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Thursday, April 29, 2010

Cloud Walk


Today's market opened with a bang and stayed there most of the day.  My observation with cloud walk in FAS is it opens up with a gap and progressively gets better until about 11.30 then there is a sharp sell of usually temporary and FAS closes near the high of the day.  There was a small window of opportunity at 7.10 and I jumped on it and got in at 104.5 and sold it at 109.5.  Having lost some very good chances yesterday I wanted to lock in some profits.  I am looking for a follow thru tomorrow.  Many instances I have noticed this process can continue anywhere between 2- 11 days before a top is made.  SPX did go above 1206 to 1209.36.  Giving a plus sign.  FAS closed at or above the DOMA 77 in 60, 30, 15 min charts  but not very convincingly.
  It is bullish but iffy.  The problem was DOMA was not near the bottom but near the top.  It took quite bit of move just to get to DOMA and after that there wasn't much steam left.  I have drawn channels as an overlay on to the envelope to give a better picture of the turns.  The midpoint of the channel is quite  important level both in declines and advances.  There are two immediate resistances one at top line of the channel and next at the top line of the envelope.  They should give an indication of the follow thru.   FAS did close positive and that is always bullish.
The second chart is FAS five minutes.  I put it up to illustrate the violence that is followed by a calming top or a bottom.  Mostly they are not a V formation.  Both steep and flat take more than a day finish their jobs.  The end of the month window dressing has one more day and if buyers show up to pretty up their portfolios we may get a new high.  I will be watching DOMA and DMRM to look for follow thru.  I will stay bullish as SPX is above the DMRM 1206.  I have very little interest in looking at EW at this point may be a little later if the process of decline matures.   .

Wednesday, April 28, 2010

Long jump from 40 points to P3


It was worth looking at yesterday's close as we started trading today.  FAS closed at 98.15 from a low of 97.53 that is less than 1% from the bottom.  It is one of my observation that When FAS closes at the low or near low ( within 1%) next day morning is reflex up move.  Which we got today as FAS moved to 103.95 and that is $5.75.  On the downgrading of Spain debt FAS moved to 99.42 and I went short precisely at 100.62.  The FED releasing of the minutes did not bring anything to the Market up or down.  There are three trades that one can potentially make.  (1) First move usually up (2) counter to 1 and down (3) back up and higher than 1).  The second and third moves are much more realistic to play.  These are very fast moves. I am talking less than 10 minutes long  and I have done them quite correctly many times.  I ignore first and do the second and third.  Today nothing much happened that was buzz kill.  Flat O Flat all day.  Near close FAS came back down to 100.1 and I bailed out at 100.28 not much money.  Just didn't feel good enough to carry the short home.  The big news to me was today was an inside day.  On Almost all ETFs and SPx we got a LH and HL.  Inside days are pauses before continuing the trend.  There is an excellent chance tomorrow would be an outside day.  Because the range was very small today and can easily expand.  My DMRM is giving very small profits or small loss.  This happens when the trend is not clear.
I plan to switch to giving more attention to DOMA and trade based on that.  60 min DOMA 77 is what I will be using.  That will reduce the number of trades and put me on a better hitting average. The chart on the right is TNA. Its Doma is 103.  As with any decline the perma bears will come out of hibernation to claim that it is the end of the world and show parallels to as far back as 1930 or as recent as 2007.  I take these with a grain of salt as they have been calling for the end of P2 and start of disastrous P3 for quite sometime now. Grand is one of our unbiased EW analyst on CIL and you can get his superb expertise in our chat room. I am bearish will stay that way until I see a 1206 or better on SPX. 

Tuesday, April 27, 2010

The GS BS

Today's market action can be described by one word.  Booyah!.  I expected this market to gap open,   make a low  lower than 100 on FAS and FAS's negative KOD to give rich returns.  FAS made a new low at 97.53.  There were couple of head fakes meaning false long signals.  One one I got burned. I went long at 102.63 FAS went to 104.32  and came right back gave a short signal at 101. I sold my long for a loss of 1.4 at 101.2 and went short at 100.83. That is how much FAS moved between the sell and subsequent short order.  I covered at 98.11.  I am all in cash.  All indicators are extremely negative.  FAS is way under DOMA 77 on 60,30,15 min charts.  New MACD crossovers have occured in SPX daily chart.  SPX broke thru some key support areas.  VIX was up a whopping 30% today. Sounds a little extreme.  Tomorrow is day 288 from March 6th 2009 and also Fed meeting minutes release date.  GS provided lot of action today.  Tomorrow could be calming day.  If tomorrow is a violent day like today was it will signal the near term end of a move if it is quiet and calm this decline phase may continue.  I will not go short if the market gets hits again.  If there is a rally followed by a sell signal that may the time I will take a short position.  All envelopes were blown away.  JPM, AIG BAC, Wells and MS were all down substantially.  However GS was up.  I am not bullish but am itching to go long.

