08/30/2014 Weekend Update

[Cobra]

The institutional buying and selling chart (courtesy of stocktiming) shows record low distribution and falling in accumulation despite near new high, so guess we might see a pullback soon.

inst b sell.png (16.66 KiB) Viewed 6020 times

Smart money shorted a little more. Generally I'd like to see a huge short then some chances a top of some kind is near. The short this week is far from huge, so says nothing it.

[Cobra]

Summary of the week's stock picks. Not a bad week.
viewtopic.php?f=10&t=1404&p=170004#p170004

[Cobra]

preview of the next week's stock picks.
viewtopic.php?f=10&t=1411&p=170006#p170006

[Al_Dente]

What’s going on here?
This is the first time in at least two years that M1 made a lower low on the daily
M2 is fine
Must monitor that one ...…

Here it is on the QUARTERLY chart….. last quarterly downtick was in 2009……hmmm

[Al_Dente]

Looks like folks bought plenty of index puts Thursday and Friday

[lostlamb98]

Looks like folks bought plenty of index puts Thursday and Friday

829cpci_png.png

Short term top

[DellGriffith]

Here's an idea for identifying SPY corrections. Its 8-1 recently but longer term has failed more often. I wouldn't use it as a primary signal, especially as is. It could be something to workbench. Adding more rules or reasons to ignore some signals could make it a lot better. I haven't played around with it much tho. Maybe I'll tinker with it in the garage over a weekend.

My first thought however is that the higher the slow line is on the MACD when you get a cross, the more valid the signal is. The slow line is currently 1.41 as we cross which is VERY high for daily SPY. So the odds of a top are higher than normal here.

[fehro]

for the contrarian trade, bulls nearing the nosebleed territory… http://www.aaii.com/sentimentsurvey/sen ... ts?adv=yes

[fehro]

Fear & Greed Index… http://money.cnn.com/data/fear-and-greed/?iid=SF_INV_FG

[pezhead9000]

Weekly Economic Analysis:

"Strong commodity price gains come in a strong economy. Last week's swoon was reversed this week.

My summary this week is brief: literally every weekly indicator was positive with the exception of mortgage applications, which were negative (although they have gotten "less worse"), and gasoline usage. Every other long leading, short leading, and coincident high frequency indicator of the economy was positive.
At the same time, adjusted 2Q corporate profits as reported in the revised GDP this week failed to make a new high for the third quarter in a row, which is a negative in the long leading indicators.

Manufacturing as measured by steel production was the strongest in several years, confirming the extremely strong Chicago PMI. On the other hand, Gallup consumer spending, while positive, was relatively weak, as it has been for over a month, confirming the weak personal spending report."

The most important items to watch are interest rates and housing permits. If the decline in rates continues, housing will get a second wind. If rates reverse higher, then the outlook for 2015 becomes weaker."

http://community.xe.com/blog/xe-market- ... th-edition

[Al_Dente]

Busy week ahead: this filters for important US reports only.
So it doesn’t list a most important event: The ECB meeting Thursday. What action will be announced? (possible rate cut? an ABS purchase program?)

[Al_Dente]

Top 10 best SPX stocks YTD (compare with SPX return +10% YTD with dividends reinvested)

[Al_Dente]

The two week uptrend (week of aug 11 and week of aug 18) stalled last week to what looks like a plateau (week of aug 25). The little H&S failed last week (already erased on this chart) as bulls pushed ahead. Momentum is slowing but it’s not dead yet.
Consolidation here is bullish (a concept previously learned from Cobra).
Bulls will need to prove themselves and leap across double-top resistance to a new high… not much of a stretch as SPY closed Friday just .11 cents away.
Surely SPY bulls can manage a lousy .12 cents and more to confirm. If not, then I’m guessing that stops will be taken out en-masse just under 199.39 which was the low set on Thursday, and support just below that is at 199.06 (the 7/24 high) “line in the sand”

Shaeffer’s shows max open interest for "9/5 expiration" puts at the 198 strike and the 202+ call strike

The case for following momentum until it fails:
"Momentum is the ‘tendency of investments in every market and asset class, to exhibit persistence in their relative performance for some period of time' (Berger et al. 2009). Since the first significant studies on momentum in the 1990s (Jegadeesh and Titman 1993; Asness 1994), this theory has been one of the most strongly tested in all of modern finance, with more than 300 academic and practical papers including 150 in the past five years. Asness et al. (1997), the first to evaluate momentum across countries, concluded that even accounting for currency effects, the momentum effect was consistent. In a subsequent study, Balvers and Wu (2004) revealed that a combination of short-term momentum and intermediate-term mean reversion provide strong risk-adjusted returns. Extending the work of Asness et al. (1997), Griffin et al. (2004) find that price and earnings momentum profits are significant globally.
Again, the theme that recent outperformance tends to continue in the near term is consistent across geographies and asset classes.”
[David Garff on momentum, from “The Journal of Investment Consulting” Volume 15, 2014]

[taggard]

Consolidation here is bullish (a concept previously learned from Cobra).

