Happy Holidays!
I was 100% in the C Fund since 1205 on the S&P 500 Index.
We are now entering a 42-day down cycle, if past experience is any guide.
I moved 100% into the G Fund this morning.
2011 was a disappointing year for many funds and institutions. There was alot of up and down but the year began @ 1257 and here we are again @ 1258 as I write.
Later,
Wink
Wednesday, December 28, 2011
Friday, September 23, 2011
Terry's Model Portfolio - October 82 SPY Put
Trade Execution - Buy 20 October 82 Puts on SPY @ 0.25.
Time - 7:15 a.m.
Value of Trade - $500.00
Rationale - Thursday/Friday/Monday Crash Pattern noted by Art Cashin and Alexander Elder, Come Into My Trading Room: A Guide to Trading, page 197.
Time - 7:15 a.m.
Value of Trade - $500.00
Rationale - Thursday/Friday/Monday Crash Pattern noted by Art Cashin and Alexander Elder, Come Into My Trading Room: A Guide to Trading, page 197.
Saturday, August 20, 2011
More Weekend Reflections from Market Oracle UK
Ian Gordon, economic forecaster and chair of the Longwave Group: The majority of gold investors are there because they can see the impending collapse of paper money, but some investors, including many hedge funds, are in the gold market simply because they are trend-followers. In ugly markets, such as the one now unfolding, these trend-followers sell their gold. During the stock bear market, which commenced in October 2007, the price of gold continued to rise into March 2008, even though the Dow had lost about 17.5% from October 2007 to March 2008. But after March, gold sold off into October 2008, losing about 35% of its value. We feel that something similar could happen to gold, this time, in the wake of falling stock prices. As for silver, prices fell by 60% between March 2008 and October 2008. A 35% drop from current prices would see the price of gold fall to something like $1,200/oz. As for the stock market, we are extremely bearish and believe that in the Elliott Wave market cycles, we are entering the third downswing, which should take the Dow Jones Industrial Average well below the March 2009 low of 6,470; perhaps 4,500 will be the target by September 2012.
Weekend Reflections - Market Oracle UK Post
Bull/Bear Market
Nadeem, I have been reading your work over the last couple of years, and I have to acknowledge your work is indeed very good. Over paid Economists the world over are raking the moolah with forecasts that are a great deal away from the line of best fit, but I dont blame them at all, given that academics are unwilling to admit that external events (except acts of god and other catastrophes) do not move markets. Bernanke probably does (or atleast the crowd believes so), but in 4 weeks, all of his genius work and therefore, the stock market's post QE2 gains have been completely wiped out in 1/10th (maybe even lesser) of the time. I remember how he adorned the cover page of TIME as man of the year, and I am a great believer in Robert Prechter's Magazine cover extreme. Since then it has been downhill for him and the Fed. Its not the Fed's business to support stock markets, and if it is, they should probably put it on record so people know. History is replete with examples of the market rendering "interventions" absolutely impotent. The latest is the USDJPY episode. You might help create a bounce in the larger scheme of things, only for the worse to snowball into something that no regulator can handle. In this background, let us make an effort to acknowledge different opinions rather than tearing somebody else's arguments to shreds (Read: Mish). The one thing about Robert Prechter that is particularly likeable is that he has never shied away from accepting his mistake. I follow him very closely, and whatever he did recommend, he's always had stops. Always. Here again, I hope he is wrong with his dow 1k forecast, but there is nothing that the market can't do, and am sure with your experience, you know that a lot better than I do. On a final note, am not sure if you follow David Rosenberg of Gluskin Sheff and he's not scared to be a bear. In a bear market, you just cannot be a bull. The great thing about a good technical analyst is to swap sides when the trend turns, and not just be bullish because a bull gets called to studios more often. Having said that, keep up the good work.
Submitted by a guest commentator
Nadeem, I have been reading your work over the last couple of years, and I have to acknowledge your work is indeed very good. Over paid Economists the world over are raking the moolah with forecasts that are a great deal away from the line of best fit, but I dont blame them at all, given that academics are unwilling to admit that external events (except acts of god and other catastrophes) do not move markets. Bernanke probably does (or atleast the crowd believes so), but in 4 weeks, all of his genius work and therefore, the stock market's post QE2 gains have been completely wiped out in 1/10th (maybe even lesser) of the time. I remember how he adorned the cover page of TIME as man of the year, and I am a great believer in Robert Prechter's Magazine cover extreme. Since then it has been downhill for him and the Fed. Its not the Fed's business to support stock markets, and if it is, they should probably put it on record so people know. History is replete with examples of the market rendering "interventions" absolutely impotent. The latest is the USDJPY episode. You might help create a bounce in the larger scheme of things, only for the worse to snowball into something that no regulator can handle. In this background, let us make an effort to acknowledge different opinions rather than tearing somebody else's arguments to shreds (Read: Mish). The one thing about Robert Prechter that is particularly likeable is that he has never shied away from accepting his mistake. I follow him very closely, and whatever he did recommend, he's always had stops. Always. Here again, I hope he is wrong with his dow 1k forecast, but there is nothing that the market can't do, and am sure with your experience, you know that a lot better than I do. On a final note, am not sure if you follow David Rosenberg of Gluskin Sheff and he's not scared to be a bear. In a bear market, you just cannot be a bull. The great thing about a good technical analyst is to swap sides when the trend turns, and not just be bullish because a bull gets called to studios more often. Having said that, keep up the good work.
Submitted by a guest commentator
Friday, August 19, 2011
Now is a Good Time to Get Out of the Market
Today's action confirms the Stock Trader's Almanac pattern; i,e. the market should be weak into August 30, a rally possibly into September 4, and a really shocking drop into October/November.
I'm already out, so I'm not stressing anymore.
But the downtrend on the weekly chart is strong. A close below 1130 will seal the deal for more downside next week. My target on the S&P 500 Index (and it is hard to believe) is about 970. It could happen either by August 30 or by October/November.
Anyway, now is a good time to get out of the market. The move down is very strong. Bounces are being sold with vigor.
Your standing on the sidelines writer,
Wink
I'm already out, so I'm not stressing anymore.
But the downtrend on the weekly chart is strong. A close below 1130 will seal the deal for more downside next week. My target on the S&P 500 Index (and it is hard to believe) is about 970. It could happen either by August 30 or by October/November.
Anyway, now is a good time to get out of the market. The move down is very strong. Bounces are being sold with vigor.
Your standing on the sidelines writer,
Wink
Thursday, August 18, 2011
100% in the G Fund - The Bounce Has Died
The bounce has died. I am 100% in the G Fund. We hit the 13-day moving average and then dived down. It is time to go.
The market has changed. Support has been breached @ 1172. Support shouldn't be breached if we are heading up. Also, we are now below the 200-day moving average on a weekly chart. Time to go and step aside. I found myself hoping. Hope is not a plan.
Breaching 1172 support was a trigger. Breaching the 200-day moving average on a weekly chart was a trigger.
October/November should offer better entry opportunities. It's just not a good market environment. Plus, there is less stress to just step aside and watch from the sidelines.
The market has changed. Support has been breached @ 1172. Support shouldn't be breached if we are heading up. Also, we are now below the 200-day moving average on a weekly chart. Time to go and step aside. I found myself hoping. Hope is not a plan.
Breaching 1172 support was a trigger. Breaching the 200-day moving average on a weekly chart was a trigger.
October/November should offer better entry opportunities. It's just not a good market environment. Plus, there is less stress to just step aside and watch from the sidelines.
Friday, August 12, 2011
Let It Be
"When I find myself in times of trouble, Mother Mary comes to me,
Speaking words of wisdom, let it be
And in my hour of darkness, she is standing right in front of me,
Speaking words of wisdom, let it be.
Let it be, let it be, let it be
Whisper words of wisdom, let it be."
---written by Paul McCartney
The close today was higher than the open. The MACD Histogram is rising. The daily stochastics are coming out of oversold conditions. The week closed higher than it opened with a long-tailed doji. Next week is options expiration week. The moving averages are overhead.
Let it be.
Speaking words of wisdom, let it be
And in my hour of darkness, she is standing right in front of me,
Speaking words of wisdom, let it be.
Let it be, let it be, let it be
Whisper words of wisdom, let it be."
---written by Paul McCartney
The close today was higher than the open. The MACD Histogram is rising. The daily stochastics are coming out of oversold conditions. The week closed higher than it opened with a long-tailed doji. Next week is options expiration week. The moving averages are overhead.
Let it be.
Thursday, August 11, 2011
Market Opportunity Moment
We are in an outstanding market moment right now. Remember, buy low sell high.
Well, the market is going higher right now. It passed the Thursday, August 11, 2011 test. So, if you were thinking about going long, now is the time before the market close (1:00 EST). As I mentioned in an earlier post, tomorrow should be a dickens of a rally. Same for Tuesday, August 16.
Why am I confident that the market is going higher?
There are several reasons.
First, the market was gravely oversold. I have not seen the market this oversold since the bottom in March 2009 and October 2008 bottoms. Even if we are bearish long-term, bear markets can offer epic rally opportunities for profit.
Second, the probabilities favored a low today. When the market kept rising into the final hour of the trading day, that was the signal to go long. Yes, it was.
Third, retail people were scared on Monday and Tuesday. They were crazy scared if you looked at the daily Trin readings. I could see the money just coming out of the market. That created a buying opportunity but you had to trust your signals; i.e. that even if the world is falling apart and the nightmare is upon us, the market will return to overhead moving averages. It just does. When you place your faith in overhead moving averages, then you have the stomach to weather the dramatic falls in the market.
Fourth, if you simply followed your emotions and feelings, you would have sold early this week or late last week. I may discount Jim Cramer but he is on the mark when he says that a panic is the worst time, the absolute worst time, to sell. You have to just forget about the market during a crash, think of something else, and know that the overhead moving average will not be denied.
Finally, we are in the last hour of the trading day as I type. Smart money is at work right now!!! Imagine how fearful the shorts are....They know what is coming tomorrow. I know what is coming tomorrow. (Thank you, Stock Trader's Almanac). The market keeps rising and shorts keep covering. I can feel the upward momentum in the market. This upward move is not false like we saw on Tuesday. This move is for real.
In short, opportunity is a powerful force! I believe that. Right here, right now, we are in a moment of historic opportunity. May we all enjoy the upward climb to the heavenly embrace of overhead moving averages. (OMG, the market is now @ 1180 and keeps going up!! These are the times when traders make their year.)
Your too excited market analyst,
Wink
Well, the market is going higher right now. It passed the Thursday, August 11, 2011 test. So, if you were thinking about going long, now is the time before the market close (1:00 EST). As I mentioned in an earlier post, tomorrow should be a dickens of a rally. Same for Tuesday, August 16.
Why am I confident that the market is going higher?
There are several reasons.
First, the market was gravely oversold. I have not seen the market this oversold since the bottom in March 2009 and October 2008 bottoms. Even if we are bearish long-term, bear markets can offer epic rally opportunities for profit.
Second, the probabilities favored a low today. When the market kept rising into the final hour of the trading day, that was the signal to go long. Yes, it was.
Third, retail people were scared on Monday and Tuesday. They were crazy scared if you looked at the daily Trin readings. I could see the money just coming out of the market. That created a buying opportunity but you had to trust your signals; i.e. that even if the world is falling apart and the nightmare is upon us, the market will return to overhead moving averages. It just does. When you place your faith in overhead moving averages, then you have the stomach to weather the dramatic falls in the market.
Fourth, if you simply followed your emotions and feelings, you would have sold early this week or late last week. I may discount Jim Cramer but he is on the mark when he says that a panic is the worst time, the absolute worst time, to sell. You have to just forget about the market during a crash, think of something else, and know that the overhead moving average will not be denied.
Finally, we are in the last hour of the trading day as I type. Smart money is at work right now!!! Imagine how fearful the shorts are....They know what is coming tomorrow. I know what is coming tomorrow. (Thank you, Stock Trader's Almanac). The market keeps rising and shorts keep covering. I can feel the upward momentum in the market. This upward move is not false like we saw on Tuesday. This move is for real.
In short, opportunity is a powerful force! I believe that. Right here, right now, we are in a moment of historic opportunity. May we all enjoy the upward climb to the heavenly embrace of overhead moving averages. (OMG, the market is now @ 1180 and keeps going up!! These are the times when traders make their year.)
Your too excited market analyst,
Wink
Terry's Model Portfolio: Rally Conditions
Trade execution - Buy 5 SPY August 120 calls @ 1.84.
Trade time - 12:07 p.m.
Date: Thursday, August 11, 2011
Rationale: Historic rally underway. Next week is options expiration week. Insider buying at record levels. Market rising from gravely oversold conditions.
Time Target: Tuesday, August 16 or Friday, August 19.
Trade time - 12:07 p.m.
Date: Thursday, August 11, 2011
Rationale: Historic rally underway. Next week is options expiration week. Insider buying at record levels. Market rising from gravely oversold conditions.
Time Target: Tuesday, August 16 or Friday, August 19.
The Market is Going Up: Overhead Resistance Levels
Club members, the market is going up!
Overhead resistance levels are at the following levels:
1231.70 - 13-day moving average (daily)
1285.84 - 50-day moving average (daily)
1285.69 - 200-day moving average (daily)
1290.76 -13-day moving average (weekly)
Today was key and more important then Monday, Tuesday, and Wednesday of this week. We have record levels of inside buying. Check. We have record panic of retail investors as money flowed out of mutual funds at record levels. Check. The resistance level at 1148 this morning was taken out with ease. Check. The rally's momentum is increasing from oversold levels. Check. All 30 members of the Dow Jones blue chip 30 are higher right now. Check. The S&P price has moved up above the oversold level. Check. The RSI is above oversold. Check.
The market is going up, right now, as I type.
We will look to exit at an overhead resistance level, either on Tuesday, August 16 or Friday, August 19.
This is a good time to go long if you are a short-term trader.
The bounce is on.
Your lunchtime writer,
Wink
Overhead resistance levels are at the following levels:
1231.70 - 13-day moving average (daily)
1285.84 - 50-day moving average (daily)
1285.69 - 200-day moving average (daily)
1290.76 -13-day moving average (weekly)
Today was key and more important then Monday, Tuesday, and Wednesday of this week. We have record levels of inside buying. Check. We have record panic of retail investors as money flowed out of mutual funds at record levels. Check. The resistance level at 1148 this morning was taken out with ease. Check. The rally's momentum is increasing from oversold levels. Check. All 30 members of the Dow Jones blue chip 30 are higher right now. Check. The S&P price has moved up above the oversold level. Check. The RSI is above oversold. Check.
The market is going up, right now, as I type.
We will look to exit at an overhead resistance level, either on Tuesday, August 16 or Friday, August 19.
This is a good time to go long if you are a short-term trader.
The bounce is on.
Your lunchtime writer,
Wink
Thursday, August 11 is the Key Date
Today is the day that we watch the market with great focus.
If the market closes @ the high of the day, then the odds favor a rally into the end of next week. We get out when we hit an overhead moving average. The day for the exit could be Tuesday, August 16 or Friday, August 19.
Watch the end of the day.
There is a possible inverted head and shoulders pattern this week on the S&P 500 Index. If confirmed by a close above Monday's top, then we should be looking @ the 1250 level as resistance.
Today is key. The earlier days this week were less important from a bullish perspective. If the market should close at its lows today, then I'm out.
Later.
Your on the road writer,
Wink
If the market closes @ the high of the day, then the odds favor a rally into the end of next week. We get out when we hit an overhead moving average. The day for the exit could be Tuesday, August 16 or Friday, August 19.
Watch the end of the day.
There is a possible inverted head and shoulders pattern this week on the S&P 500 Index. If confirmed by a close above Monday's top, then we should be looking @ the 1250 level as resistance.
Today is key. The earlier days this week were less important from a bullish perspective. If the market should close at its lows today, then I'm out.
Later.
Your on the road writer,
Wink
Monday, August 8, 2011
After the Crash: 13-Day Moving Average
I was traveling on the road all day. When I got to my hotel, I saw that the market had crashed. So, what do we do? Here is what we do:
The rule remains that we get out at the 13-day moving average. That is hard to do as you see the market continuing to drop. But the drop is setting up a rally. Prices will bounce and we will sell out on that bounce.