Monday, April 26, 2010

Taxing top?

The cutout on the left is  FAS in the last few days. 
April 15th tax day it made a high of 119.22 and made a low of 100.04. I see that as (a) and a rally to 114.88 as (b) and FAS is coming down in a (c). FAS made a lower high and a lower low and that is negative. FAS also has a negative Dino's KOD today and that is a negative.  FAS closed close to low and that is a negative.Had it closed at the low then it would have been a positive on FAS.  We finished 286th trading day and are waiting to see what happens on day 288, a  Gann date.  FAS closed below the DOMA 77 on 60, 30 and 15 min chart and they are negative. FAS gave a sell short signal at 111.2.  I have marked on the graph the Long points (green arrow) and Short point (red arrow) to show its relation to Doma 77 on a 5 min chart.  Looking at the chart I would surmise we should go lower and take out the 100 low and go lower.  How far I wouldn't know.  I highly respect Columbia1 in our chat room and he put it this way something big going to happen.  Everything is getting very compressed.  The link to his blog is on the right under **** EW trends and charts ****.  He has some very good analysis   I am bearish and looking to see if the market  can come down a bit.  GS is on the hot seat tomorrow There could be some fireworks and Fed minutes are due in a day or two that also makes the market more active.  I will be watching the DOMA for a backtest.

Sunday, April 25, 2010

Time and Price

Gann's method had 2 components time and price.  Price was primarily based on Vibrations of a stock.  In layman's terms it was the speed of movement of a stock up or down.  Many who follow assume a 1 point move per day or per candle that Gann assumed.  With that being the slope of 1 one draws a 45 degree line from the bottom. Say 666 on March 6th 2009.  and as long as spx is above this 45 line it is bullish and below is bearish.  Based on that we are bullish.  We have completed 285 days of trading and spx is above (666+285 =)  951 with that one is bullish. One can also draw 2x1, 3x1, 4x1 and 8x1 where price move 2, 3, 4 or 8 times the vibration  or points  in 1 day. One may be able to estimate the move to the next angle line.  This is not as complicated as it sounds it is laborious and at best is an estimation and I did not get very good results.
The second aspect in Gann's studies is time.  The Gann emblem on the left is from March 06th  2009.  The dates in the middle are Gann turn date.  I have marked those on the right daily chart in the form of squares.  
The seems to give very good fore warning of the tops and bottoms in the making.  The green Gann emblem is from Feb 05 2010nd the daily chart of spx is from Feb 05th 2010.  The next big  turn dates coming up are 288 days from March 6th 2009 on 28th of April.   May06 is 90 day turn date from feb 05th 2010.  Both these points that we may be near a top.
Also our very well respected Astro person in our CCL ( Incidentally you should visit our chat room we discuss a ton of EW, Astro, Cycles, Channels, and a number of market indicators) Miss Malibu is also calling for a good size turn.  I am totally in cash and playing DOMA and DMRM if and when we hit the top or a top I will know.  No negative indicators were generated.  I think use of progressive stop is the way to go so I don't have to pick the top or bottom.  I will continue stay bullish until something changes.

Thursday, April 22, 2010

A good fluorescent bulb is not for lights only

Yesterday was a outside day to the down side on SPX and FAS and that was a negative.  I went long in the  after hours at 109.77.  When the market opened with a lot of negative news from Greece I was not much confident that that this could be anything but THE negative day.  As FAS opened and in 2 minutes went to 105.8 and slowly started climbing.  I was beginning to believe that this could be a positive Dino's KOD day. I actually  misread 105.8 as 105  (the light is a little dim where my table) and 108.36 gave the long signal.  I bought some more and later noticed it was 105.8 and the signal wasn't till 109.2.  After Obama's .  speech to wall street the market took off slowly and then rapidly to a high of 113.3 and I got out at 112.8.  What would have been a disaster was narrowly avoided. 
Obama's speech should be put in perspective.  This is the first time the markets have gone up after his speech.  On many previous occasions it had only gone down.  SPX made a lower high and lower low that is negative. Not a trend changer but a negative. AMZN and MSFT were down sharply after the close on unmet earnings that is a negative. Finally I have a new laptop that is all loaded up.  I will have some Dino's octavia and Dino's modified Gann over the weekend.  My trading techniques are simple It mainly involves DOMA, DMRM, Envelope,  Dino's KOD and today's highs and lows compared to previous days highs and lows.  I do look at my modified Gann, Octavia, cycles, channels, Elliot waves and market indicators (RSI getting the highest rank) but very seldom make my buy and sell based purely on one  of these.  I am bullish and will stay that way until we take 1083 out on SPX.  I will not be trading tomorrow. 

