this post but are updated to my private email list after each market close.

Selected Charts

ANV_Daily Trend Model

ANV_Weekly Trend Model

AXU_Daily Trend Model

Shorter term trends - Stocks

Yesterday I posted the ETF performance table that I send out to my private email list after the close every day.  Today I am posting the Stocks table with current signals and performance. 

The Daily Signal represents the current signal and trend for each stock. The Entry Price represents the closing price of the stock on the day the signal was generated.  The Daily Reversal is the price level where the trend changes.  As with the yesterday's table,  reversal levels change daily, so please do not rely on the listed Daily Reversal levels.  The reversals are updated after the close every day and sent to subscribers.The color codes designate a certain feature of each stock's trend, again, proprietary and reserved for subscribers.  The Daily Returns represent the net percentage return from inception of the current trade.  Past performance is not a guarantee of future results. 

There are 21 winning signals against 3 losses.  Yesterday, the ETF table showed 19 wins and 0 losses.  These results should not come as any surprise, since the market has been in a down trend since August 9th.  Still, not a bad showing for a simple, objective, mechanical trading regimen.

Selected Charts

CME_Daily

GS_Daily

PCLN_Daily

Shorter term trends

Let's change the view from the big picture to the current trends with a look at the Daily ETF's  followed in the subscription service:

   The reversal levels change daily, so please do not rely on the above numbers.

Reversal levels are updated daily for subscribers.

Selected Charts

TYP_Daily

SCO_Daily

UUP_Daily

FAZ_Daily

Past performance is not a guarantee of future results

Market Collapse of Epic Proportions

Let's make the case with our biggest picture time frame, the SPX_Monthly Trend Model. This trend model reversed SHORT with the April-June decline in the market.  Note also that these monthly signals measure in years, not days, not weeks.  The implications are for a heck of a ride down in the months and perhaps years ahead.

 SPX_Monthly Trend Model

There are two Elliott Wave counts embedded on this chart.  The first one (blue)  is automatically applied by my Advanced GET software.  I have been using this software since 1994.  It works more often then it doesn't, I give it a lot of weight.  It represents the most bullish of the two EW counts, yet still projects a move to below 600 on the SPX, as is suggested by the horizontal blue support line in the lower right corner of the chart.

The second wave count (black) is from Robert Prechter, the controversial EW analyst that EW wannabes love to disparage because of his missing calls in the past.  They ignore his body of work which is staggering in its prescient analysis and observations of not just the stock market, not just the economy, but in particular social mood as the driving engine of all things financial, in the evolution of society to some extent the rise and fall civilization itself.  

A little too sweeping?  Only if you believe the ignorant, snide snippets of opinion of him so rampant on the Internet.  Not if you read is seminal works,  Elliott Wave Principle: Key To Market Behavior and especially, the most important publication of last twenty years, Socionomics: The Science of History and Social Prediction.  There is no better Elliottician alive today.  We had better pay attention to his analysis, whether we agree with it or not.

All that said, I've placed  Prechter's Cycle degree wave count on the above monthly SPX chart, a completed Wave 1 (early 2009), a completed Wave 2 (April, 2010) and now the beginning of Wave 3 down.  From Prechter's  January, 2010, Elliott Wave Theorist:

The very center of the wave structure-the most volatile point in an impulse-should occur in 2010 when the market reaches wave iii of III of 3 of (3) of 3.  In a bull market, this point in the wave structure marks the time at which investors in the aggregate stop worrying about the downside risk and begin projecting ever-higher levels (for example, by writing books about stocks for the long run and Dow 100,000).  In a declining impulse wave, such as the market is in now, the same point marks the time at which investors in the aggregate stop focusing on the market's upside potential and start worrying about how far down it will go.  This is a very rare event at Cycle degree, and its upcoming occurrence will be stunning enough to set records for financial panic (Emphasis added).

Let's translate all of the above into some workable, tradable, ambitious strategies.  Below the Weekly and Daily SPX Trend Models:

SPX_Weekly Trend Model

 SPX_Daily Trend Model

The two most important characteristics of these trend models are first, the current dominant trends, which in these cases are both DOWN and second, each model includes a trend line that represents a reversal of the current trend.  In the case of a rally that extends, or in the event that these dominant trends are short-lived rather then the beginning of something massive, these trend lines will be broken to the upside and, "All bets (on the SHORT side) are off." 

I utilize these trend lines and trend models extensively in my subscription service, my private email list in which I give real time market observations and updated short-term trend model analysis.   On Thursday our SPX_60 and SPX_240 models reversed SHORT and captured most of Thursday's decline.  Our VXX_240 model has been LONG since August 11.  We use these short-term models for entries into the SHORT side in conjunction with the longer term Daily and Weekly SHORT trends in the SPX.  