Q: Well, Wink, what's the timing for this bounce?
A: The market has more to fall. It just does due to the momentum of the down draft. However, the 2011 Stock Trader's Almanac offers hope.
* Based on a study of 21 years of market data, the probabilities favor a market low this Thursday, August 11, 2011. I would ignore the market news until this Thursday. You will just get caught up in the media frenzy. BUT you should pay attention to the market this Thursday, particularly the close. If the market rallies this Thursday and closes up, then so far so good.
* Probabilities favor a market rally on Friday, August 12. This rally should be a dickens of a rally and reward our patience.
*Probabilities favor a second dickens of a market rally on Tuesday, August 16. This is the rally that should take us up to the 13-day moving average or 1275.10 on a daily chart. If all goes according to plan, we get out on that rally. And it will feel very, very good to be out of this market! (Historically, mid-August is stronger than the beginning and end of August.)
*The Almanac has a striking chart on page 104. This chart shows that the Russell 2000 is likely to plunge EVEN MORE between September and November. We should be on the sidelines before that drop. I would not be surprised if the S&P 500 Index hit 970 before year's end. We are in a powerful Bear Market. Prices are trending down. Sooo, we wait patiently for the 13-day moving average to be hit and then we get out.
I apologize that other commitments have taken me away from close scrutiny of the markets. Sometimes, life intrudes.
Your humbled commentator,
Wink
The rule remains that we get out at the 13-day moving average. That is hard to do as you see the market continuing to drop. But the drop is setting up a rally. Prices will bounce and we will sell out on that bounce.
Q: Well, Wink, what's the timing for this bounce?
A: The market has more to fall. It just does due to the momentum of the down draft. However, the 2011 Stock Trader's Almanac offers hope.
* Based on a study of 21 years of market data, the probabilities favor a market low this Thursday, August 11, 2011. I would ignore the market news until this Thursday. You will just get caught up in the media frenzy. BUT you should pay attention to the market this Thursday, particularly the close. If the market rallies this Thursday and closes up, then so far so good.
* Probabilities favor a market rally on Friday, August 12. This rally should be a dickens of a rally and reward our patience.
*Probabilities favor a second dickens of a market rally on Tuesday, August 16. This is the rally that should take us up to the 13-day moving average or 1275.10 on a daily chart. If all goes according to plan, we get out on that rally. And it will feel very, very good to be out of this market! (Historically, mid-August is stronger than the beginning and end of August.)
*The Almanac has a striking chart on page 104. This chart shows that the Russell 2000 is likely to plunge EVEN MORE between September and November. We should be on the sidelines before that drop. I would not be surprised if the S&P 500 Index hit 970 before year's end. We are in a powerful Bear Market. Prices are trending down. Sooo, we wait patiently for the 13-day moving average to be hit and then we get out.
I apologize that other commitments have taken me away from close scrutiny of the markets. Sometimes, life intrudes.
Your humbled commentator,
Wink
Saturday, August 6, 2011
Too, Too Much Fear in the Air!
I have other work projects I am working on. Those projects have consumed most of my waking hours.
Nonetheless, I keep the radio and tv on.
I simply cannot believe my ears! There is so much gloom and doom on the airways. The debt downgrade has really thrown the media into a frenzy. Geez! I'm a bear too but things don't go down in a straight line. There's always a bounce or reaction or correction to the main trend.
I am bearish on the market in the long run. Daniel Arnold was right. (See The Great Bust Ahead) The trend is down. Nonetheless, even if the trend is down, even if we are locked into a broadening top pattern, even if the world is coming to an end, there will be some up movement. It is just a matter of time.
Why am I so confident that we can get out on a bounce? Several reasons.
1. We haven't hit the 200-day moving average yet on a weekly chart. I keep to the left of my eye a weekly chart of the S&P 500 Index dated July 8, 2010. I keep this chart on the file cabinet because it reminds me of the importance of the 200-day moving average (all praise to Sy Harding, by the way). Even in January 2008 when the October 2008 plunge was ahead of us, the market respected the 200-day moving average. The market tipped below the 200-day moving average (panic, panic, panic) and then bounced (short covering rally) up to 1300. The bounce nearly erased a loss of two weeks in two weeks. If it happened before, it can happen before. There is nothing new in the market.
2. The retail public is sooooo nervous right now. I smell the fear in the air (and mind you, I am focused on other things right now). The Saudi Arabian market is down 5% right now ("Oh, dear!") The debt downgrade wasn't priced in. ("Oh, my!") The fears are all around us. I live by Contrary Opinion and the Fear Factor. I saw the daily stochastics on the S&P 500 Index dip into single digits on Thursday. That reminds me of the last week in August 2010. Just that little dip told me that a bounce is coming. Now, it doesn't mean the trend will turn up. Not at all. But that little intelligence will protect me from selling at the bottom. And that's really a good thing in volatile conditions.
3. What is my target? Some financial commentators and analysts shy away from targets. They prefer to rely upon the market's energy. I respect that approach. But I need something tangible to hang my hat on. For me, moving averages clear away the fog of fear in real time. Remember my old colleague Joel? He's looking in the rear view mirror this weekend. I just know it. And he's thinking, this drop will never end! This could go straight down to zero. This could be 1907, 1929, and 1987 all rolled up into one.
And that's why the rear view mirror will fail you. We all have a natural and human tendency to project past market conditions into the future. But markets, even trending markets, cycle. They go up. They do down. And they go up again (if you are a Bull/smile).
Anyway, I felt the need to reassure Club Members on this scary weekend. Embrace the fear. Accept the anxiety. Put your faith in the moving averages over your head. You cannot trust your feelings. They will betray you. You cannot trust the rear view mirror. It will deceive you. Place your faith in a simple idea, that there is nothing new under the sun in the marketplace. Even if we are heading to 950 or 400 on the S&P 500 Index, its not going to happen on Monday morning. Nor is the crash of a lifetime going to happen next week.
Well, that's all I have to say. Sure, we are in a Bear Market, a threatening down trend. But we know that markets bounce. Markets are attracted to moving averages like bears to honey. We will be ok and navigate these shoals well.
Your hearing too much fear on the airways commentator,
Wink
Nonetheless, I keep the radio and tv on.
I simply cannot believe my ears! There is so much gloom and doom on the airways. The debt downgrade has really thrown the media into a frenzy. Geez! I'm a bear too but things don't go down in a straight line. There's always a bounce or reaction or correction to the main trend.
I am bearish on the market in the long run. Daniel Arnold was right. (See The Great Bust Ahead) The trend is down. Nonetheless, even if the trend is down, even if we are locked into a broadening top pattern, even if the world is coming to an end, there will be some up movement. It is just a matter of time.
Why am I so confident that we can get out on a bounce? Several reasons.
1. We haven't hit the 200-day moving average yet on a weekly chart. I keep to the left of my eye a weekly chart of the S&P 500 Index dated July 8, 2010. I keep this chart on the file cabinet because it reminds me of the importance of the 200-day moving average (all praise to Sy Harding, by the way). Even in January 2008 when the October 2008 plunge was ahead of us, the market respected the 200-day moving average. The market tipped below the 200-day moving average (panic, panic, panic) and then bounced (short covering rally) up to 1300. The bounce nearly erased a loss of two weeks in two weeks. If it happened before, it can happen before. There is nothing new in the market.
2. The retail public is sooooo nervous right now. I smell the fear in the air (and mind you, I am focused on other things right now). The Saudi Arabian market is down 5% right now ("Oh, dear!") The debt downgrade wasn't priced in. ("Oh, my!") The fears are all around us. I live by Contrary Opinion and the Fear Factor. I saw the daily stochastics on the S&P 500 Index dip into single digits on Thursday. That reminds me of the last week in August 2010. Just that little dip told me that a bounce is coming. Now, it doesn't mean the trend will turn up. Not at all. But that little intelligence will protect me from selling at the bottom. And that's really a good thing in volatile conditions.
3. What is my target? Some financial commentators and analysts shy away from targets. They prefer to rely upon the market's energy. I respect that approach. But I need something tangible to hang my hat on. For me, moving averages clear away the fog of fear in real time. Remember my old colleague Joel? He's looking in the rear view mirror this weekend. I just know it. And he's thinking, this drop will never end! This could go straight down to zero. This could be 1907, 1929, and 1987 all rolled up into one.
And that's why the rear view mirror will fail you. We all have a natural and human tendency to project past market conditions into the future. But markets, even trending markets, cycle. They go up. They do down. And they go up again (if you are a Bull/smile).
Anyway, I felt the need to reassure Club Members on this scary weekend. Embrace the fear. Accept the anxiety. Put your faith in the moving averages over your head. You cannot trust your feelings. They will betray you. You cannot trust the rear view mirror. It will deceive you. Place your faith in a simple idea, that there is nothing new under the sun in the marketplace. Even if we are heading to 950 or 400 on the S&P 500 Index, its not going to happen on Monday morning. Nor is the crash of a lifetime going to happen next week.
Well, that's all I have to say. Sure, we are in a Bear Market, a threatening down trend. But we know that markets bounce. Markets are attracted to moving averages like bears to honey. We will be ok and navigate these shoals well.
Your hearing too much fear on the airways commentator,
Wink
Friday, August 5, 2011
A Bounce is Coming
Now that the market has closed, we can assess where we are.
The S&P 500 Index opened @ 1200.82. The high of the day was 1218.11. The jobs report was sold and the market plummeted to a low of 1168.09. News of the European Central Bank (ECB) intervention to save Italy caused the market to rally hard up to about 1210. Then, the market fell again below the day's open before closing @ 1200.28. Those are wild swings, a sign that we are witnessing a broadening top pattern. The other sign of a broadening top pattern was the drop to a daily low of 1168.09 which represents the low of a broadening top pattern trend line since February 1, 2011.
Today's low was a buying opportunity. I'm not sure how long or how high the bounce will last but those souls courageous enough to buy @1168.09 have been (and will be) rewarded in the coming days.
Since we are locked in a broadening top pattern, the proper play is to look for a rally or bounce for selling. Moving averages provide great targets for exit points. Even in August of 2008, one could have gotten out of the market around August 11, 2008 at the 13-day moving average on a weekly chart and avoided the September/October 2008 tumble.
Where are the overhead moving averages on a daily chart? The 13-day is at 1290.97. That is an exit target. The 50-day is at 1300.54. That is an exit target. The 200-day at at 1286.45. That is an exit target. No matter how dark the night or bleak the news, the overhead moving averages will be hit. Its just a question of how long and when.
On a weekly chart, we can see the more serious moving averages. The 13-day moving average is @ 1303.81. The 50-day average is at 1261.22. Even if we are in a Bear Market, I would expect 1303.81 to be hit. That's the sign to go.
Anyway, these wild swings are the death knell of a Bull Market, the birth of a Bear Market. In Bull Markets, we aim to buy oversold conditions in an uptrend. In a Bear Market, we aim to get out on overbought conditions. We are no where near overbought conditions on the S&P 500 Index.
For now, let's just wait for our moving average targets to come within range. Then, we fire.
We've had the fall. This morning, I saw the daily stochastics fall into single-digits. A bounce is coming.
Wink
The S&P 500 Index opened @ 1200.82. The high of the day was 1218.11. The jobs report was sold and the market plummeted to a low of 1168.09. News of the European Central Bank (ECB) intervention to save Italy caused the market to rally hard up to about 1210. Then, the market fell again below the day's open before closing @ 1200.28. Those are wild swings, a sign that we are witnessing a broadening top pattern. The other sign of a broadening top pattern was the drop to a daily low of 1168.09 which represents the low of a broadening top pattern trend line since February 1, 2011.
Today's low was a buying opportunity. I'm not sure how long or how high the bounce will last but those souls courageous enough to buy @1168.09 have been (and will be) rewarded in the coming days.
Since we are locked in a broadening top pattern, the proper play is to look for a rally or bounce for selling. Moving averages provide great targets for exit points. Even in August of 2008, one could have gotten out of the market around August 11, 2008 at the 13-day moving average on a weekly chart and avoided the September/October 2008 tumble.
Where are the overhead moving averages on a daily chart? The 13-day is at 1290.97. That is an exit target. The 50-day is at 1300.54. That is an exit target. The 200-day at at 1286.45. That is an exit target. No matter how dark the night or bleak the news, the overhead moving averages will be hit. Its just a question of how long and when.
On a weekly chart, we can see the more serious moving averages. The 13-day moving average is @ 1303.81. The 50-day average is at 1261.22. Even if we are in a Bear Market, I would expect 1303.81 to be hit. That's the sign to go.
Anyway, these wild swings are the death knell of a Bull Market, the birth of a Bear Market. In Bull Markets, we aim to buy oversold conditions in an uptrend. In a Bear Market, we aim to get out on overbought conditions. We are no where near overbought conditions on the S&P 500 Index.
For now, let's just wait for our moving average targets to come within range. Then, we fire.
We've had the fall. This morning, I saw the daily stochastics fall into single-digits. A bounce is coming.
Wink
Thursday, August 4, 2011
Do Not Panic
Today, I received an e-mail from Barbara. She was concerned about the recent market developments. I have several things to say but the most important thing is DO NOT PANIC!
Stay calm. Be at peace. Inhale and exhale.
Perspective is always a good thing.
Now on to the market....
1. Do not panic. When we are most fearful is when we are most moved to sell at the bottom. That is a fool's game. We are in buying times, right now, not selling times. Remember that it is always best to buy when others are in panic. I must confess that the drop since mid-July has taken me by surprise. This surprise leads me to point number 2.
2. Is the market gonna' crash? Yeah, the market is going to crash. Is it going to crash tomorrow? Nope. Is it going to crash next week. Nada. Nyet. No way. The market is now extremely oversold. Even if we are in a severe down trend (which we are), bounces happen. At a minimum, the S&P 500 Index should bounce up to the 200-day moving or 1280ish. That's a big increase from today's closing price of 1200.
3. Why do you feel so anxious about the market, you might ask. Well, we are hard-wired to be social creatures. We take the greatest comfort when we are part of a herd. Well, now the herd is in a state of Def Con 4 panic. You feel the panic and worry. Look at the headlines on the web. Listen to the commentators on NPR and CNN. Panic is in the air. That means these are actually the best times to buy. Remember, Contrary Opinion works. Resist that anxious feeling. Remember that markets do bounce. And they tend to bounce up to moving averages. If you can remember that little gem of market wisdom, you might feel less anxious about tomorrow and next week.
4. The character of the market has changed. These wild swings up and down signal a broadening top pattern. The market is very emotional and out of control (not a comforting thought for pension funds and 401(k) plans). It is what it is. We cannot change the market. We cannot will it to go up. Not going to happen. From what I see, the wisest move is for us to sell out on the bounce. The upcoming bounce should be pretty extreme. Remember that bounce into July 1? I think we are looking at a similar bounce in the near future. We want to sell out of the C Fund on that bounce. In Bear Markets, we sell the rallies. We do so because the past nine days are just an appetizer which brings me to my final point.
5. We want to avoid with all of our effort the drop that follows the next bounce. The next drop will be a sight to behold. I hope to behold that sight from the sidelines. These broadening top patterns are diabolical because trends fizzle out. But these patterns are also a blessing because they alert us to prepare to get out of Dodge on the next bounce.
Sadly, that is the state of affairs this evening. We are waiting for a bounce to sell out. The coming two months will not be fun months in the market.
Your sometimes AWOL commentator,
Wink
Stay calm. Be at peace. Inhale and exhale.
Perspective is always a good thing.
Now on to the market....
1. Do not panic. When we are most fearful is when we are most moved to sell at the bottom. That is a fool's game. We are in buying times, right now, not selling times. Remember that it is always best to buy when others are in panic. I must confess that the drop since mid-July has taken me by surprise. This surprise leads me to point number 2.
2. Is the market gonna' crash? Yeah, the market is going to crash. Is it going to crash tomorrow? Nope. Is it going to crash next week. Nada. Nyet. No way. The market is now extremely oversold. Even if we are in a severe down trend (which we are), bounces happen. At a minimum, the S&P 500 Index should bounce up to the 200-day moving or 1280ish. That's a big increase from today's closing price of 1200.