Wednesday, April 21, 2010

Ballerinas are not the only ones on toes




The drop in SPX from 1213.92 to 1183.62 was 30.3 points and its equivalence in FAS was from 119.22 to 100.04 a drop of 19.18.  And the subsequent rally to 1210.99 was 27.37 points on the SPX and in FAS it was to 114.50 and was worth 14.44 points.  SPX has rallied 27.37/30.3 or 90% of the drop and FAS has come in  at 75% (14.44/19.18).  Generally FAS is faster than SPX except in this instance it is running behind.  This morning FAS in a hurry to get to the top line of the 15 min envelope and playing from the commodity traders book I sold FAS at 113.80 and waited and bought FAZ at 11.29 when FAS came back in the envelope and later sold it at 11.77. 
I am not going to play FAZ. It  moves in pennies and I have to buy large quantities to make any money. I did get a short signal on FAS at 110.84 and bottomed at 106.81.  Full $4.  This is same as the move in FAZ from 11.29 to 11.84.  I got a signal to go long at 110.23
very close to end of the day.  I went long in after hours at 109.63 but not very comfortable with it for FAS dropped to 108.37. It was an outside day in SPX and FAS with Higher High coming in the morning and Lower Low coming late in the day and that is negative for FAS and market.  Both closed in the negative not a positive sign.  FAS closed higher above the DOMA 77 both in 60 min and 15 min charts that is positive.  It is possible that this 27 point  rally we had is a counter to the mini correction of 30 points.  That seems so oblique a statement.  90% is a lot.  Unless we get a severe hit and take out the 1183 low I am going to continue to depend on DMRM and play along.  I have had a very good streak with envelope and DMRM I wouldn't be surprised if one of my near term trades goes sour.  I will be on my bullish toes.

Tuesday, April 20, 2010

To err is human to forgive oneself and move on is economical



I have a lot of respect for commodity traders.  The leverage is much higher in currency and commodities than equities hence one has to be quick to accept a mistake much faster than in ETFs and stocks.  After the Goldman story all indicators were crushed but a fresh new life sprang up today.  Yesterday's low on SPX was 1183.68 the DMRM was at 1206.20.  It happened rather quickly in the morning giving the rest of the day to buy.  Also FAS gave a buy signal at 104.47 yesterday but I was in cash this morning and waited till after 7.20 to buy. Generally if there is gap open up or down at about 7.15 a.m. there is a counter move that is a good time to hop on.  FAS is back inside the envelope. That is the commodity trade.  Wait for the issue to go out of the envelope and when it comes back in at the lower line one buys and at the upper line one shorts. Also a third reason to buy was FAS crossed the 60 min DOMA 77 and the fourth reason was positive Dino's KOD on FAS I got yesterday.  With such high scores on buy the decision was simple. Chart on the right is FAZ.
I see a triple top. Blue portion gives the height and the duration. If it takes a long time to develop then they are not that good.  The bottom is generally as far away from the support line as the top is.  There is a ton of great information on this and many other topics at stockcharts.com choose chartschool.  I make it a habit to visit here and read for about 20 minutes when not a whole lot is going on in the market around 9 a.m.  Based on that the FAZ should show a sharp reversal at around 10.80.  I am bullish. 

Monday, April 19, 2010

Driving Thru San Fransisco Fog

Right in the middle of summer there are days when driving thru the Golden Gate Bridge in SF is very hard because of the dense fog.  Somehow with fog lights and GPS and little stop and go a a little slow and scooting real close to windshield I make it across.  I felt the same way about the market today.  After Friday's clobber of all indicators and channels and counts  it was extremely difficult to know where the market was before I could guess what the market's next move would be.  I found under these circumstances one there is a lot of money to be made and hesitation puts me into "could have ,should have"  I depend on DOMA and DMRM and start taking small profits.  On my right is my DMRM work sheet for FAS.  I was in cash this morning and went long at 104.24, short at 104.5 and long again at 104.50.  Each of the trades I made between 2 and 3 dollars.  I am back to 100% cash at end of day. Explanation for the work sheet is on the work sheet itself.  I Have also pasted the excel formulas. 3.2% is my own creation for FAS only.  Other ETFs have different numbers.  FAS trying to climb back into the envelope and one school of thought is to buy if an ETF/Stock goes out of the channel and comes back into it.  It is bullish.  We had a bullish Dino's KOD on FAS today.  Yesterday's negative Dino's KOD on FAS made money early in the morning.  Most of the bull ETFs are hitting against their DOMAs.  FAS did not make a lower low.  It made a lower high. That is an inside day.  After such big day on Friday it was expected.  So for the time being I will be playing DMRM until fog is cleared.  I am not bullish.