"Momentum is the ‘tendency of investments in every market and asset class, to exhibit persistence in their relative performance for some period of time' (Berger et al. 2009). Since the first significant studies on momentum in the 1990s (Jegadeesh and Titman 1993; Asness 1994), this theory has been one of the most strongly tested in all of modern finance, with more than 300 academic and practical papers including 150 in the past five years. Again, the theme that recent outperformance tends to continue in the near term is consistent across geographies and asset classes.”


Thank you al

just riffing a bit here--maybe it's just me--but lately i have been running into "stick with the trend" "momentum" quotes. in this quote above the first amusing thing was the idea that 300 academic papers got knocked out. during the middle ages peer reviewed journals touted "the earth as the center of the universe" and "rational markets" and a classic "herbalists and witches will sink if tied up and tossed in a pond--good people will float". Nowadays we are passed all that and finance is as solid as the new physics. still the idea that in an uptrend the next data point is more likely up--it both appealing and not surprising. of course neither is the idea that momentum creates the crash--because when it seems logical and rational to go with the flow--everyone is on the same side of the rowboat and it turns over.

i believe and think al does too--that you should trade it as it plays . But perhaps more subtly the later in the trend--the more the idea of "sticking with the program" has appeal which is "human nature" or "looking at the past". so you don't see stick with the trend near bottoms and mostly not at mid points too much. .

the last move up in bulls is often just breathtaking David Rosenberg noted barrons a while back that "Tops typically show a melt-up of 11% over 30 days which represents a first peak." so that certainly supports going with the flow. and the idea that there i reason the rowboat turns over.

last night i wound up talking to one of my neighbors a dude adding a tile floor to a rental. i showed him the monthly charts for the last 20 years with a 20 ema on one chart--and the same chart with trend lines drawn on another (many normal people don't really "get the point" or "feel" EMAs so large thick (size matters) trend lines are more effective). after the usual "it cannot be that simple" (why not? try to make a counter argument to the idea that "a trend continues until it ends and when it ends something different happens") to "so how does leverage fit into this" (it's not important until you get the idea of the trends wired to an extreme) to "how do you optimize entries and exits" (unless you want to lose money don't try to be smart--be stupid--oddly in day to day life people seem to think being stupid is simple and easy--but my experience is that it's near impossible--the desire to try to "know what is going to happen" is overwhelming. ) to "dude you could make millions teaching this stuff" (and get drawn and quartered when people ignore everything you are saying--lose money and then blame you--since it was your ideas they were ignoring at the time--they messed up.)

to the dreaded "what do i do-- i want to make tons of money now?" (ok this one you have to answer in terms they know--this guy is deeply involved in the long distance running in-dust-ry. so i said "pretend i want to be placing in major races now and i have never run--what do you tell me?"--first he said run intervals--then after being prodded he said--ok you just have to light train for 6-18 months then run intervals and do the other hard core stuff. this is why you paper trade--and then scale no leverage--then scale leverage while keeping records when you are starting out)

so once again the second you are desperate and motivated to act--is egg-xactly the time to sit down and chill.

if you are serious you will get there eventually. at the start the more you work hard and put in time--the longer it will takes. the problem is discussing the idea that you are not only learning a new language--but you are also (far more importantly) learning a new emotional language.

on an emotional level the mistake people tend to make is to believe "sooner or later it's not going to feel like i am jumping off a cliff entering a trade". the answer to this is "dude if you are lucky it won't". why? because if you feel certain etc--you are trading using an illusion (false model/false belief) or you are trading too small (so again not trading--making money is the issue). Like a bike racer you do have to "spin" when you train a lot (so long boring rides that build and maintain a base esp cv but connective tissue etc too) But eventually you have to get outside your comfort zone (intervals and huge trades). generally the two comfort zones for me and most people i have met seem to be "the idea i am trading" and "size" of the trade.

learning to trade technically and emotionally is best done like learning Spanish or another language. move to mexico and relax it will seep in. listening to kids on the street. and more to the point not just the translation of "chill" to "tranquilo" but the actual emotional content conveyed by the words which is not exactly the same. you alter yourself when you become a trader or learn Spanish in any serious way. i am reminded of this every time i talk to a citizen (as opposed to players) you cannot phrase anything easily--as they cannot easily get the content of the words. to a trader like you a line like "when asked what the market will do he said "it will fluctuate" is just wonderful and you are very happy.