3. Why do you feel so anxious about the market, you might ask. Well, we are hard-wired to be social creatures. We take the greatest comfort when we are part of a herd. Well, now the herd is in a state of Def Con 4 panic. You feel the panic and worry. Look at the headlines on the web. Listen to the commentators on NPR and CNN. Panic is in the air. That means these are actually the best times to buy. Remember, Contrary Opinion works. Resist that anxious feeling. Remember that markets do bounce. And they tend to bounce up to moving averages. If you can remember that little gem of market wisdom, you might feel less anxious about tomorrow and next week.
4. The character of the market has changed. These wild swings up and down signal a broadening top pattern. The market is very emotional and out of control (not a comforting thought for pension funds and 401(k) plans). It is what it is. We cannot change the market. We cannot will it to go up. Not going to happen. From what I see, the wisest move is for us to sell out on the bounce. The upcoming bounce should be pretty extreme. Remember that bounce into July 1? I think we are looking at a similar bounce in the near future. We want to sell out of the C Fund on that bounce. In Bear Markets, we sell the rallies. We do so because the past nine days are just an appetizer which brings me to my final point.
5. We want to avoid with all of our effort the drop that follows the next bounce. The next drop will be a sight to behold. I hope to behold that sight from the sidelines. These broadening top patterns are diabolical because trends fizzle out. But these patterns are also a blessing because they alert us to prepare to get out of Dodge on the next bounce.
Sadly, that is the state of affairs this evening. We are waiting for a bounce to sell out. The coming two months will not be fun months in the market.
Your sometimes AWOL commentator,
Wink
Thursday, July 21, 2011
Up We Go into August 1
Only one word need be said: Up!
Terry's Model Portfolio: The August 135 SPY calls closed @ 2.22.
Terry's Model Portfolio: The August 135 SPY calls closed @ 2.22.
Wednesday, July 20, 2011
Market Conditions Today
Today was a high level consolidation day. The trend is up, so we are experiencing a pause right before the next upswing. The August 135 SPY calls in Terry's Model Portfolio closed @ 1.35.
Tuesday, July 19, 2011
Up We Go into August 1
The market is going up. We hit a low yesterday on the S&P 500 Index @ 1295. Yesterday was classic oversold conditions in an uptrend. Up we go. The trend is up.
Terry's Model Portfolio: July 19, 2011
Trade Execution: Buy 47 August 135 SPY Calls @ 1.05
Execution Time: 6:37 a.m. (PST)
Reason: Bullish conditions on daily stochastic. Falling Wedge Trend Line breached.
Execution Time: 6:37 a.m. (PST)
Reason: Bullish conditions on daily stochastic. Falling Wedge Trend Line breached.
Saturday, July 16, 2011
A Bottom Next Week: Up Trend Continues
As a rule of thumb, it is good to buy oversold conditions in an uptrend. Oversold conditions can be defined in one of several ways. One possibility is a daily stochastic reading below 20. We are there right now on the clearstation.com 9-month chart of the S&P 500 Index. Things are bullish right now, even though the news seems bleak. Another possibility is a dip below the 50-day and 13-day moving average in an uptrend. We dipped below both respective moving averages on Friday. Finally, there is a time element. We are due for a low this coming week.
Taken together, these factors suggest we are heading higher into August 1.
Interesting.
Have a good weekend!
Wink
Taken together, these factors suggest we are heading higher into August 1.
Interesting.
Have a good weekend!
Wink
Friday, July 15, 2011
Market Conditions for the Week
The market has spent this week correcting. We are very close to a low before the next rally. So, be on the lookout for the market to begin a rally next week. It is strange but the market remains in an uptrend. So, market bottoms are good opportunities to go long.
Tuesday, July 12, 2011
Market Conditions: Correction Within An Uptrend
The market appears to be correcting within an uptrend. I would give this correction perhaps 3-5 more days. Then, we should see higher prices and a price higher than the May 1 high of 1370.
Friday, July 8, 2011
Terry's Model Portfolio: Day 9
Trade execution: Sell all July 137 calls @ 0.15
Time: 6:31 p.m., Friday, July 8, 2011
Portfolio balance: $8,239.00
Market assessment: Market totally collapsed due to dreadful jobs report. Busted chart pattern negated inside day. Not encouraging.
More details later today.
Time: 6:31 p.m., Friday, July 8, 2011
Portfolio balance: $8,239.00
Market assessment: Market totally collapsed due to dreadful jobs report. Busted chart pattern negated inside day. Not encouraging.
More details later today.
Thursday, July 7, 2011
Terry's Model Portfolio: Day 8
Last Trade: Buy 468 July 137 SPY Calls @ 0.32. 6:35 a.m. (PST), Thursday, July 7, 2011.
Rate of Return Today: 53.12%
Profit Today (Unrealized):$7,968.75
Portfolio Balance: $24,317.75
Performance Year to Date:143.17%
Objective: 100% gain by November 21, 2011
Time: 1:00 p.m. (PST), Thursday, July 7, 2011
Market Assessment: Breach of July 1, 2011 daily high has produced explosive move higher. Uptrend is strong, particularly
the MACD Histogram. Probabilities favor a higher Friday. Natural resistance lies @ 1368 on the S&P 500
Index. High and Tight Bull Flag pattern. No reason to sell calls in a rising market.
Twyman Asset Management
July 7, 2011
Dear Terry:
We have reached our goal of a 100% gain by November 21, 2011.
I am not celebrating because the trade remains open. The profit is unrealized. The July 137 SPY calls closed @ 0.49 today. As a rule, we cut our losses short. We let our profits ride. The market action since July 1, 2011 has been extremely bullish. Rather than a price target, my time target would be to close out the trade tomorrow @ noon. I will closely monitor market conditions and, should an earlier close out of the trade be warranted, I will do so.
We had a disappointing trade on July 1 but today's trade has more than made up for the difference. If we keep our losses to a bare minimum, we will have the resources to exploit opportunities like today.
Warm regards,
Wink
Rate of Return Today: 53.12%
Profit Today (Unrealized):$7,968.75
Portfolio Balance: $24,317.75
Performance Year to Date:143.17%
Objective: 100% gain by November 21, 2011
Time: 1:00 p.m. (PST), Thursday, July 7, 2011
Market Assessment: Breach of July 1, 2011 daily high has produced explosive move higher. Uptrend is strong, particularly
the MACD Histogram. Probabilities favor a higher Friday. Natural resistance lies @ 1368 on the S&P 500
Index. High and Tight Bull Flag pattern. No reason to sell calls in a rising market.
Twyman Asset Management
July 7, 2011
Dear Terry:
We have reached our goal of a 100% gain by November 21, 2011.
I am not celebrating because the trade remains open. The profit is unrealized. The July 137 SPY calls closed @ 0.49 today. As a rule, we cut our losses short. We let our profits ride. The market action since July 1, 2011 has been extremely bullish. Rather than a price target, my time target would be to close out the trade tomorrow @ noon. I will closely monitor market conditions and, should an earlier close out of the trade be warranted, I will do so.
We had a disappointing trade on July 1 but today's trade has more than made up for the difference. If we keep our losses to a bare minimum, we will have the resources to exploit opportunities like today.
Warm regards,
Wink
Terry's Model Portfolio: Day 8
Trade execution: Buy 468 July 137 SPY calls @ 0.32.
Time: 6:35 a.m.
Rationale: Inside day high breached. Technicals suggest big up move ahead. Cup and handle breakout. Resistance @ 1345 breached. Probabilities favor higher prices into middle of July.
Market conditions: Strong uptrend. Stochastics approaching embedded status. Target @ 1420. High and Tight Bull Flag playing itself out.
Time: 6:35 a.m.
Rationale: Inside day high breached. Technicals suggest big up move ahead. Cup and handle breakout. Resistance @ 1345 breached. Probabilities favor higher prices into middle of July.
Market conditions: Strong uptrend. Stochastics approaching embedded status. Target @ 1420. High and Tight Bull Flag playing itself out.
100% into the C Fund
I am 100% in the C Fund. The market is going up. We had two inside days this Wednesday and Thursday. The daily high of July 1 will be breached this morning. So, the market is going up for now. The trend is now up. Follow the trend or be left behind.
Tuesday, July 5, 2011
Terry's Model Portfolio: Day 7
Trade execution: Sold all July 125 puts @ 0.10.
Time: 10:02 a.m. (EST)
Rationale: Anticipated a July 5 post-holiday drop in the market. Monitored the first 15 minutes for trading range. Trading range was not broken to the down side after 30 minutes, so decided to close trade, preserve capital, and wait for better trade opportunity.
Rate of Return Today: - 17%
Loss on Trade Realized: $3,230
Portfolio Balance: $16,349
Performance Year to Date: 63.49%
Objective: 100% by November 21, 2011
Time: 10:02 a.m. (EST)
Rationale: Anticipated a July 5 post-holiday drop in the market. Monitored the first 15 minutes for trading range. Trading range was not broken to the down side after 30 minutes, so decided to close trade, preserve capital, and wait for better trade opportunity.
Rate of Return Today: - 17%
Loss on Trade Realized: $3,230
Portfolio Balance: $16,349
Performance Year to Date: 63.49%
Objective: 100% by November 21, 2011
Monday, July 4, 2011
The G Fund As A Safe Haven
Happy July 4th!
The question for the day is whether the G Fund remains a safe haven in the days ahead. Obviously, I am well versed in the ups and downs of the C Fund (S&P 500 Index). But might the G Fund become less of a safe haven should U.S. government debt be downgraded? I want to explore this issue in coming posts.
To start the conversation, I am attaching this interesting essay from Money Morning:
"Since last November, the U.S. Federal Reserve has been buying U.S. Treasury bonds at a rate of about $75 billion a month. That's part of Fed Chairman Ben S. Bernanke's "QE2" program, under which the central bank was to buy $600 billion of the government bonds.
But QE2 ended yesterday (Thursday), meaning the Fed will no longer be a big buyer of Treasury bonds.
So starting today (Friday), the U.S. Treasury needs to sell twice as many Treasury bonds to end investors as it had been.
But the problem is, who's going to buy them?
Not China, which is diversifying its trillions in assets to get as far away from the U.S. dollar as fast as it can.
Not Japan, which is trying to rebound from its March 11 earthquake, tsunami and nuclear disaster - and is focusing all its spending on reconstruction.
And - as we've seen -neither is the Bernanke-led Fed.
I'm telling you right now: We are headed for an epic bond market crash. If you don't know about it, or don't care, you could get clobbered.
But if you do know, and are willing to take steps now, you can easily protect yourself - and even turn a nice profit in the process.
Let me explain ...
A Timetable for the Coming Crash
I'm an old bond-market hand myself - my experience dates back to my days at the British merchant bank Hill Samuel in the 1970s - so I see all the signs of what's to come.
Having the two biggest external customers of U.S. debt largely out of the market is a huge problem. Unfortunately, those aren't the only challenges the market faces. The challenges just get bigger from there - which is why I'm predicting a bond market crash.
Steadily rising inflation is one of the challenges. Inflation is a huge threat to the bond markets, and is almost certain to create a whipping turbulence that will ultimately infect the stocks markets, too.
Many pundits will tell you that if investor demand for bonds declines, and investor fear of inflation increases, bond-market yields could increase in an orderly fashion.
But I can tell you that the bond markets don't work like that. Price declines affect existing bonds as well as new ones, so the value of every investor's bond holdings declines. And with many of those investors heavily leveraged - especially at the major international banks - the sight of year-end bonuses disappearing down the Swanee River as bonds are "marked to market" will cause a panic. That's especially true when end-of-quarter or end-of-year reporting periods loom.
That's why we can expect a bond market crash at some point. If you ask me to make a prediction, I'd say that September or December were the most likely months for such a crash.
A Boxed-In Bernanke
One sad - even scary - fact about what I'm predicting is that Fed Chairman Bernanke won't be able to do much about it ... though he'll certain try.
Consumer price inflation is now running at 3.6% year-on-year while producer price inflation is running at 7.2%. In that kind of environment, a 10-year Treasury bond yielding 3% is no longer economically attractive. Since monetary conditions worldwide remain very loose, inflation in the U.S. and worldwide will trend up, not down.
The bottom line: At some point, the "value proposition" offered to Treasury bond investors will become impossibly unattractive. When that happens, expect a rush to the exits.
If Bernanke attempts "QE3" - a third round of "quantitative easing" - he will have a problem. If other investors head for the exits, Bernanke may find that the U.S. central bank is as jammed up as the European Central Bank (ECB) currently is with Greek debt: Both will end up as the suckers that are taking all the rubbish off of everyone else's books.
There's a limit to how much Treasury paper even Bernanke thinks he can buy. And if everyone else is selling, that "limit" won't be high enough to save the bond market.
With Bernanke buying at a rapid rate, the inflationary forces will be even stronger, so every Bureau of Labor Statistics report on monthly price indices will be marked by a massive swoon in the Treasury bond market.
Eventually, there has to be a new head of the Fed - a Paul A. Volcker 2.0 who is truly committed to conquering inflation. Alas, it won't be Volcker himself since, at 84, he is probably too old.
But it might be John B. Taylor, who invented the "Taylor Rule" for Fed policy. The Taylor Rule is actually a pretty soggy guide on running a monetary system. But it has been flashing bright red signals about the current Fed's monetary policy since 2008.
However, since a Fed chairman who is actually serious about fighting inflation would be a huge burden for current U.S. President Barack Obama to bear - and could badly hamper his chances for re-election, any such appointment is unlikely before November 2012.
How to Profit From the Bond Market Crash
Given that reality, it's likely that Bernanke will attack any bond market crash that occurs ahead of the presidential election just by printing more money; there won't be any serious attempt to rectify the fundamental problem, meaning inflation will continue to accelerate.
For you as an investor, this insight leads to two conclusions that you can put to work to your advantage. The scenario I've outlined for you will be:
Very good for gold and other hard assets. Challenging for Treasury bonds; prices will remain weak no matter how vigorously Bernanke attempts to support them.
So what should you do with this knowledge? I have three recommendations.
First and foremost, if Bernanke were not around, I would expect gold prices to fall following a bond market crash. But since he's still at the helm at the Fed, I expect him to do "QE3" in the event of a crash. And that means gold - not Treasury bonds - would become an investor "safe haven."
You can expect gold prices to zoom up, peaking at a much higher level around the time Bernanke is finally replaced. Silver will also follow this trend. So make sure you have substantial holdings of either physical gold and silver or the exchange-traded funds (ETFs) SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV).
Second, if you want to profit more directly from the collapse in Treasury bond prices, you could buy a "put" option on Treasury bond futures (TLT) on the Chicago Board Options Exchange (CBOE). The futures were recently trading around 94, and the January 2013 80 put (CBOE: TLT1319M80-E) was priced around $4.50, which seems an attractive combination of low price and high leverage.
Finally, if you don't already own a house, you should buy one - and do so with a fixed-rate mortgage. A U.S. Treasury bond market crash will send mortgage rates through the roof, so today's rates of about 4.8% will represent very cheap money, indeed. Even if house prices decline by 10%, a 2% rise in mortgage rates would increase the monthly payment (even accounting for a 10% smaller mortgage), by a net 11.8% (the payment on a $100,000 mortgage at 4.8% is $524.67; that on a $90,000 mortgage at 6.8% is $586.73).
Needless to say, the same benefits apply to rental properties financed by fixed-rate mortgages: With lower home ownership and rising inflation, rents are tending to rise significantly.
There's a storm coming in the Treasury bond market. But by recognizing its approach, we can turn the bond market crash to our advantage."
Q: What do you think? Does the argument make sense? Are TSP investors boxed in with no viable out, should bond prices collapse? Its a difficult question but a good one since cash may be less and less of a safe haven over time. Personally, I believe we need more diverse options in the TSP suitable for the times. There should be a precious metals fund. Why there isn't a precious metals fund is beyond me. There should be a foreign currencies fund. I know we are federal employees but, if the U.S. dollar is debased, then why should we be denied the option of sweeping our retirement funds into the Swiss Franc or the Australian Dollar or the Norweigan currency for protection? I'm not sentimental about these questions. I'm realistic.
What choice is really there if every choice given is depreciating and every choice denied is appreciating?
Offer some thoughts and we can get the conversation going....