There is no one strategy that fits all traders.  For some, simply buying an inverse ETF, such as the SDS, when the Weekly Trend Model went SHORT on May 3rd at SPX 1111 provides all the trading that is necessary to garner the most from an existing trend.  For others, the Daily Models provide more active entries and exits.  Finally, for the very short-term oriented traders, I update the 60 and 240 minute models in the SPX and QQQQ throughout the trading day.

I don't know what is going to happen next in the markets.  Monday, even next week, can go either way, as is always the case.  What these Trend Models of varying lengths do for me is assure me that the market isn't going to go too far in either direction without me.  That removes a lot of uncertainty from trading.  But even more significant, there is absolute assurance that if the above wave counts unfold as forecast that they will do so with me on board.   

With the Monthly, Weekly and Daily Trend Models all pointing down coincident with a compelling EW case of an imminent market collapse of epic proportions, a persusive case can made for being SHORT the market, right here, right now.


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Energy Stocks

In keeping with our sector theme, below are some energy-related ideas across different time frames to illustrate how trends can make great swing trading vehicles regardless of time horizons. 

OXY_Weekly Trend Model

Occidental  Petroleum will always have a place in my heart.  It was the summer of 1978 and I was on vacation in Chilmark, Martha's Vineyard.  During a rare bout with sobriety I purchased some OXY options that  tripled in value in the ten days I was on holiday.  This was a time before personal computers, cell phones, or instant quotes, just me, a transistor radio on the nude beach, a dial-up phone at the cottage and a Merrill Lynch broker in Atlanta.  The birth of a career, a passion and a new found respect for lucidity even when all those around you are crumbling into chaos and debauchery.

SCO_Daily Trend Model

The investment will seek to replicate, net of expenses, twice the inverse daily performance of the Dow Jones AIG Crude Oil Sub-Index. 

Note the pattern of whips-saws followed by huge percentage gains.  Discipline and money management are all that need be added to this model.

 SCO_15 Trend Model

Although I don't presently trade this 15 minute model, the chart makes a compelling case for doing so.  

Market Notes 

I am not going to use the C word today, but the elements are building and I'll likely be going into a more detailed evaluation of the potential in my Weekend Update. 

Computer Stocks

Yesterday I highlighted three stocks from the financial sector.  Continuing with the sector theme, here are three stocks from the computer sector.  This time, let's look at the Weekly Trend Models:

DELL Weekly Trend Model

IBM Weekly Trend Model

HPQ Weekly Trend Model

The obvious question that arises is, "It can't be that easy, can it?"    

Past performance is not a guarantee of future results.  

Plus, the past three years have seen some rather large trends, which is exactly the kind of market that this technique is designed to navigate.  

Finally, note that all three of these stocks are in Weekly SELL modes. 

Market Notes

Today's sharp decline out of the gate was enough to turn all Intermediate Trend Models SHORT. Below is a Daily chart of the DJIA with a potential wave count.  Next key level is 9600.

Financial stocks

Here are a few financial stocks from my Trend Tables.  My thesis is that financial stocks lead the market, especially this market and when they all lead in the same direction we need to take note.

 GS_240 Trend Model

JPM_240 Trend Model

AIG_240 Trend Model

NNVC

Here is an updated NNVC_240 chart.  It really is too early to have much faith in the EW count shown, but I'm including it anyway, just in case it's right:

NNVC_240 Trend Model

VXX

Below is the SPX_Weekly Trend Model which puts today's rally in perspective:

SPX Weekly Trend Model

But my favorite chart today is of the VXX_Daily Trend Model:

VXX Daily Trend Model

VXX traded above 35 in late May.  At those VXX highs, SPX was trading at about 1050.  That suggests that a 5% decline in the SPX could generate about a 50% advance in VXX.

My very short term VXX Trend Models are SHORT.  When they reverse LONG, the trade begins.

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Our Tradable Edge

By now, it is no longer my tradable edge, it belongs to all who have been following my work this past year and especially those who have been gracious enough to subscribe to my private email list.  Along the way, the system has had its successes as well as a few stumbles and although nothing is perfect in trading, we seem to have found a method that provides favorable implied odds for trading the market, what I refer to as our tradable edge.