to a citizen the statement appears meaningless. they will ask "what is the point" the point is the exact words tell you how to trade it. (any honest simple minded statement about current action will instantly tell a serious trader what to do--eg we seem to be in a range--oh i will short tops) for beginners or citizens--at best you are reduced to finding an experience in their life and translating the idea--that approach is fraught with danger also but is more likely to convey the feeling of something like "waiting is active--you wait in an aware state--knowing that you will see that moment when it appears and not anticipating it because it will alter your speed of perception. (next time you are driving an old beater and pull up next to young kids gunning dads porsche at a red light--breath deeply and watch the light out of the side of your eye--not directly--you will beat them off the line every time--the quality of their car or their youth makes no difference--that is what chilled means entering a trade to me--this is because your central nervous system will work usually 2-10x faster than theirs in that situation.)

so after you get serious about trading--you are different in various ways--and when starting out--it's worth considering if you want that sort of difference. if you are learning already--great you still need to get the idea you are hearing and thinking things not exactly as a trader. if you are trading then you are trying to discard the desire for clarity--or fortune telling and trying to relax outside your comfort zone into that outsized or leveraged trade.

explaining this to a citizen is always--amusing and terrifying to both of you--for different reasons--esp that you cannot trust the econ data/studies/indicators/thinking and experience/dudes who say they know/stats. the only thing you can trust is that when you do the B.A.S.E. jump thing--you will stay focused and centered in that moment. "sung" or classic chinese for "chill" is all you get period if you are totally honest--and it's what you need in the end. So the image is cool and in control and the reality is something else.

between the idea and the reality. . falls the shadow (ts eliot)

in my own country i am in a far-off land. . .
. . . when i lay down i have a great fear of falling (francous villon)

good luck to all in sep and oct. . .

[ALdaytrade]

Bullish? Really?

Check some headlines!

The world is falling apart. There is turmoil in every corner of the world. First, perhaps we will go down prior to a bullish situation. Some things have to be resolved.

[Al_Dente]

Hi ALdaytrade
I showed a sloppy box or what Bulkowski calls a “rectangle top”:
“The breakout direction is unknown until it happens but the breakout is upward 68% of the time.”
That means the chances for a breakdown are 32% and my stops are as previously stated: “199.39 which was the low set on Thursday, and support just below that is at 199.06 (the 7/24 high).”
Either way, we’ll be fine.
(The world is always falling apart.)

elsewhere: thanks tagg

[quientuves]

Aldaytrade... which headlines??

Now that we know that even Central banks are buying equity futures and options... now all the people is waiting a european money waterfall...

The only headline that matters to make this market bearish is one notice saying Draghi comments were fake, Merkel still has the printed keys and she doesn't want to use them...

Any other thing... make simple little swings... nothing else...

[Out of Bounds]

FYI, if anyone followed me into TMUS, up 7% today in Germany. Iliad is trying to get financing and/or partner to buy at $35+ -Bloomberg
GL

[johnnywa]

Here's an idea for identifying SPY corrections. Its 8-1 recently but longer term has failed more often. I wouldn't use it as a primary signal, especially as is. It could be something to workbench. Adding more rules or reasons to ignore some signals could make it a lot better. I haven't played around with it much tho. Maybe I'll tinker with it in the garage over a weekend.

My first thought however is that the higher the slow line is on the MACD when you get a cross, the more valid the signal is. The slow line is currently 1.41 as we cross which is VERY high for daily SPY. So the odds of a top are higher than normal here.

WENT SHORT FRIDAY CLOSE...PROBABLY GO 8-2 LAW OF AVERAGES!!!!

[DellGriffith]

On the terrorism issue, there are concerns over "significantly increased chatter". The reports are only coming from the Washington Times and Fox News and here they are:

http://www.washingtontimes.com/news/201 ... -911-near/
http://www.foxnews.com/us/2014/08/29/on ... -bulletin/

The general idea I'm getting is that:

1. ISIS (the Islamic State of the Iraq and Syria) split off from Al Quaeda earlier this year.
2. ISIS and AQ are now rivals trying to gain recruits in the region.
3. ISIS wants its own signature "911" for recruiting purposes, to show its as good as AQ or even "one-up" AQ.

ISIS is making it a point it wants its own 911 and to take credit for it. Some talk about car bombs but nothing very specific. There has been increased chatter before and nothing came of it, altho 911 itself was prefaced by increased chatter. And there are no credible threats at this time.