The question for the day is whether the G Fund remains a safe haven in the days ahead. Obviously, I am well versed in the ups and downs of the C Fund (S&P 500 Index). But might the G Fund become less of a safe haven should U.S. government debt be downgraded? I want to explore this issue in coming posts.
To start the conversation, I am attaching this interesting essay from Money Morning:
"Since last November, the U.S. Federal Reserve has been buying U.S. Treasury bonds at a rate of about $75 billion a month. That's part of Fed Chairman Ben S. Bernanke's "QE2" program, under which the central bank was to buy $600 billion of the government bonds.
But QE2 ended yesterday (Thursday), meaning the Fed will no longer be a big buyer of Treasury bonds.
So starting today (Friday), the U.S. Treasury needs to sell twice as many Treasury bonds to end investors as it had been.
But the problem is, who's going to buy them?
Not China, which is diversifying its trillions in assets to get as far away from the U.S. dollar as fast as it can.
Not Japan, which is trying to rebound from its March 11 earthquake, tsunami and nuclear disaster - and is focusing all its spending on reconstruction.
And - as we've seen -neither is the Bernanke-led Fed.
I'm telling you right now: We are headed for an epic bond market crash. If you don't know about it, or don't care, you could get clobbered.
But if you do know, and are willing to take steps now, you can easily protect yourself - and even turn a nice profit in the process.
Let me explain ...
A Timetable for the Coming Crash
I'm an old bond-market hand myself - my experience dates back to my days at the British merchant bank Hill Samuel in the 1970s - so I see all the signs of what's to come.
Having the two biggest external customers of U.S. debt largely out of the market is a huge problem. Unfortunately, those aren't the only challenges the market faces. The challenges just get bigger from there - which is why I'm predicting a bond market crash.
Steadily rising inflation is one of the challenges. Inflation is a huge threat to the bond markets, and is almost certain to create a whipping turbulence that will ultimately infect the stocks markets, too.
Many pundits will tell you that if investor demand for bonds declines, and investor fear of inflation increases, bond-market yields could increase in an orderly fashion.
But I can tell you that the bond markets don't work like that. Price declines affect existing bonds as well as new ones, so the value of every investor's bond holdings declines. And with many of those investors heavily leveraged - especially at the major international banks - the sight of year-end bonuses disappearing down the Swanee River as bonds are "marked to market" will cause a panic. That's especially true when end-of-quarter or end-of-year reporting periods loom.
That's why we can expect a bond market crash at some point. If you ask me to make a prediction, I'd say that September or December were the most likely months for such a crash.
A Boxed-In Bernanke
One sad - even scary - fact about what I'm predicting is that Fed Chairman Bernanke won't be able to do much about it ... though he'll certain try.
Consumer price inflation is now running at 3.6% year-on-year while producer price inflation is running at 7.2%. In that kind of environment, a 10-year Treasury bond yielding 3% is no longer economically attractive. Since monetary conditions worldwide remain very loose, inflation in the U.S. and worldwide will trend up, not down.
The bottom line: At some point, the "value proposition" offered to Treasury bond investors will become impossibly unattractive. When that happens, expect a rush to the exits.
If Bernanke attempts "QE3" - a third round of "quantitative easing" - he will have a problem. If other investors head for the exits, Bernanke may find that the U.S. central bank is as jammed up as the European Central Bank (ECB) currently is with Greek debt: Both will end up as the suckers that are taking all the rubbish off of everyone else's books.
There's a limit to how much Treasury paper even Bernanke thinks he can buy. And if everyone else is selling, that "limit" won't be high enough to save the bond market.
With Bernanke buying at a rapid rate, the inflationary forces will be even stronger, so every Bureau of Labor Statistics report on monthly price indices will be marked by a massive swoon in the Treasury bond market.
Eventually, there has to be a new head of the Fed - a Paul A. Volcker 2.0 who is truly committed to conquering inflation. Alas, it won't be Volcker himself since, at 84, he is probably too old.
But it might be John B. Taylor, who invented the "Taylor Rule" for Fed policy. The Taylor Rule is actually a pretty soggy guide on running a monetary system. But it has been flashing bright red signals about the current Fed's monetary policy since 2008.
However, since a Fed chairman who is actually serious about fighting inflation would be a huge burden for current U.S. President Barack Obama to bear - and could badly hamper his chances for re-election, any such appointment is unlikely before November 2012.
How to Profit From the Bond Market Crash
Given that reality, it's likely that Bernanke will attack any bond market crash that occurs ahead of the presidential election just by printing more money; there won't be any serious attempt to rectify the fundamental problem, meaning inflation will continue to accelerate.
For you as an investor, this insight leads to two conclusions that you can put to work to your advantage. The scenario I've outlined for you will be:
Very good for gold and other hard assets. Challenging for Treasury bonds; prices will remain weak no matter how vigorously Bernanke attempts to support them.
So what should you do with this knowledge? I have three recommendations.
First and foremost, if Bernanke were not around, I would expect gold prices to fall following a bond market crash. But since he's still at the helm at the Fed, I expect him to do "QE3" in the event of a crash. And that means gold - not Treasury bonds - would become an investor "safe haven."
You can expect gold prices to zoom up, peaking at a much higher level around the time Bernanke is finally replaced. Silver will also follow this trend. So make sure you have substantial holdings of either physical gold and silver or the exchange-traded funds (ETFs) SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV).
Second, if you want to profit more directly from the collapse in Treasury bond prices, you could buy a "put" option on Treasury bond futures (TLT) on the Chicago Board Options Exchange (CBOE). The futures were recently trading around 94, and the January 2013 80 put (CBOE: TLT1319M80-E) was priced around $4.50, which seems an attractive combination of low price and high leverage.
Finally, if you don't already own a house, you should buy one - and do so with a fixed-rate mortgage. A U.S. Treasury bond market crash will send mortgage rates through the roof, so today's rates of about 4.8% will represent very cheap money, indeed. Even if house prices decline by 10%, a 2% rise in mortgage rates would increase the monthly payment (even accounting for a 10% smaller mortgage), by a net 11.8% (the payment on a $100,000 mortgage at 4.8% is $524.67; that on a $90,000 mortgage at 6.8% is $586.73).
Needless to say, the same benefits apply to rental properties financed by fixed-rate mortgages: With lower home ownership and rising inflation, rents are tending to rise significantly.
There's a storm coming in the Treasury bond market. But by recognizing its approach, we can turn the bond market crash to our advantage."
Q: What do you think? Does the argument make sense? Are TSP investors boxed in with no viable out, should bond prices collapse? Its a difficult question but a good one since cash may be less and less of a safe haven over time. Personally, I believe we need more diverse options in the TSP suitable for the times. There should be a precious metals fund. Why there isn't a precious metals fund is beyond me. There should be a foreign currencies fund. I know we are federal employees but, if the U.S. dollar is debased, then why should we be denied the option of sweeping our retirement funds into the Swiss Franc or the Australian Dollar or the Norweigan currency for protection? I'm not sentimental about these questions. I'm realistic.
What choice is really there if every choice given is depreciating and every choice denied is appreciating?
Offer some thoughts and we can get the conversation going....
Sunday, July 3, 2011
A Playbill: Historic Rates of Performance
After a little research, I have put together a preliminary list of the greatest rates of performance within a 12-month period of time. I already hear the naysayers (What about this trade or that campaign?). This listing is based on a light review of my trading and investment library. So, you should not assume the list is 100% complete or accurate. Instead, think of the listing as a playbill for keeping Terry's Portfolio growth in perspective over the coming months.
Selected 12-Month Epic Rates of Return:
1. 1973 - 433% - Larry Williams' 1973 Commodities campaign
2. 2007 - 400% - Michael Burry's 2007 Mortgage subprime derivatives
3. 2008 - 16,324% -Unidentified currency trader reported in Super Trader by Van K. Tharp, pages 202-204. The results were unaudited and were only from July 28 through October 12, 2008. (The trader probably died of a heart attack!/smile)
4. 1987 - 67,000% - Nassim Taleb's front month long position in eurodollar options on October 20, 1987
5. 1972 - 3,428% - Michael Marcus' commodities trade in plywood/lumber
6. 1973 - 266% - Michael Marcus commodities
7. 1977 - 1,333% - Bruce Kovner futures contracts
8. 1980s - 100%+ - Paul Tudor Jones (five consecutive, triple-digit return years)
9. 1965 - 100% - Gary Bielfeldt soybeans contracts
10.1962-1963 - 4,000% - William O'Neil pyramids profits in three exceptional back-to-back trades--short Korvette, long Chrysler, and long Syntex
Blogger's note-To repeat myself, I know I have omitted many other epic trades. For example, I did not calculate rates of return on a 12-month time frame for Nicholas Darvas or Jesse Livermore or John Paulson or George Soros or
Marty Schwartz. So, view these examples as an illustration of A+ performance over the years.
Your faithful newsletter writer,
Wink
Selected 12-Month Epic Rates of Return:
1. 1973 - 433% - Larry Williams' 1973 Commodities campaign
2. 2007 - 400% - Michael Burry's 2007 Mortgage subprime derivatives
3. 2008 - 16,324% -Unidentified currency trader reported in Super Trader by Van K. Tharp, pages 202-204. The results were unaudited and were only from July 28 through October 12, 2008. (The trader probably died of a heart attack!/smile)
4. 1987 - 67,000% - Nassim Taleb's front month long position in eurodollar options on October 20, 1987
5. 1972 - 3,428% - Michael Marcus' commodities trade in plywood/lumber
6. 1973 - 266% - Michael Marcus commodities
7. 1977 - 1,333% - Bruce Kovner futures contracts
8. 1980s - 100%+ - Paul Tudor Jones (five consecutive, triple-digit return years)
9. 1965 - 100% - Gary Bielfeldt soybeans contracts
10.1962-1963 - 4,000% - William O'Neil pyramids profits in three exceptional back-to-back trades--short Korvette, long Chrysler, and long Syntex
Blogger's note-To repeat myself, I know I have omitted many other epic trades. For example, I did not calculate rates of return on a 12-month time frame for Nicholas Darvas or Jesse Livermore or John Paulson or George Soros or
Marty Schwartz. So, view these examples as an illustration of A+ performance over the years.
Your faithful newsletter writer,
Wink
Saturday, July 2, 2011
Basic Concepts from Jim Rogers
Jim Rogers is a famous investor profiled in Market Wizards. Born in Baltimore, Maryland, Rogers grew up in Alabama and came of age at Yale and Oxford. While at Oxford, he began investing and became quite adept at spotting trends. He co-founded the Quantum Fund with George Soros in 1973. Between 1973 to 1983, the Quantum Fund gained 4200% while the S&P gained 47%.
The following is a listing of basic concepts from Rogers:
1. Buy value. If you buy value, you will not lose much even if your timing is wrong.
2. Wait for a catalyst. Bottoming markets can go nowhere for very long periods of time. To avoid tying up your money in a dead market, wait until there is a catalyst to change the market direction.
3. Sell hysteria. Wait for hysteria, examine to see whether the market is wrong, go against the hysteria if fundamentally validated, be sure you are right, and then hold on tight.
4. Be very selective. Wait for the right trade to come along. Have the patience to sit on your money until the high probability trade sets up exactly right.
5. Be flexible. Biases against certain markets or types of trades limit your field of opportunity. A trader who says, "I will never go short," has a distinct disadvantage compared to the trader who is willing to go short as well as long.
6. Never follow conventional wisdom. Keep this principle in mind and you will be less likely to buy stocks after the Dow has already moved from 1,000 to 2,600 and everyone is convinced that there is a shortage of stocks.
7. Know when to hold and when to liquidate a losing position. "The first loss is the best loss."
Have a great holiday weekend!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The following is a listing of basic concepts from Rogers:
1. Buy value. If you buy value, you will not lose much even if your timing is wrong.
2. Wait for a catalyst. Bottoming markets can go nowhere for very long periods of time. To avoid tying up your money in a dead market, wait until there is a catalyst to change the market direction.
3. Sell hysteria. Wait for hysteria, examine to see whether the market is wrong, go against the hysteria if fundamentally validated, be sure you are right, and then hold on tight.
4. Be very selective. Wait for the right trade to come along. Have the patience to sit on your money until the high probability trade sets up exactly right.
5. Be flexible. Biases against certain markets or types of trades limit your field of opportunity. A trader who says, "I will never go short," has a distinct disadvantage compared to the trader who is willing to go short as well as long.
6. Never follow conventional wisdom. Keep this principle in mind and you will be less likely to buy stocks after the Dow has already moved from 1,000 to 2,600 and everyone is convinced that there is a shortage of stocks.
7. Know when to hold and when to liquidate a losing position. "The first loss is the best loss."
Have a great holiday weekend!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, July 1, 2011
Terry's Model Portfolio: Day 6
Short.
Trade execution: Buy 1583 July 125 SPY puts @ 0.12.
Time: 12:47 p.m., Friday, July 1, 2011.
Rationale: Parabolic market @ 1340 resistance. Long holiday weekend. Probabilities favor some pullback.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Trade execution: Buy 1583 July 125 SPY puts @ 0.12.
Time: 12:47 p.m., Friday, July 1, 2011.
Rationale: Parabolic market @ 1340 resistance. Long holiday weekend. Probabilities favor some pullback.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Thursday, June 30, 2011
A Great Week: 1280 to 1320
Dear Club Members:
We had a great week this week!
We entered the C Fund at 1280. We exited the C Fund today at 1320. Even I was not expecting 1320 as a closing price. Everyone should feel pleased. A special shout out to Terry who entered the C Fund on a down day (Friday). Terry's entry took courage. He is to be commended.
Terry's Model Portfolio is up 95.79% for the week. We surpassed the 2010 performance record for Bridgewater Associates. Our goal remains 100% by November 21, 2011. I am waiting for the right opportunity, clear overbought conditions in a down trend. We are also approaching a long holiday weekend which may provide opportunities as well.
The take away point is that we saw opportunity this week. We executed. We closed out the trade and preserved our profits. It is likely that tomorrow will show a higher high but that higher high will not be sustainable. Watch the closing price tomorrow. Is the closing price lower than the opening price? Is the closing price higher than the opening price? Is tomorrow an Inside Day? These traits will signal that the time is nigh to short this overbought market in a down trend.
A toast to everyone on a good week,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
We had a great week this week!
We entered the C Fund at 1280. We exited the C Fund today at 1320. Even I was not expecting 1320 as a closing price. Everyone should feel pleased. A special shout out to Terry who entered the C Fund on a down day (Friday). Terry's entry took courage. He is to be commended.
Terry's Model Portfolio is up 95.79% for the week. We surpassed the 2010 performance record for Bridgewater Associates. Our goal remains 100% by November 21, 2011. I am waiting for the right opportunity, clear overbought conditions in a down trend. We are also approaching a long holiday weekend which may provide opportunities as well.
The take away point is that we saw opportunity this week. We executed. We closed out the trade and preserved our profits. It is likely that tomorrow will show a higher high but that higher high will not be sustainable. Watch the closing price tomorrow. Is the closing price lower than the opening price? Is the closing price higher than the opening price? Is tomorrow an Inside Day? These traits will signal that the time is nigh to short this overbought market in a down trend.
A toast to everyone on a good week,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Move 100% into the G Fund
I am 100% in the G Fund.
There is significant risk of a drop ahead in the S&P 500 Index. From a technical basis, there is astounding triple negative divergence between price action and the MACD Histogram. Resistance on a closing basis sits @ 1316. Gann resistance lies @ 1313. Elliott Wave resistance lies @ 1311. Resistance on the daily 50-day moving average sits @ 1316. Resistance on the weekly 13-day moving average sits at 1316. The dominant trend is down and yet the market is approaching an overbought condition on low volume. These factors suggest an excellent shorting opportunity. Since our objective is to remain in the C Fund while the market is going up, the future seems inconsistent with our objective.
On the fundamental level, there are ample reasons for the market to sell off. There is the continuing risk of a Greek default. Who knows the connection between a Greek default and the threat of contagion in French and British banks? We have the continuing risk of bad news on the federal debt ceiling vote. There is too much sovereign debt out there in Europe. And, most importantly, investors and traders sell bad news in a Bear Market.
For these reasons, it is prudent to leave the C Fund at this time.