To the right of this page is my brief introductory essay, titled, "Why Are You Here?"  Notwithstanding the occasional human interest detours that chronicle my own version of, Eat Pray Love, we are here to make money.  So everything you read and see here, from my commentary to the charts to the occasional links to what I consider engaging ideas from others, is put up with a view toward making money in the stock market.  For most, that means to stop what you have been doing, end a series of bad decisions, flip-of-the coin guesses and failed strategies. In other words, if you want to start making money in this game, you really have to do things different, you need to find yourself a tradable edge and implement it in your trading.

The Trend Following Trading Model is our tradable edge.  It's premise is to identify the dominant trend of the market so we can align our trading accordingly.  Trading with the trend takes us out of the fog of stupidity in dealing with trading, but only if we surrender to the solutions provided by this simple,  objective, algorithm. Thus we have defined, quantified, embraced a new approach to our trading, one that will allow anyone to, "do something different" this time.   On to some charts.

Below is a two month chart of my VXX_240minute Trading Model.  On it are eight actual, real time trades of which six were nice winners and two were small losers.  Ergo the essence of trading such a system, not perfect, but good enough to provide a tradable edge.

VXX_240 Trend Model

The most recent trade is a LONG triggered at 90 minutes into trading on Wednesday, August 10, 2010.  That trade is up about 9% in less then three days, that is without margin or options, just buying the VXX and holding with the trend.  How far will VXX go?  Don't know and don't care.  But at the early 2009 market lows, VXX printed 120. 

Below is a longer-term VXX study using daily closes for the Trend Model.  Again, not prefect, but the winners outnumber the losers and more importantly, the winners are much bigger then the losers.  A tradable edge?  

VXX Daily Trend Model

The algorithm works across a diversified cross-section of stocks, ETF's and indexes and can be applied to any time frame. While past performance does not guarantee future results, for now, this trend following algorithm is performing its job, providing a tradable edge allowing us to do something different this time.  Which brings me to the market and a big picture overview.

The Market

Here is a snippet of my Weekend Update sent out earlier this morning to my private email list:

I really want these Trend Models to speak for themselves, but I can't help myself.  Here is what I think:  We are at the beginning of  huge decline in market capitalization of the US and global stock markets. That means lower stock prices, much, much lower prices in an extended bear market, maybe one for the history books.  It is a convenient view with all of our index Trend Models in SHORT mode. But more then that, it allows me the luxury of designing a strategy that will maximize returns from such a decline.

With this as my operative thesis on the big picture, how does it reconcile with trend following and the trading models?  Remember, we want to do something different this time, we want to simply identify a trend and jump on board, whichever direction that trend is going.  If I were a rampant bull on the stock market and our economy, I would still be short the market in here, as the Daily and Weekly Trend Models are compellingly SHORT (note, VXX trades inverse to market direction, so it's LONG mode is market SHORT mode.).

Below is a NASDAQ weekly chart covering about the past two years of price action.  I've puposely left off any Elliott Wave analysis, which by-the-way is direly bearish currently.  Just the trends:

NASDAQ Weekly Trend Model

Now here is the same chart with a couple of EW counts.  The first count, in squares, is based on an EW algorithm in my software program, Advanced GET.  The second count, in black, is my preferred count as well as the preferred count of Robert Prechter and Elliott Wave International.

NASDAQ Weekly Trend Model with Elliott Wave analysis

The implications of the two wave counts are for all intents and purposes the same.  An extended decline in stock prices that will take out the lows made in March, 2009.  (Remember, VXX printed 120 at those lows.)

This is how my market view reconciles with the Trend Following Trading Model.  It caught the massive down move from late 2007 into early 2009.  It then caught the rally that lasted into April, 2010.  It's too early to say how far this newest trend will go nor how long it will last.  But my whole point of this post today is to suggest that it doesn't matter.  If Prechter's analysis proves accurate, there will be huge profits generated by being short for the bulk of the decline.  The same holds true for the Advanced GET analysis. As I wrote to my subscribers earlier, if neither scenario unfolds, our Trend Models will let us know by reversing LONG.  

I started this private e-mail list (SUBSCRIBE button on the right, above my photo) in part because of this weekly NASDAQ chart.  The other indexes are pretty much the same.  I expect another leg down in the overall structure that began in late 2007.  It is beginning to look like that decline is in its nascent stages, right now, in August, 2010.  Why it is happening, where and when it will end is fodder for speculation, but for now, the dominant trend of the market looks to have turned down.  The market will do what is necessary leave most at the station.  Our simple algorithm and its trend line will almost certainly allow us to jump on board and go along for the ride.  That is our tradable edge.

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GS - Sitting on a ledge

We've used GS as a market tell before.  I am surprised that it has held up as well as it has in the past few days.  A break below 149 would reverse GS's trend to down and would have bearish implications for financial stocks and the general market. 