Your early morning strategist,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
There is significant risk of a drop ahead in the S&P 500 Index. From a technical basis, there is astounding triple negative divergence between price action and the MACD Histogram. Resistance on a closing basis sits @ 1316. Gann resistance lies @ 1313. Elliott Wave resistance lies @ 1311. Resistance on the daily 50-day moving average sits @ 1316. Resistance on the weekly 13-day moving average sits at 1316. The dominant trend is down and yet the market is approaching an overbought condition on low volume. These factors suggest an excellent shorting opportunity. Since our objective is to remain in the C Fund while the market is going up, the future seems inconsistent with our objective.
On the fundamental level, there are ample reasons for the market to sell off. There is the continuing risk of a Greek default. Who knows the connection between a Greek default and the threat of contagion in French and British banks? We have the continuing risk of bad news on the federal debt ceiling vote. There is too much sovereign debt out there in Europe. And, most importantly, investors and traders sell bad news in a Bear Market.
For these reasons, it is prudent to leave the C Fund at this time.
Your early morning strategist,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, June 29, 2011
Time to Go
Dear Club Members:
Tonight, it is time to leave the C Fund. Barbara will be receiving her e-mail shortly.
We have had a good ride this week. We took advantage of the short up trend and oversold conditions. Kudos to Terry for moving into the C Fund on Friday. He was right on the mark. He has also taken plans to leave the C Fund which I applaud wholeheartedly.
Q: What are my reasons for leaving the C Fund?
I will list five reasons but I could list ten reasons just as easily:
1. The momentum is slowing down. Trader Mark Weinstein famously would look for a slow down in momentum and then go the other way. The strategy works because markets only go up on momentum. If you say good-bye to up momentum, then a stall is sure to follow. Then, its down you go.
2. The downward sloping 50-day moving average on a daily chart hangs over our heads at 1316. I know I sound like a stuck record but I remember the Flash Crash in 2010 and the Crash in 2008. Better safe than sorry. Both were heralded by resistance at the 50-day moving average. There are pros out there selling into this rally. They are banking on the 50-day moving average as a brick wall. I can feel it. So can Terry.
3. On a weekly chart, 1316 is resistance on the 13-day moving average. The market is not going higher than 1316, particularly since we are in a dominant downtrend. Yet, another reason to leave the C Fund.
4. I saw dangerous triple negative divergence between the MACD Histogram and the price action today. The market is rising on fumes. Triple negative divergences can lead to dramatic drops in price.
5. If you accept the Elliott Wave take on this market since May 1, 2011, then we are approaching the end of this Wave 4 (corrective wave c). What should follow is a Wave 5 down comparable to Wave 1 down (May 1 to May 23) and Wave 3 down (June 1 to June 16).
It is time to go.
Your resolute newsletter writer,
Wink
Inspirational Quote: "Only when nearly everything lines up right and he feels the timing is virtually perfect does he put on a trade. He passes up many trades that he believes have a high probability of working, but for which he lacks the same degree of near absolute confidence." Mark Weinstein in Market Wizards, page 337.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tonight, it is time to leave the C Fund. Barbara will be receiving her e-mail shortly.
We have had a good ride this week. We took advantage of the short up trend and oversold conditions. Kudos to Terry for moving into the C Fund on Friday. He was right on the mark. He has also taken plans to leave the C Fund which I applaud wholeheartedly.
Q: What are my reasons for leaving the C Fund?
I will list five reasons but I could list ten reasons just as easily:
1. The momentum is slowing down. Trader Mark Weinstein famously would look for a slow down in momentum and then go the other way. The strategy works because markets only go up on momentum. If you say good-bye to up momentum, then a stall is sure to follow. Then, its down you go.
2. The downward sloping 50-day moving average on a daily chart hangs over our heads at 1316. I know I sound like a stuck record but I remember the Flash Crash in 2010 and the Crash in 2008. Better safe than sorry. Both were heralded by resistance at the 50-day moving average. There are pros out there selling into this rally. They are banking on the 50-day moving average as a brick wall. I can feel it. So can Terry.
3. On a weekly chart, 1316 is resistance on the 13-day moving average. The market is not going higher than 1316, particularly since we are in a dominant downtrend. Yet, another reason to leave the C Fund.
4. I saw dangerous triple negative divergence between the MACD Histogram and the price action today. The market is rising on fumes. Triple negative divergences can lead to dramatic drops in price.
5. If you accept the Elliott Wave take on this market since May 1, 2011, then we are approaching the end of this Wave 4 (corrective wave c). What should follow is a Wave 5 down comparable to Wave 1 down (May 1 to May 23) and Wave 3 down (June 1 to June 16).
It is time to go.
Your resolute newsletter writer,
Wink
Inspirational Quote: "Only when nearly everything lines up right and he feels the timing is virtually perfect does he put on a trade. He passes up many trades that he believes have a high probability of working, but for which he lacks the same degree of near absolute confidence." Mark Weinstein in Market Wizards, page 337.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Trading
I picked up this handy list from Clearstation.com this morning:
"Title: Trading
I was looking over some old posts at the old website this morning and rediscovered this little gem offering the 22 Rules Of Trading according to Dennis Gartman:
Never, under any circumstance add to a losing position! Nothing more need be said. To do otherwise will eventually and absolutely lead to ruin!
Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
Capital comes in two varieties: mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two.
Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
Markets can remain illogical longer than you or I can remain solvent. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.
An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
Establish initial positions on strength in bull markets and on weakness in bear markets.
The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
Bear markets are more violent than are bull markets and so also are their retracements.
Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
The market is the sum total of the wisdom and the ignorance of all of those who deal in it and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable.
All rules are meant to be broken: The trick is knowing when and how infrequently this rule may be invoked!"
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
"Title: Trading
I was looking over some old posts at the old website this morning and rediscovered this little gem offering the 22 Rules Of Trading according to Dennis Gartman:
Never, under any circumstance add to a losing position! Nothing more need be said. To do otherwise will eventually and absolutely lead to ruin!
Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
Capital comes in two varieties: mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two.
Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
Markets can remain illogical longer than you or I can remain solvent. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.
An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
Establish initial positions on strength in bull markets and on weakness in bear markets.
The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
Bear markets are more violent than are bull markets and so also are their retracements.
Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
The market is the sum total of the wisdom and the ignorance of all of those who deal in it and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable.
All rules are meant to be broken: The trick is knowing when and how infrequently this rule may be invoked!"
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Terry's Model Portfolio: Day 5
Trade Execution: Sell 102 July 130 SPY calls @ 1.87.
Rate of Return Today: 3.8%.
Profit on the Trade (Realized): $10,125.
Portfolio Balance: $19,579.
Performance Year to Date: 95.79%.
Objective: 100% by November 21, 2011.
Time: 6:31 a.m. (PST), Wednesday, June 29, 2011.
Assessment: Market gapped up on news of Greek vote. Good practice to sell on the news.
Twyman Asset Management
June 29, 2011
Dear Terry:
We closed out the trade this morning for a nice realized profit of 95.79%.
Our 100% objective is within sight. Triple negative divergence (MACD Histogram) is evident on a 60-minute chart. As we discussed, market conditions are setting up a top. The next major move should be down.
QE2 is ending this week. Where is the money going to come from to buy all of the treasuries next week?
Warm regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Rate of Return Today: 3.8%.
Profit on the Trade (Realized): $10,125.
Portfolio Balance: $19,579.
Performance Year to Date: 95.79%.
Objective: 100% by November 21, 2011.
Time: 6:31 a.m. (PST), Wednesday, June 29, 2011.
Assessment: Market gapped up on news of Greek vote. Good practice to sell on the news.
Twyman Asset Management
June 29, 2011
Dear Terry:
We closed out the trade this morning for a nice realized profit of 95.79%.
Our 100% objective is within sight. Triple negative divergence (MACD Histogram) is evident on a 60-minute chart. As we discussed, market conditions are setting up a top. The next major move should be down.
QE2 is ending this week. Where is the money going to come from to buy all of the treasuries next week?
Warm regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tuesday, June 28, 2011
The Next Couple of Days
Terry wanted to know my thoughts on the next couple of days.
I am uneasy tonight. The 50-day moving average looms overhead @ 1316.89. The S&P 500 Index closed today @1296, a resistance level. Once we breach Wednesday's high of 1298, my Elliott Wave signal will flash caution. I am under no delusions here. We are in a corrective wave c. It is the final wave against the dominant trend down since May 1, 2011. I am more concerned with safeguarding profits than capital appreciation. Elliott Wave points to an end to the up wave at around 1310. Clearstation.com is also suggesting a top @1310. Gann suggests a top around 1313. So, I see a confluence of indicators pointing to the 1310 - 1318 zone as significant resistance.
Its funny. When I am on the side of the dominant trend, I am at peace. I tend to forget the market. When I'm on the right side of a corrective wave, I am very alert because I know that gains can be fleeting. The dominant trend remains in place.
I also am mindful that QE2 ends on June 30. Q: How will the market react come July 1?
On a 60-minute chart, I can see that the momentum is slowing down. There is the beginning of negative divergence on the MACD Histogram. The market can go higher but now is a good time to be on the lookout for triple negative divergence. Triple negative divergence between price action and an underlying indicator can provide an excellent sell signal. It has worked for me in the past.
The world economy is slowing. The debt problems in Europe are not going away.
An idealized chart of the Russell 2000 shows a sharp peak into July 1 followed by a decline into August.
Conclusion.
For all of these reasons, I am not dancing the jig this evening. I am watching my indicators. I remain on the lookout for signs that the market momentum is slowing. I feel that the time to sell is close at hand.
Your anxious newsletter writer,
Wink
Inspirational Quote of the Day: "If, at the time my million dollar tools are giving buy indications, most advisory services are going against my indications, your chances for a good trade are further increased! I mean this sincerely. As with the stock market, when too people believe something will happen, it never does." Larry R. Williams, How I Made One Million Dollars Last Year Trading Commodities, page 60.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I am uneasy tonight. The 50-day moving average looms overhead @ 1316.89. The S&P 500 Index closed today @1296, a resistance level. Once we breach Wednesday's high of 1298, my Elliott Wave signal will flash caution. I am under no delusions here. We are in a corrective wave c. It is the final wave against the dominant trend down since May 1, 2011. I am more concerned with safeguarding profits than capital appreciation. Elliott Wave points to an end to the up wave at around 1310. Clearstation.com is also suggesting a top @1310. Gann suggests a top around 1313. So, I see a confluence of indicators pointing to the 1310 - 1318 zone as significant resistance.
Its funny. When I am on the side of the dominant trend, I am at peace. I tend to forget the market. When I'm on the right side of a corrective wave, I am very alert because I know that gains can be fleeting. The dominant trend remains in place.
I also am mindful that QE2 ends on June 30. Q: How will the market react come July 1?
On a 60-minute chart, I can see that the momentum is slowing down. There is the beginning of negative divergence on the MACD Histogram. The market can go higher but now is a good time to be on the lookout for triple negative divergence. Triple negative divergence between price action and an underlying indicator can provide an excellent sell signal. It has worked for me in the past.
The world economy is slowing. The debt problems in Europe are not going away.
An idealized chart of the Russell 2000 shows a sharp peak into July 1 followed by a decline into August.
Conclusion.
For all of these reasons, I am not dancing the jig this evening. I am watching my indicators. I remain on the lookout for signs that the market momentum is slowing. I feel that the time to sell is close at hand.
Your anxious newsletter writer,
Wink
Inspirational Quote of the Day: "If, at the time my million dollar tools are giving buy indications, most advisory services are going against my indications, your chances for a good trade are further increased! I mean this sincerely. As with the stock market, when too people believe something will happen, it never does." Larry R. Williams, How I Made One Million Dollars Last Year Trading Commodities, page 60.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Terry's Model Portfolio: Day 4
Open Trade: Buy 102 July 130 SPY calls @ 0.88. Closed today @ 1.80.
Rate of Return Today: 60.71%
Profit Today (Unrealized): $6,954.06
Portfolio Balance: $18,862.26
Performance Year to Date: 88.62%
Objective: 100% by November 21, 2011
Time: 1:00 p.m. (PST), Tuesday, June 28, 2011
Assessment: Market reaching cycle top. Signs of negative divergence. Prepared to exit on June 30, 2011.
Twyman Asset Management
June 28, 2011
Dear Terry,
Today, we beat Bridgewater Associates for the year 2010.
The numbers say it all.
We had a very good day.
Warm regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Rate of Return Today: 60.71%
Profit Today (Unrealized): $6,954.06
Portfolio Balance: $18,862.26
Performance Year to Date: 88.62%
Objective: 100% by November 21, 2011
Time: 1:00 p.m. (PST), Tuesday, June 28, 2011
Assessment: Market reaching cycle top. Signs of negative divergence. Prepared to exit on June 30, 2011.
Twyman Asset Management
June 28, 2011
Dear Terry,
Today, we beat Bridgewater Associates for the year 2010.
The numbers say it all.
We had a very good day.
Warm regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Inside Days: Buy Stop @ 1286.60
9:42 a.m. (PST)
The buy stop for Thursday's outside day has been triggered. The high for Thursday was 1286.60. At 9:42 a.m., the S&P 500 Index reached 1286.82. Many astute traders and investors have set buy stops just above Thursday's high of 1286.60. Higher prices are ahead today.
Classic play out of yesterday's inside day.
I don't like to blog during the trading day but this event seemed noteworthy.
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The buy stop for Thursday's outside day has been triggered. The high for Thursday was 1286.60. At 9:42 a.m., the S&P 500 Index reached 1286.82. Many astute traders and investors have set buy stops just above Thursday's high of 1286.60. Higher prices are ahead today.
Classic play out of yesterday's inside day.
I don't like to blog during the trading day but this event seemed noteworthy.
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, June 27, 2011
An Inside Day
Tonight, I want to return to a topic that is near and dear to my heart.
Let's talk about inside days.
Inside days are simply days of range contained within a larger previous day's range. They reflect indecision. They show a coiled spring being wound up. They represent market opportunity in real time.
Today was an inside day. This means that the high on the S&P 500 Index was 1284 which was lower than Thursday's high of 1286.60. The low was 1267.53 which was higher than Thursday's low of 1262. Q: See how the entire daily range today is contained within Thursday's range from high to low?
Now, inside days tend to produce explosive moves. If the price goes higher than the outside day high, then you will see an explosive increase in price. If the price goes lower than the outside day low, you will see prices move with conviction lower.
Today was an inside day.
If prices top 1286.60 (Thursday's high), then we should see a price move higher to 1310. The price move up should equal the length of Thursday's price range. Now, here's the thing---While it is good to anticipate a price move to 1310, it is also likely to be a terminal move. 1310 might be it and it might then be time to go home. Time to get out, as they say. That's my thinking.
In the meantime, please note the historical precedent. The May 2010 Flash Crash was preceded by a tremendous outside day on April 27, 2010. Several inside days followed, thus building up pressure for the waterfall decline on May 6, 2010. Similarly, we saw a tremendous outside day on September 18, 2008 (I think) followed by several inside days. Pressure was built up before the low of the outside day was breached, thus producing the Crash of October 10, 2008.
Conclusion.
Inside days lead to predictable and exciting price moves. The important thing is to be right with the trend. If you are on the side of the trend, you will make money when the inside day breaches the outer limits of the outside day. (For more details, google "Larry Williams" and "Inside Days.")
Your newsletter writer,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Let's talk about inside days.
Inside days are simply days of range contained within a larger previous day's range. They reflect indecision. They show a coiled spring being wound up. They represent market opportunity in real time.
Today was an inside day. This means that the high on the S&P 500 Index was 1284 which was lower than Thursday's high of 1286.60. The low was 1267.53 which was higher than Thursday's low of 1262. Q: See how the entire daily range today is contained within Thursday's range from high to low?
Now, inside days tend to produce explosive moves. If the price goes higher than the outside day high, then you will see an explosive increase in price. If the price goes lower than the outside day low, you will see prices move with conviction lower.
Today was an inside day.
If prices top 1286.60 (Thursday's high), then we should see a price move higher to 1310. The price move up should equal the length of Thursday's price range. Now, here's the thing---While it is good to anticipate a price move to 1310, it is also likely to be a terminal move. 1310 might be it and it might then be time to go home. Time to get out, as they say. That's my thinking.
In the meantime, please note the historical precedent. The May 2010 Flash Crash was preceded by a tremendous outside day on April 27, 2010. Several inside days followed, thus building up pressure for the waterfall decline on May 6, 2010. Similarly, we saw a tremendous outside day on September 18, 2008 (I think) followed by several inside days. Pressure was built up before the low of the outside day was breached, thus producing the Crash of October 10, 2008.
Conclusion.
Inside days lead to predictable and exciting price moves. The important thing is to be right with the trend. If you are on the side of the trend, you will make money when the inside day breaches the outer limits of the outside day. (For more details, google "Larry Williams" and "Inside Days.")
Your newsletter writer,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Terry's Model Portfolio: Day 3
Last Trade: Buy July 130 SPY calls @ 0.88. Closed @ 1.12.
Rate of Return today: 27.27%
Profit Today (Unrealized): $2,454.30
Portfolio Balance: $11,908.20
Performance Year to Date: 19.08%
Objective: 100% by November 21, 2011
Time: 1:00 p.m. (PST), Monday, June 27, 2011
Assessment: Market in strong short-term up trend. No reason to sell calls in a rising market. Time exit is July 1, 2011, depending upon conditions.
Twyman Asset Management
June 27, 2011
Dear Terry:
Today we had a good day.
When the opening 15-minute trading range was broken to the up side, we committed heavily to the long side with calls. This up wave should take us through Friday. I am confident that we will best Bridgewater Associates by Friday (What do you get for $60 billion anyway these days?/smile)Support lies at the 13-day moving average or 1278. Overhead resistance @ the 50-day moving average will take us out of the trade.
Regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Rate of Return today: 27.27%
Profit Today (Unrealized): $2,454.30
Portfolio Balance: $11,908.20
Performance Year to Date: 19.08%
Objective: 100% by November 21, 2011
Time: 1:00 p.m. (PST), Monday, June 27, 2011
Assessment: Market in strong short-term up trend. No reason to sell calls in a rising market. Time exit is July 1, 2011, depending upon conditions.
Twyman Asset Management
June 27, 2011
Dear Terry:
Today we had a good day.
When the opening 15-minute trading range was broken to the up side, we committed heavily to the long side with calls. This up wave should take us through Friday. I am confident that we will best Bridgewater Associates by Friday (What do you get for $60 billion anyway these days?/smile)Support lies at the 13-day moving average or 1278. Overhead resistance @ the 50-day moving average will take us out of the trade.
Regards,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Reminder - Resistance @ the 50-Day Moving Average
Just a reminder---Even if the market goes up this week, resistance is anticipated @ the 50-day moving average.
I just checked. Resistance on the 50-day moving average is @ 1317.28.
I plan to leave the C Fund when we hit that target.
I hate blogs during the trading day because market conditions can change rapidly. However, my plan to get out @ the 50-day moving average remains the same.
Enjoy the week!
Wink
P.S., Terry's model portfolio is performing well....
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I just checked. Resistance on the 50-day moving average is @ 1317.28.
I plan to leave the C Fund when we hit that target.
I hate blogs during the trading day because market conditions can change rapidly. However, my plan to get out @ the 50-day moving average remains the same.
Enjoy the week!
Wink
P.S., Terry's model portfolio is performing well....
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Terry's Model Portfolio: Day 3
Trade Execution:
Bought 102 July 130 calls on the Spiders Fund (SPY)
Limit price filled @ 0.88.
Time: 6:44 a.m. (PST)
Date: Monday, June 27, 2011
Rationale: Oversold conditions in an uptrend. Up trending MACD on 60-minute chart. Up pointing 200-day moving average. Market did not drop to or test 1262 in the first 15 minutes of the trading day. Anticipated drop happened in overnight futures market. Probabilities favor market rise into July 1, 2011.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Bought 102 July 130 calls on the Spiders Fund (SPY)
Limit price filled @ 0.88.
Time: 6:44 a.m. (PST)
Date: Monday, June 27, 2011
Rationale: Oversold conditions in an uptrend. Up trending MACD on 60-minute chart. Up pointing 200-day moving average. Market did not drop to or test 1262 in the first 15 minutes of the trading day. Anticipated drop happened in overnight futures market. Probabilities favor market rise into July 1, 2011.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
100% in the C Fund @ 1272
The market is going up. We did not see a drop to 1262 during the first 15 minutes of trade. 1272 is resistance and, since the 200-day moving average is pointed up, time to go long the C Fund. This week should be bullish. Later.
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sunday, June 26, 2011
1262 - Buy Zone
Good Morning!
It is early. I am still a little sleepy. However, I wanted to share my developing thoughts before my busy day kicks into gear.
1262 should be a buy zone this week for the following reasons:
First, a 100% retrace of Thursday's dramatic up move would take us to 1262. This means that everyone who decided that 1262 was a good buy on Thursday will be either underwater or flat. This realization should produce demoralization among new Bulls. Demoralization among new Bulls = a buying opportunity in an up trend. (Remember, I use "up trend" advisedly here. When I say "up trend," I mean "up trend" until the S&P 500 Index hits the downward sloping 50-day moving average @ 1318. By no means do I believe that the dominant trend has changed to up.)
Second, a test of support is required to put in a bottom. First, we tested the 1258 low with Thursday's 1262 low. Another test of 1262 is consistent with how bottoms are formed. Remember that we profit by buying fear. Maximum fear is at the point of the re-test. Our minds will produce fear because we project a drop from 1268 to 1262 as continuing into infinity. Markets don't work that way. They cycle, although our minds are not hard-wired to presume a cycle. High-speed computers have an advantage over retail investors in this regard. Computers don't have to get dressed for work. Computers don't listen to CNBC and feel the fear. Computers don't imagine scary conditions. Computers operate on raw data. We would profit to do the same.
Third, corrections against the trend come in three waves. This is Elliott Wave Theory 101. So, if we trust our technicals, then we are in an up trend until the downward sloping 50-day moving average or roughly 1318. The Correction down from the 1298 high should come in three waves. I'm thinking that Wave A down was from 1298 to 1262 (Wednesday-Thursday). Wave B up was that dramatic short covering rally on Thursday (1262 to 1282). We are now in Wave C down from Thursday's 1262 short covering high. Friday was one long Wave C down all day with a low of 1267 and a close @ 1268. Since Wave C should surpass the Wave A low to trigger stop loss orders, 1261 is a logical terminus for Wave C. Then, the fun begins on the road to the downward sloping 50-day moving average or 1318. I am not that good, so I would buy just above 1261 and wait for the market's behavior to confirm my strategy.
Fourth, the closing trin on Friday was 2.27. A high trin suggests that more money is leaving stocks then entering stocks. As a contrarian, I take a high trin reading as a buying opportunity. Any closing reading above 2.4 is considered high. While the closing trin was not above 2.4, the high of the day was 2.6 That's good enough for me. In my experience, the following day should produce a buy opportunity, particularly since we are in a short up trend.
Finally, there are so many long tails on the japanese candlesticks in the 1258 to 1268 zone. (By this point, I have totally lost Barbara/smile.) A japanese candlestick is a way of depicting price action for the day. A day has four points of interest for the trader and investor: the open, the low, the high, the close. If the close is higher than the open, this day is considered a bullish day. The candle will be white. If the close is lower than the open, this day is considered a bearish day. The candle will be red. Sometimes, the opening price will be followed an early morning plunge or drop in prices. These early morning bulges (to use Larry Williams' phrase, see How I Made One Million Dollars Last Year Trading Commodities) sometimes reverse. When the reversal in price exceeds the opening price, then the drop in price produces a visual long tail on a chart. Long tails reflect buying pressure in the market. They are good places to buy as the odds favor higher prices ahead. For examples, pull up a chart of the market action on February 5, 2010. The market opened at about 1062 and then dropped about 20 points. You can be sure that early morning drop placed the fear of (insert the word of your choice) into the hearts and minds of retail investors that morning! But the professional institutional investor was lying in wait for a rebound. (Remember Gary Smith's admonition that the time to buy is a late day reversal and positive close after a period of price decline?)
Here is the take away point about February 5, 2010. February 5, 2010 was the low point in the market until the April 26, 2010 high. The market never came close to 1042 again for months. The price action on February 5, 2010 produced a long tail from which the market bounced onward and upward. For another long tail, look at May 6, 2010. Yes, this was the day of the infamous Flash Crash. But the market rallied sharply into the close. The price action produced one of the longest tails in 2010. Is it no surprise that the bottom on May 6, 2010 was met with buying pressure that took the S&P 500 Index up to resistance @ the 50-day moving average of 1173? There was also a long tail on May 24, 2010. From a low of 1042, the market bounced up in corrective fashion until making a high of 1131 on June 21 just below the downward sloping 50-day moving average.
Conclusion.
For these reasons, I consider 1262 to be a buy zone. I hasten to add that I consider the downward sloping 50-day moving average at 1318 as resistance. The character of the market during the first hour of the trading day will determine whether a buy recommendation is issued.
Have a good Sunday!
Wink
Quote of the Day:
"Without a doubt, the most important trading advice I can give you is
BUY ONLY ON DOWN DAYS
SELL ONLY ON UP DAYS"
Source, Larry Williams, How I Made One Million Dollars Last Year Trading Commodities, page 128.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
It is early. I am still a little sleepy. However, I wanted to share my developing thoughts before my busy day kicks into gear.
1262 should be a buy zone this week for the following reasons:
First, a 100% retrace of Thursday's dramatic up move would take us to 1262. This means that everyone who decided that 1262 was a good buy on Thursday will be either underwater or flat. This realization should produce demoralization among new Bulls. Demoralization among new Bulls = a buying opportunity in an up trend. (Remember, I use "up trend" advisedly here. When I say "up trend," I mean "up trend" until the S&P 500 Index hits the downward sloping 50-day moving average @ 1318. By no means do I believe that the dominant trend has changed to up.)
Second, a test of support is required to put in a bottom. First, we tested the 1258 low with Thursday's 1262 low. Another test of 1262 is consistent with how bottoms are formed. Remember that we profit by buying fear. Maximum fear is at the point of the re-test. Our minds will produce fear because we project a drop from 1268 to 1262 as continuing into infinity. Markets don't work that way. They cycle, although our minds are not hard-wired to presume a cycle. High-speed computers have an advantage over retail investors in this regard. Computers don't have to get dressed for work. Computers don't listen to CNBC and feel the fear. Computers don't imagine scary conditions. Computers operate on raw data. We would profit to do the same.
Third, corrections against the trend come in three waves. This is Elliott Wave Theory 101. So, if we trust our technicals, then we are in an up trend until the downward sloping 50-day moving average or roughly 1318. The Correction down from the 1298 high should come in three waves. I'm thinking that Wave A down was from 1298 to 1262 (Wednesday-Thursday). Wave B up was that dramatic short covering rally on Thursday (1262 to 1282). We are now in Wave C down from Thursday's 1262 short covering high. Friday was one long Wave C down all day with a low of 1267 and a close @ 1268. Since Wave C should surpass the Wave A low to trigger stop loss orders, 1261 is a logical terminus for Wave C. Then, the fun begins on the road to the downward sloping 50-day moving average or 1318. I am not that good, so I would buy just above 1261 and wait for the market's behavior to confirm my strategy.
Fourth, the closing trin on Friday was 2.27. A high trin suggests that more money is leaving stocks then entering stocks. As a contrarian, I take a high trin reading as a buying opportunity. Any closing reading above 2.4 is considered high. While the closing trin was not above 2.4, the high of the day was 2.6 That's good enough for me. In my experience, the following day should produce a buy opportunity, particularly since we are in a short up trend.
Finally, there are so many long tails on the japanese candlesticks in the 1258 to 1268 zone. (By this point, I have totally lost Barbara/smile.) A japanese candlestick is a way of depicting price action for the day. A day has four points of interest for the trader and investor: the open, the low, the high, the close. If the close is higher than the open, this day is considered a bullish day. The candle will be white. If the close is lower than the open, this day is considered a bearish day. The candle will be red. Sometimes, the opening price will be followed an early morning plunge or drop in prices. These early morning bulges (to use Larry Williams' phrase, see How I Made One Million Dollars Last Year Trading Commodities) sometimes reverse. When the reversal in price exceeds the opening price, then the drop in price produces a visual long tail on a chart. Long tails reflect buying pressure in the market. They are good places to buy as the odds favor higher prices ahead. For examples, pull up a chart of the market action on February 5, 2010. The market opened at about 1062 and then dropped about 20 points. You can be sure that early morning drop placed the fear of (insert the word of your choice) into the hearts and minds of retail investors that morning! But the professional institutional investor was lying in wait for a rebound. (Remember Gary Smith's admonition that the time to buy is a late day reversal and positive close after a period of price decline?)
Here is the take away point about February 5, 2010. February 5, 2010 was the low point in the market until the April 26, 2010 high. The market never came close to 1042 again for months. The price action on February 5, 2010 produced a long tail from which the market bounced onward and upward. For another long tail, look at May 6, 2010. Yes, this was the day of the infamous Flash Crash. But the market rallied sharply into the close. The price action produced one of the longest tails in 2010. Is it no surprise that the bottom on May 6, 2010 was met with buying pressure that took the S&P 500 Index up to resistance @ the 50-day moving average of 1173? There was also a long tail on May 24, 2010. From a low of 1042, the market bounced up in corrective fashion until making a high of 1131 on June 21 just below the downward sloping 50-day moving average.
Conclusion.
For these reasons, I consider 1262 to be a buy zone. I hasten to add that I consider the downward sloping 50-day moving average at 1318 as resistance. The character of the market during the first hour of the trading day will determine whether a buy recommendation is issued.
Have a good Sunday!
Wink
Quote of the Day:
"Without a doubt, the most important trading advice I can give you is
BUY ONLY ON DOWN DAYS
SELL ONLY ON UP DAYS"
Source, Larry Williams, How I Made One Million Dollars Last Year Trading Commodities, page 128.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Saturday, June 25, 2011
Terry's Most Excellent Questions
Good morning!
It is a sunny Saturday morning. I feel rested and refreshed from a crazy work week. Now on to the market....
Terry raised very good questions recently in a comment. The questions are so good that they deserve a separate blog posting.
1. "If we are in a high and tight Bull flag pattern, should we consider entering a buy position in the TSP? I am typing this just after close on thurs. The DOW closed down ~60 and the S&P down 3.6."
Answer--When I saw the dramatic rise in the market on Thursday after 7:50 a.m. (PST), my first thought wasn't bullishness. My first thought was that (1) the drop caught the market off guard which meant (2) a bounce was due which we saw in the last hour of the trading day. Now normally, the last hour of the trading day means professionals are at work. But I remembered the same action in the afternoon of May 6, 2010 and the Flash Crash. Remember how the market drop caught everyone by surprise and then there was this tremendous short covering rally as the shorts feared losing their unanticipated good fortune? I also remembered this wonderful video on You Tube titled "100 Pips in 25 minutes." In this video, a Forex trader shows how shorts late to the party are always hurt by the inevitable retracement. So, I immediately took out my calculator and calculated a 0.618 retrace of the 1298 to 1262 drop. That got me to 1284. So, I anticipated the market should halt around 1284. It actually stopped around 1282.
After the 0.618 retrace, I anticipated a further drop in the market. That further drop happened on Friday.
But to answer your question, it remains a High and Tight Bull Flag pattern until the 1258 low is breached. So, a buy position in the TSP should be considered Monday morning. I am cautious because the upside is limited to the downward sloping 50-day moving average or roughly 1318. I am not comfortable right now with a buy recommendation, but definately, a buy consideration would be in order for Monday. If my thoughts should change, I will send out an alert to the Club members ASAP.
2. "I feel today would have been a good day to move into C fund. It would have been a scary move considering the market opened down 200. I ended the day +ing up my meager positions in stocks and ended the day up 2%."
Answer: Assuming we are witnessing a High and Tight Bull Flag Pattern, then Thursday would not have been a bad day to enter the C Fund. However, drops retrace (sometimes 0.618%) and then they make a lower low. The You Tube video "100 Pips in 25 minutes" makes this point. I recommend a viewing by all Club members. So, the best time to enter the C Fund might not have been Thursday because there was more of a drop in price to come. Why enter the C Fund at 1282 if you can enter the C Fund at 1262? Just a point to chew on.