Below, FAZ is suggesting its only a matter of time before GS makes its move lower:

NNVC - chart update

Look at the size of the most recent 240 minute bars.  You would think this company found the holy grail of anti-viral treatment.  Take note, something is up.

NNVC

The NNVC Daily Trend Model has been SHORT since June 30 @ $1.80.  With NNVC up about 10% today, is it time to get back in?

NNVC_60 Trend Model

NNVC_240 Trend Model

NNVC_Daily Trend Model

The two key levels above are $1.12 (240_min) and $1.20 (Daily).  Notwithstanding general stock market conditions, this company is going forward in paradigm changing treatments of viral disease. It's easy to manipulate a stock like this, but not so easy to deny their place in watershed medical achievement.

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Prechter on Bloomberg

Here is a link to a live interview of Robert Prechter on Bloomberg yesterday:

Robert Prechter, August 11, 2010

Prechter discusses current market conditions in the stock market and US Dollar.


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Key Trend Models

Today has the potential to end the summer rally and lead-off an intermediate decline into autumn.  We have seen them rally the market back into the close too often to remove the word "potential" from this analysis. 

A couple of things though: 

First, the Russell 2000 (low volatility settings) is the weakest of all indexes and was never able to turn up, summer rally or not.  It should lead the markets lower should this downturn be confirmed.

Second, yesterday we saw the VXX_240 Trend Model reverse LONG.  Today, the VXX_Daily Trend Model is close to a BUY SIGNAL, but not there yet.  Should the DJIA SHORT SIGNAL be confirmed  at the close today and the Daily VXX reverse LONG, that would be a strong combination of signals to usher in the long-awaited intermediate market decline. 

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VXX_240 Trend Model

VXX_240 Trend Model

Would you take this trade?  This reflects back to this weekend's post, The Tao of Trading. The LONG Pending signal still has not been confirmed, so as I am writing this there is about a 45 minute window in which this trend model is in "Pending" mode only.  The characteristic of this summer's market is to reverse initial moves like today's and recover to at least about break-even for the day.  This flies in the face of jumping into this signal early, if at all.  Such is the lot of the committed trader of this system.  One of these days the opening move will extend.  Who will be on board for that one?

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Can't remember if we said good-bye

The Tao of Trading

I just sent out a Weekend Update to subscribers, titled, The Tao of Trading.

Tao 

1. In Taoism, the basic, eternal principle of the universe that transcends reality and is the source of being, non-being, and change.
2. In Confucianism, the right manner of human activity and virtuous conduct seen as stemming from universal criteria and ideals governing right, wrong, and other categories of existence.

What is the Tao of Trading?  It is the way.  Our indicators line up and we take a trade.  The outcome is not important.  If we are detached from the outcome, we can more easily do our job.  What is our job?  To implement strategies designed to generate profits.

Enter our Trend Models:

SPX_Daily Trend Model

We have seen this sucker before, it along with it's weekly counterpart, defines the dominant trend of the market. 

SPX Weekly Trend Model

Such has been the nature of our summer.  Our parenting unit, as represented by the above two SPX Trend Models, has been squabbling.  One is Yin, the other Yang.  Oh cruel fate......

Friday was a callous hoax.  The SPX_240 minute went SHORT, but the market refused to follow-through on the downside and recovered nicely into the close:

SPX_240 Trend Model

Yet we had to take this trade.  That is our way.  The 240 minute model is our heads-up and head-start on what is usually a pending Daily reversal.  But apparently not so in this case.  What did we do wrong?

Nothing.  

Such is the Tao of Trading.  If you are looking for perfection, marry me.  But as far as our trading strategies go, we are batting about .500, which means that half of our trades are like the one above, busted.  It's the other half that provides our sustenance.

In an ironic twist of karma, taking losses are part of the winning trading paradigm:

In order to take wins, you have to take trades;

In order to take trades, you have to take losses.

 
Was it Yogi Berra who said, "Half of psychology is mental"?  Well, at least half of trading is psychology and its never easy to take a losing trade in our accounts. But if successful trading was easy, everyone would be doing it.

The point that I made to my subscribers and which I am sharing here today is that successful implementation of a trading strategy isn't defined by taking profits alone, its defined by taking the trades that your system generates, all trades, regardless of the outcome.

The Tao of Trading.

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VXX 240_min Trend Model

We've been watching this one all week:

Mid-seesion edit:

 This DJIA_10 minute chart is looking ominous, more so should today's lows get taken out:

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