Now, Terry, allow me to place on my Elliott Wave hat for a moment....
We can all agree that we have seen a big wave 1 down in May, a big correction wave 2 up in the last week of May, a big wave 3 down in June, a big correction (long and complex) wave up since the 1258 low on June 16. June 16 is very, very important to this big corrective wave 4. The low was 1258. Then, the market went up to 1298. Remember how I wrote that the daily trend changed on me? I believe this change means the big corrective wave will not be denied and that we will see the downward sloping 50 day-moving average or 1318.
Corrections are against the dominant down trend. They proceed up (A), then down (B), and then up to a higher high (C). 1258 to 1298 was corrective Wave A. Corrective Wave B began at 1298 and dropped to 1262. Then the market rose on Thursday from 1262 to 1282 (0.618 retrace). We need a retest of 1262 to scare people, then the market can continue its date with destiny at the downward sloping 50-day moving average.
So, I am looking for a test of 1262 on Monday, probably Monday morning. The buy zone is between 1258 and 1262.
3. "Your decision to sell out of the position above was a smart move how would your percentages calculated if you had held firm 1 more day?
Answer: The July 125 puts closed @ 1.70 on Friday. But I don't look back. There are plenty of opportunities between now and November to meet and surpass our goal. For example, Monday morning might present an opportunity around 1262. We will see....
Your contented strategist,
Wink
Quote of the Day: "What are the elements of good trading? The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance." Ed Seykota, quoted in Market Wizards, page 163.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
It is a sunny Saturday morning. I feel rested and refreshed from a crazy work week. Now on to the market....
Terry raised very good questions recently in a comment. The questions are so good that they deserve a separate blog posting.
1. "If we are in a high and tight Bull flag pattern, should we consider entering a buy position in the TSP? I am typing this just after close on thurs. The DOW closed down ~60 and the S&P down 3.6."
Answer--When I saw the dramatic rise in the market on Thursday after 7:50 a.m. (PST), my first thought wasn't bullishness. My first thought was that (1) the drop caught the market off guard which meant (2) a bounce was due which we saw in the last hour of the trading day. Now normally, the last hour of the trading day means professionals are at work. But I remembered the same action in the afternoon of May 6, 2010 and the Flash Crash. Remember how the market drop caught everyone by surprise and then there was this tremendous short covering rally as the shorts feared losing their unanticipated good fortune? I also remembered this wonderful video on You Tube titled "100 Pips in 25 minutes." In this video, a Forex trader shows how shorts late to the party are always hurt by the inevitable retracement. So, I immediately took out my calculator and calculated a 0.618 retrace of the 1298 to 1262 drop. That got me to 1284. So, I anticipated the market should halt around 1284. It actually stopped around 1282.
After the 0.618 retrace, I anticipated a further drop in the market. That further drop happened on Friday.
But to answer your question, it remains a High and Tight Bull Flag pattern until the 1258 low is breached. So, a buy position in the TSP should be considered Monday morning. I am cautious because the upside is limited to the downward sloping 50-day moving average or roughly 1318. I am not comfortable right now with a buy recommendation, but definately, a buy consideration would be in order for Monday. If my thoughts should change, I will send out an alert to the Club members ASAP.
2. "I feel today would have been a good day to move into C fund. It would have been a scary move considering the market opened down 200. I ended the day +ing up my meager positions in stocks and ended the day up 2%."
Answer: Assuming we are witnessing a High and Tight Bull Flag Pattern, then Thursday would not have been a bad day to enter the C Fund. However, drops retrace (sometimes 0.618%) and then they make a lower low. The You Tube video "100 Pips in 25 minutes" makes this point. I recommend a viewing by all Club members. So, the best time to enter the C Fund might not have been Thursday because there was more of a drop in price to come. Why enter the C Fund at 1282 if you can enter the C Fund at 1262? Just a point to chew on.
Now, Terry, allow me to place on my Elliott Wave hat for a moment....
We can all agree that we have seen a big wave 1 down in May, a big correction wave 2 up in the last week of May, a big wave 3 down in June, a big correction (long and complex) wave up since the 1258 low on June 16. June 16 is very, very important to this big corrective wave 4. The low was 1258. Then, the market went up to 1298. Remember how I wrote that the daily trend changed on me? I believe this change means the big corrective wave will not be denied and that we will see the downward sloping 50 day-moving average or 1318.
Corrections are against the dominant down trend. They proceed up (A), then down (B), and then up to a higher high (C). 1258 to 1298 was corrective Wave A. Corrective Wave B began at 1298 and dropped to 1262. Then the market rose on Thursday from 1262 to 1282 (0.618 retrace). We need a retest of 1262 to scare people, then the market can continue its date with destiny at the downward sloping 50-day moving average.
So, I am looking for a test of 1262 on Monday, probably Monday morning. The buy zone is between 1258 and 1262.
3. "Your decision to sell out of the position above was a smart move how would your percentages calculated if you had held firm 1 more day?
Answer: The July 125 puts closed @ 1.70 on Friday. But I don't look back. There are plenty of opportunities between now and November to meet and surpass our goal. For example, Monday morning might present an opportunity around 1262. We will see....
Your contented strategist,
Wink
Quote of the Day: "What are the elements of good trading? The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance." Ed Seykota, quoted in Market Wizards, page 163.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, June 24, 2011
Market Forecast for Balance of 2011
Market conditions are ever changing. Oftentimes, the best time to sell is when the market looks the strongest. Similarly, the best time to buy is when the market looks most weak. In the spirit of Contrary Opinion and the Fear Factor, the following is my best sense of how the balance of 2011 might unfold.
Between Now and July 1, 2010.
The market appears to be putting in a short-term bottom. Several factors point to this conclusion. First, the daily Trin reading is quite high today. As I type, the trin reading is at 1.93. That is on the high side. A high trin indicates more money is leaving stocks than entering stocks. It is a rough gauge of cash flow into and out of the market. Ironically, high trin readings are bullish. They create buy opportunities. Second, the low today was 1268. I wrote down 1268 this morning as an anticipated low consistent with a short-term up trend. Thus far, 1268 has held. The longer 1268 holds as support, the more bullish I am. Third, the 200-day moving average has provided strong support thus far since June 16. Fourth, yesterday's price action showed strong buying pressure up from the 1262 level. We now appear to be retesting that level. Finally, it is normal for the market to hit the 50-day moving average before declining further. The 50-day moving average is now at 1318 on a daily chart. That level would seem to be a target for the market.
Between July 1, 2011 and October/November 2011
The outlook is bearish. The dominant down trend remains intact. Alot of damage was done to investor psychology during the month of May. Consider these factors:
First, the Elliott Wave theory suggests that we have a final fifth wave down to witness. Thus far, the market has only gone down in two waves (May 1 to May 23, June 1 to June 16). There is a final decline ahead of us.
Second, the Stock Trader's Almanac on page 104 refers to an idealized chart of price action on the Russell 2000/Russell 1000 One-Year Seasonal Pattern. The chart is interesting in that depicts a sharp drop between July 1 and the end of August based on daily data from July 1, 1979 to April 30, 2010. The chart is not a guarantee that the future will unfold the same way but it is a factor to take into consideration.
Third, the absence of $600 billion in buying pressure from the Federal Reserve as of June 30 would seem bearish for the market. Remember how the Federal Reserve ended QE1 last year? The termination of QE1 resulted in the Flash Crash in May 2010. History doesn't always repeat itself but one has to wonder where will the money come from to replicate $600 billion in buying pressure?
Fourth, the weekly chart of the S&P 500 Index shows a down trend based on the MACD lines and the stochastics. The momentum is down for now.
Finally, notice how news about Greece seems to matter more now. Bad news is not ignored in a Bear Market. Bad news is sold.
In conclusion, the coming four months should be bearish. Price should drift lower, although it is not clear they will stair case lower or plunge lower.
November - December 2011 End of the Year Rally
It is likely that the market will rally into the end of the year. Thus, be prepared to
move back into the C Fund around October/November. This is a good time to also select individual small-cap stocks for rallies.
Your market strategist,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Between Now and July 1, 2010.
The market appears to be putting in a short-term bottom. Several factors point to this conclusion. First, the daily Trin reading is quite high today. As I type, the trin reading is at 1.93. That is on the high side. A high trin indicates more money is leaving stocks than entering stocks. It is a rough gauge of cash flow into and out of the market. Ironically, high trin readings are bullish. They create buy opportunities. Second, the low today was 1268. I wrote down 1268 this morning as an anticipated low consistent with a short-term up trend. Thus far, 1268 has held. The longer 1268 holds as support, the more bullish I am. Third, the 200-day moving average has provided strong support thus far since June 16. Fourth, yesterday's price action showed strong buying pressure up from the 1262 level. We now appear to be retesting that level. Finally, it is normal for the market to hit the 50-day moving average before declining further. The 50-day moving average is now at 1318 on a daily chart. That level would seem to be a target for the market.
Between July 1, 2011 and October/November 2011
The outlook is bearish. The dominant down trend remains intact. Alot of damage was done to investor psychology during the month of May. Consider these factors:
First, the Elliott Wave theory suggests that we have a final fifth wave down to witness. Thus far, the market has only gone down in two waves (May 1 to May 23, June 1 to June 16). There is a final decline ahead of us.
Second, the Stock Trader's Almanac on page 104 refers to an idealized chart of price action on the Russell 2000/Russell 1000 One-Year Seasonal Pattern. The chart is interesting in that depicts a sharp drop between July 1 and the end of August based on daily data from July 1, 1979 to April 30, 2010. The chart is not a guarantee that the future will unfold the same way but it is a factor to take into consideration.
Third, the absence of $600 billion in buying pressure from the Federal Reserve as of June 30 would seem bearish for the market. Remember how the Federal Reserve ended QE1 last year? The termination of QE1 resulted in the Flash Crash in May 2010. History doesn't always repeat itself but one has to wonder where will the money come from to replicate $600 billion in buying pressure?
Fourth, the weekly chart of the S&P 500 Index shows a down trend based on the MACD lines and the stochastics. The momentum is down for now.
Finally, notice how news about Greece seems to matter more now. Bad news is not ignored in a Bear Market. Bad news is sold.
In conclusion, the coming four months should be bearish. Price should drift lower, although it is not clear they will stair case lower or plunge lower.
November - December 2011 End of the Year Rally
It is likely that the market will rally into the end of the year. Thus, be prepared to
move back into the C Fund around October/November. This is a good time to also select individual small-cap stocks for rallies.
Your market strategist,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Thursday, June 23, 2011
What a Day!
Dear Club Members:
What a day in the market! There is so much to say. In my continuing effort to be creative, I will address the day's action in a question-and-answer format.
Q: What happened today? The market was all over the place!
A: Yes, it was. Before the market opened, the futures were tanking. I saw the drop in futures as a continuation of the sharp drop in price action on the S&P 500 Index during the last hour of yesterday's trading day. Remember that the professionals tend to drive price action in the last hour of the trading day. Yesterday evening, I saw the price evaporate on the futures market, thus setting up a lower open this morning.
Q: How did you see the low opening this morning? Was it a buying opportunity or a selling opportunity?
A: It depends on your time frame. For day traders, it was a heaven-sent opportunity to go long the market. For longer-term investors like our Club members, it was much ado about nothing.
Q: Please explain.
A: Well, here's the thing. The dominant trend is down and that's what we care about in our Club. However, there are always bounces even in a Bear Market/dominant down trend. For the guys with a time horizon of a day or 60 minutes, these bounces can be quite profitable.
Q: How so?
A: Well, you might recall that I said a few posts ago that the daily trend had changed from down to up. I define the trend for purposes of daily action by the MACD lines. Pull up "Stockcharts.com." Type in "$Spx" as a symbol. "$SPX" stands for the Standard & Poor's 500 Index. When the chart pops up, you will notice at the bottom of the chart a graph for the MACD lines and MACD Histogram. Now, this information is like a dashboard for an airline pilot. The MACD readings keep me on the right side of the trend on a daily basis. This is invaluable data! When the black MACD line is above the red MACD line, then you know you are in an up trend on a daily basis. It is a short-term reading. It will change as the short-term character of the market changes. Anyway, the black MACD line is above the red MACD line now. That means it is time to rock and roll if you are a short-term Bull.
Q: Ok. But how do you make money once you know the short-term trend is up?
A: Simple, You identify an oversold condition and go long the market. You buy. Oversold conditions in an uptrend are excellent buy opportunities. The harder question is defining an oversold condition in real time.
Q: There is no objective definition?
A: It depends on the choice of the investor and trader. This morning, I defined an oversold condition by going to the website futuresource. com. They have a wonderful chart of the S&P 500 contracts, including a 60-minute chart. A 60-minute chart is really good for catching turns in the market before they register on the daily chart. I then affix a MACD and Stochastic study to the 60-minute chart. Now, I was looking for a 0.0 stochastic reading on the 60-minute chart. Do you know how rare a 0.0 stochastic reading is on the 60-minute chart? It means that everyone is standing around waiting for someone else to buy. Those are wonderful buy opportunities in the short-run, even if the dominant trend is down is the short-term trend is up. I saw a 0.0 stochastic reading this morning. And I stood there transfixed.
Q: Did you execute?
A: I have a day job, so its a little bit hard to move on a 0.0 stochastic while trying to have breakfast, read market conditions, shower and get ready for the work day. I think the institutions recognize the limitations that retail investors operate under.
Q: How so?
A: Well, it is very interesting to me that the precise low of the day, 1262, occurred at 7:50 a.m. (PST). I was probably getting out of the shower precisely at 7:50 a.m. LOL! Anyway, I don't believe for a moment that the low of the day at 7:50 a.m. after a dramatic gap down open was a "coincidence."
Q:What is the take away lesson for the Club?
A: Stick with the TSP! (smile) Seriously, if you are a retail investor, you have to trust your technicals. If you see a 0.0 stochastic reading on a 60-minute chart in an uptrend, execute first and think later. You can't go wrong buying an oversold condition in an uptrend.
Q: Anything else?
A: Today was classic. We had a panic open and a late day powerful rally. I can place the price action in context. We are in a short-term trend likely to top out around July 1. When this short-term rally finishes, it should complete a Corrective C Wave. That point (1305-1315) should provide a wonderful shorting opportunity as it will be an overbought condition in a down trend. Think of the rise from 1258 to 1298 as Corrective Wave A. Think of the drop from 1298 to today's 1262 as Wave B. We are now on our Wave C to the 1305-1315 selling zone. Then, the dominant down trend should resume in July.
That's my story and I'm sticking to it!
Have a great Friday!
Your blogger on the beat,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
What a day in the market! There is so much to say. In my continuing effort to be creative, I will address the day's action in a question-and-answer format.
Q: What happened today? The market was all over the place!
A: Yes, it was. Before the market opened, the futures were tanking. I saw the drop in futures as a continuation of the sharp drop in price action on the S&P 500 Index during the last hour of yesterday's trading day. Remember that the professionals tend to drive price action in the last hour of the trading day. Yesterday evening, I saw the price evaporate on the futures market, thus setting up a lower open this morning.
Q: How did you see the low opening this morning? Was it a buying opportunity or a selling opportunity?
A: It depends on your time frame. For day traders, it was a heaven-sent opportunity to go long the market. For longer-term investors like our Club members, it was much ado about nothing.
Q: Please explain.
A: Well, here's the thing. The dominant trend is down and that's what we care about in our Club. However, there are always bounces even in a Bear Market/dominant down trend. For the guys with a time horizon of a day or 60 minutes, these bounces can be quite profitable.
Q: How so?
A: Well, you might recall that I said a few posts ago that the daily trend had changed from down to up. I define the trend for purposes of daily action by the MACD lines. Pull up "Stockcharts.com." Type in "$Spx" as a symbol. "$SPX" stands for the Standard & Poor's 500 Index. When the chart pops up, you will notice at the bottom of the chart a graph for the MACD lines and MACD Histogram. Now, this information is like a dashboard for an airline pilot. The MACD readings keep me on the right side of the trend on a daily basis. This is invaluable data! When the black MACD line is above the red MACD line, then you know you are in an up trend on a daily basis. It is a short-term reading. It will change as the short-term character of the market changes. Anyway, the black MACD line is above the red MACD line now. That means it is time to rock and roll if you are a short-term Bull.
Q: Ok. But how do you make money once you know the short-term trend is up?
A: Simple, You identify an oversold condition and go long the market. You buy. Oversold conditions in an uptrend are excellent buy opportunities. The harder question is defining an oversold condition in real time.
Q: There is no objective definition?
A: It depends on the choice of the investor and trader. This morning, I defined an oversold condition by going to the website futuresource. com. They have a wonderful chart of the S&P 500 contracts, including a 60-minute chart. A 60-minute chart is really good for catching turns in the market before they register on the daily chart. I then affix a MACD and Stochastic study to the 60-minute chart. Now, I was looking for a 0.0 stochastic reading on the 60-minute chart. Do you know how rare a 0.0 stochastic reading is on the 60-minute chart? It means that everyone is standing around waiting for someone else to buy. Those are wonderful buy opportunities in the short-run, even if the dominant trend is down is the short-term trend is up. I saw a 0.0 stochastic reading this morning. And I stood there transfixed.
Q: Did you execute?
A: I have a day job, so its a little bit hard to move on a 0.0 stochastic while trying to have breakfast, read market conditions, shower and get ready for the work day. I think the institutions recognize the limitations that retail investors operate under.
Q: How so?
A: Well, it is very interesting to me that the precise low of the day, 1262, occurred at 7:50 a.m. (PST). I was probably getting out of the shower precisely at 7:50 a.m. LOL! Anyway, I don't believe for a moment that the low of the day at 7:50 a.m. after a dramatic gap down open was a "coincidence."
Q:What is the take away lesson for the Club?
A: Stick with the TSP! (smile) Seriously, if you are a retail investor, you have to trust your technicals. If you see a 0.0 stochastic reading on a 60-minute chart in an uptrend, execute first and think later. You can't go wrong buying an oversold condition in an uptrend.
Q: Anything else?
A: Today was classic. We had a panic open and a late day powerful rally. I can place the price action in context. We are in a short-term trend likely to top out around July 1. When this short-term rally finishes, it should complete a Corrective C Wave. That point (1305-1315) should provide a wonderful shorting opportunity as it will be an overbought condition in a down trend. Think of the rise from 1258 to 1298 as Corrective Wave A. Think of the drop from 1298 to today's 1262 as Wave B. We are now on our Wave C to the 1305-1315 selling zone. Then, the dominant down trend should resume in July.
That's my story and I'm sticking to it!
Have a great Friday!
Your blogger on the beat,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, June 22, 2011
Terry's Model Portfolio: Day 2
Trade execution:
Sell July 125 SPY puts @ 1.04
Time: 6:33 a.m. (PST) Wednesday morning, June 22, 2011
Loss: 5.56%
Account Balance: $9,454.00
Reason for trade: 4th day up in a downtrend. Probabilities favored a down move to some extent.
Assessment: Daily trend turned up during the day on a daily chart. The MACD lines have crossed and are pointing up on a daily chart. Stochastics has turned up out of oversold level. Entered trade too early for puts on the market. Sold quickly to limit losses.
[Explanation for the lay person- Yesterday, I determined that 1290-1295 was a sell zone. Assuming a down trend, this zone was a good place to buy puts on the SPY. SPY is a fund that mirrors the performance of the S&P 500 Index. Puts are contracts to acquire a security at a certain price. Now, if the price of the underlying security drops in value below the strike price, then the price of the put will increase for a profit. If the price of the security does not decrease or even increase, then the price of the put will decline. I entered the market yesterday at roughly the 1290 level with full anticipation of a drop to at least the 13-day moving average of 1280. But I was alert to being wrong. If wrong, then the proper play is to limit one's losses quickly.
Unlike the TSP which is better suited for a middle-aged guy with other commitments and obligations, puts on the SPY require minute to minute monitoring. Its like leverage. If you are right on the market direction and timing, you will see a profit right away. If you are wrong on either market direction or timing, cut your losses quickly and move on. The reality is that all investors and traders are wrong about half of the time. See Nicholas Darvas and his book on investing. The key to profits is to exercise iron discipline. When you're right, let your gains ride. When you are wrong, get out and look for a better opportunity. There are always opportunities in the market.
The opening bell allowed me to quickly assess the character of the market. If the market were bearish on a daily basis, the high of the day would have been the open. Instead, the market consolidated around 1294. A high level consolidation is not the time for ownership of puts.]
Strategy: We are now in a high and tight Bull Flag Pattern. This pattern is considered the must bullish and strongest pattern out there, according to Thomas Bulkowski. Longer term, we remain in a down trend with resistance @ roughly 1315.
Later,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sell July 125 SPY puts @ 1.04
Time: 6:33 a.m. (PST) Wednesday morning, June 22, 2011
Loss: 5.56%
Account Balance: $9,454.00
Reason for trade: 4th day up in a downtrend. Probabilities favored a down move to some extent.
Assessment: Daily trend turned up during the day on a daily chart. The MACD lines have crossed and are pointing up on a daily chart. Stochastics has turned up out of oversold level. Entered trade too early for puts on the market. Sold quickly to limit losses.
[Explanation for the lay person- Yesterday, I determined that 1290-1295 was a sell zone. Assuming a down trend, this zone was a good place to buy puts on the SPY. SPY is a fund that mirrors the performance of the S&P 500 Index. Puts are contracts to acquire a security at a certain price. Now, if the price of the underlying security drops in value below the strike price, then the price of the put will increase for a profit. If the price of the security does not decrease or even increase, then the price of the put will decline. I entered the market yesterday at roughly the 1290 level with full anticipation of a drop to at least the 13-day moving average of 1280. But I was alert to being wrong. If wrong, then the proper play is to limit one's losses quickly.
Unlike the TSP which is better suited for a middle-aged guy with other commitments and obligations, puts on the SPY require minute to minute monitoring. Its like leverage. If you are right on the market direction and timing, you will see a profit right away. If you are wrong on either market direction or timing, cut your losses quickly and move on. The reality is that all investors and traders are wrong about half of the time. See Nicholas Darvas and his book on investing. The key to profits is to exercise iron discipline. When you're right, let your gains ride. When you are wrong, get out and look for a better opportunity. There are always opportunities in the market.
The opening bell allowed me to quickly assess the character of the market. If the market were bearish on a daily basis, the high of the day would have been the open. Instead, the market consolidated around 1294. A high level consolidation is not the time for ownership of puts.]
Strategy: We are now in a high and tight Bull Flag Pattern. This pattern is considered the must bullish and strongest pattern out there, according to Thomas Bulkowski. Longer term, we remain in a down trend with resistance @ roughly 1315.
Later,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tuesday, June 21, 2011
Terry's Model Portfolio: Day 1
Trade Execution:
Bought 90 July 125 puts on the Spiders Fund (SPY).
Limit price filled @ 1.10.
Time: 7:33 a.m. (PST), Tuesday, June 21, 2011.
Further details this evening.
Bought 90 July 125 puts on the Spiders Fund (SPY).
Limit price filled @ 1.10.
Time: 7:33 a.m. (PST), Tuesday, June 21, 2011.
Further details this evening.
Terry's Model Portfolio: Day 1
Good morning, Club members!
Welcome to this real time exercise. In an attempt to liven things up, I have created a self-imposed contest. My mission is to secure a 100% rate of return on a hypothetical portfolio for Terry by November 21, 2011. I have at my disposal the world. I can use Elliott Waves, moving averages and trends. I can do futures, mutual funds, or stocks, or anything else under the sun. I can go long or sell short. All that matters is beating the 100% goal by November 21, 2011.
Be mindful that I have a day job. So, this will add stress to the endeavor. Unlike the TSP which suits my middle-aged comfort level, the world of high finance is a young person's game. It is stressful because I have to make snap decisions in real time. I will be tapping into my knowledge and experience over the years. I will make mistakes. That is part of the game. The key will be to let the profits run and keep the losses short.
The first hour of the trading day is the most important hour. You can get a feel for the character of the day. Over my left-hand shoulder,I have on CNBC. I see the quotations roll by on the lower screen: BHP, FCX, VXX, WAC, SDS, etc. What to choose? What to choose?
It's 43 minutes to the opening bell. I will get dressed for the day now, so that I can give the opening hour as much focus as possible.
The Set up: We are in a down trend. Thus, rallies should be sold. Of the most importance to me is a selling zone reflected in the long tails on a daily chart in the 1290 - 1294 zone. I consider this a selling zone.
Inspirational Quote: "For example, today I bought the S&Ps when they were down sharply. Two weeks ago, I had written down the number 248.45 as the best entry for the S&P. The low today was 248.50. Consequently, I was able to buy into weakness today and make a good deal of money. I had a plan, I carried it out, and it worked." Marty Schwartz, quoted in Market Wizards, pages 274-275.
Cheers!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Welcome to this real time exercise. In an attempt to liven things up, I have created a self-imposed contest. My mission is to secure a 100% rate of return on a hypothetical portfolio for Terry by November 21, 2011. I have at my disposal the world. I can use Elliott Waves, moving averages and trends. I can do futures, mutual funds, or stocks, or anything else under the sun. I can go long or sell short. All that matters is beating the 100% goal by November 21, 2011.
Be mindful that I have a day job. So, this will add stress to the endeavor. Unlike the TSP which suits my middle-aged comfort level, the world of high finance is a young person's game. It is stressful because I have to make snap decisions in real time. I will be tapping into my knowledge and experience over the years. I will make mistakes. That is part of the game. The key will be to let the profits run and keep the losses short.
The first hour of the trading day is the most important hour. You can get a feel for the character of the day. Over my left-hand shoulder,I have on CNBC. I see the quotations roll by on the lower screen: BHP, FCX, VXX, WAC, SDS, etc. What to choose? What to choose?
It's 43 minutes to the opening bell. I will get dressed for the day now, so that I can give the opening hour as much focus as possible.
The Set up: We are in a down trend. Thus, rallies should be sold. Of the most importance to me is a selling zone reflected in the long tails on a daily chart in the 1290 - 1294 zone. I consider this a selling zone.
Inspirational Quote: "For example, today I bought the S&Ps when they were down sharply. Two weeks ago, I had written down the number 248.45 as the best entry for the S&P. The low today was 248.50. Consequently, I was able to buy into weakness today and make a good deal of money. I had a plan, I carried it out, and it worked." Marty Schwartz, quoted in Market Wizards, pages 274-275.
Cheers!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, June 20, 2011
Terry's Model Portfolio: A Work in Progress
Let's have some fun.
I could write another dry daily update about the market today. The market continued to bounce within a symmetrical triangle and the trend remained down. Volume was awful, thus producing a delicious rising wedge pattern. But I decided to be more creative.
Let's assume that I am a Hedge Fund Manager. I manage Twyman Asset Management. Terry is my first client. After assessing market conditions, I decided that we can grow his account by least 100% between tomorrow and November 2011. Terry doesn't know what to make of this goal but he decides that I must know something about the market.
I lay out the following terms and conditions for this campaign:
Beginning Portfolio Balance: $10,000
Duration of Campaign: June 21, 2011 to November 21, 2011
Fund Manager: Wink
Fund: Twyman Asset Management
Rules of Engagement: The world is my oyster. I can make 1 trade, 5 trades, 10 trades or no trades at all. I can buy or sell. I can use stocks, bonds, treasuries, derivatives, exchanged traded funds, options, commodities, mutual funds or ultra funds, and, of course, cash. I have total discretion.
Execution of Trades: I must notify Terry of the trade confirmation as soon as possible. No hindsight investing.
Five Strikes Against Me:
1. I only have five months to reach my 100% goal. Fund managers normally have 12 months to reach their goal.
2. I don't have a cracker jack staff of tens of researchers to go out into the field and research companies. Its just Wink and his lap top.
3. We are in a strong Bear Market. It is easier to lose money than to make money.
4. 100% rate of return is unheard of for a Fund Manager. According to my preliminary research, the top Hedge Fund in 2010 was Bridgewater Associates: +38%. "Ray Dalio's 'zen' approach to an investment firm paid off as they returned one of the higher totals across the hedge fund industry last year." They manage $75 billion in global investments. Wink will be managing Terry's hypothetical $10,000 portfolio.
5. I am fading myself in a sense. The trend is down. Attempting to make any money, let alone 100%, will require a good sense of timing and market skill.
Conclusion. This exercise will be in real time. Can Wink grow Terry's portfolio by more than 100% with five strikes against him? Can Wink leave Bridgewater Associates in the dust for the year 2011? Stay tuned....
Your hypothetical fund manager at the starting gate,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I could write another dry daily update about the market today. The market continued to bounce within a symmetrical triangle and the trend remained down. Volume was awful, thus producing a delicious rising wedge pattern. But I decided to be more creative.
Let's assume that I am a Hedge Fund Manager. I manage Twyman Asset Management. Terry is my first client. After assessing market conditions, I decided that we can grow his account by least 100% between tomorrow and November 2011. Terry doesn't know what to make of this goal but he decides that I must know something about the market.
I lay out the following terms and conditions for this campaign:
Beginning Portfolio Balance: $10,000
Duration of Campaign: June 21, 2011 to November 21, 2011
Fund Manager: Wink
Fund: Twyman Asset Management
Rules of Engagement: The world is my oyster. I can make 1 trade, 5 trades, 10 trades or no trades at all. I can buy or sell. I can use stocks, bonds, treasuries, derivatives, exchanged traded funds, options, commodities, mutual funds or ultra funds, and, of course, cash. I have total discretion.
Execution of Trades: I must notify Terry of the trade confirmation as soon as possible. No hindsight investing.
Five Strikes Against Me:
1. I only have five months to reach my 100% goal. Fund managers normally have 12 months to reach their goal.
2. I don't have a cracker jack staff of tens of researchers to go out into the field and research companies. Its just Wink and his lap top.
3. We are in a strong Bear Market. It is easier to lose money than to make money.
4. 100% rate of return is unheard of for a Fund Manager. According to my preliminary research, the top Hedge Fund in 2010 was Bridgewater Associates: +38%. "Ray Dalio's 'zen' approach to an investment firm paid off as they returned one of the higher totals across the hedge fund industry last year." They manage $75 billion in global investments. Wink will be managing Terry's hypothetical $10,000 portfolio.
5. I am fading myself in a sense. The trend is down. Attempting to make any money, let alone 100%, will require a good sense of timing and market skill.
Conclusion. This exercise will be in real time. Can Wink grow Terry's portfolio by more than 100% with five strikes against him? Can Wink leave Bridgewater Associates in the dust for the year 2011? Stay tuned....
Your hypothetical fund manager at the starting gate,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Terry's Question: Opportunity in a Bear Market
One more thought for Terry--If you want to make money with low risk and high reward in a Bear Market, why not short the S&P 500 Index? Whenever the S&P 500 Index hits the downward sloping 50-day moving average on a daily chart, go short with the spiders ETF (SPY). As long as we are in a Bear Market, I (must...not...say...guarantee/smile) assure you that you will be trading wisely. Better yet, whenever the S&P 500 Index stochastics on a daily chart return to an overbought condition, (above 80), go short! (must...not...say...like...taking...candy...from...a...baby.../smile). In my experience, those trades (shorting an overbought market in a down trend) are as close to sure profit as you can get on God's green earth.
I've been thinking about Terry's question more and more. Maybe, I will set up a hypothetical portfolio for Terry from June 21 to November 21. My goal would be to earn 100% profit in real time in a Bear Market. If I have the time and if the day job permits, I might set it up....That might be fun for our Club members.
Anyway, Terry, I'm an overworked lazy toad at times. I was content to just beat the S&P 500 Index by year's end. Might as well have some fun and show off my skills in the process/smile.
We'll see.....
Your inspired lunch time writer,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I've been thinking about Terry's question more and more. Maybe, I will set up a hypothetical portfolio for Terry from June 21 to November 21. My goal would be to earn 100% profit in real time in a Bear Market. If I have the time and if the day job permits, I might set it up....That might be fun for our Club members.
Anyway, Terry, I'm an overworked lazy toad at times. I was content to just beat the S&P 500 Index by year's end. Might as well have some fun and show off my skills in the process/smile.
We'll see.....
Your inspired lunch time writer,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
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