Sunday, April 18, 2010

Elixir of Stock Market

Man has been in this quest to find a system that would let him capture all tops and all bottoms.  Kind of like an Elixir. There isn't one.  The best hitting averages for me are from DOMA 77 and DOMA 172 on FAS. All systems work phenomenally for a short interval of time.   Same thing happened with our envelopes.  They were clobbered Friday.  With DMRM and DOMA I was able to pull out very decent day.  
Friday was one of the most active tradings days in a long time.  Particularly for a options expiration Friday.  I went short at 114.68. DMRM signal to go short was at 115.44.  I sold all my longs at 108.44  as FAS went thru the 60 min  DOMA 77  at 106.82 and gave a tiny bounce to 108.85. Covered my shorts at 101.91 went long at 103.2 (DMRM 3.2% of 100.04) sold long at 106.2  Went short at 105.92 and covered at 105.11 to close shop.  I left before the market closed.  That is 3 trades in a day.  When news breaks like it did on GS and market reacts most will just freeze and watch the news. I will trade when there is big news because my DMRM gives a number of signals on such days. They are high probability trades.  Now I am 100% cash.  
The severity of the hit makes me very suspicious that this down move is for real.   Generally the top is a process and there is a cluster of days 5-7 where the spx just trades and doesn't go any where.  This kind of drop happens near the bottom.  None the less we have a lot of negatives.  FAS is clearly thru the 60 min DOMA 77 The 15 min envelope is useless now and DMRM's signal is to go short.  And after a long time FAS gave a negative KOD signal.  All in all the picture is not good.
I also used to look at DOMA 172 on the 60 min chart.  I hadn't looked at it in a few days.  The bottom 100.04 was on the 172 DOMA.  Oh! Well..I will climb back on the short side the first chance I get meaning a 50 or so point dow rally and follow DMRM.  The trend for now is down. 



Thursday, April 15, 2010

Price is never right

This is option Expiration week. All equity, ETF and Index options expire tomorrow. The expiration is on the third Friday of each month. CBOE has a ton of information on options. Here is a link for 2010 expiration calendar. http://www.cboe.com/AboutCBOE/xcal2010.pdf There are two types of options calls and puts. A call option gives the holder a right to buy the underlying security and a put option gives the right to sell. These are marketed as insurance. Lets say one owns a stock that closed at $595 and their earnings are coming out tonight. They are not sure if the stock is going to make it. They may want buy the 590 puts for about $10. If they report very good earnings and the stock jumps $35 then one spent $10 and captured rest of the move. If they report bad earning and stock get hit to 550 they will be covered for 40 of the 45 dollar move from 595 by this put insurance. It limits the loss to $15 ($10 premium and $5 out of money) and leaves the upside to all but $10 premium. CBOE has better write up. Premium is highest at the beginning of the option period (e.g. one will pay the highest premium for May option on Monday) and lowest on the day they expire. It is primarily because you get to coverage for a month in first case and only one day in the later. My experience is there are a lot of speculators in the last week of the option. Like in Goog's case if one bets $10 and the stock gets hit to 550 one can make 45 less costs (usually less than 25cents a share + premium + out of money amount). That is pure speculation. Most of the contracts that are open are written by professionals and they are naked meaning they back it up with margin required money and not actual security. Some people believe that leads to an incentive to manipulate. If I am open 5million shares equivalent in puts at 580 then I may manipulate to keep it above 580, for every dollar below 580 I loose 5 million. Same on call if a large open interest exists at say 590 then there may be a reason to keep the price below 590. Here comes Max pain calculator. It is the price at which the equity has to close to cause least pain to professionals. It is available at http://www.optionpain.com/OptionPain/Option-Pain.php. The big problem is the CBOE only provides 2 day old data on open interest. So the max pain results are 2 days old and that is a millennium in options market. The right way to use it is start looking at Maxpain value for the security every day from Monday after option expiration and plot this data and underlying security data (offset backwards by 2 days) Then one can get a better projected max pain price. Just looking at the snap shot the day before option expires is very misleading.
Fas went out of the envelope and back into it closed very negatively. Our DMRM is at 115.40. I didn't short at the envelope having been just burnt yesterday. Google's report wasn't spectacular but BofA may make up some and leave the indices flat. I will unload some more of my longs but not all of it. That only comes at 1191 on spx. 


Moth to a light bulb..


This is the envelope chart that I was following today and I interpreted it wrong and paid a small price.  As soon as FAS hit 105.48 the top channel of the envelope I couldn't wait, I shorted FAS and was thinking this is it I caught the exact top.  Nah! It wasn't.   FAS kept going higher and higher and I had to bail at 116.48. I lost a full dollar.  It is never a good idea to pick a top and never a good idea to short when the drums were beating loud and clear (JPM earnings are great) attracting buyers.  The top is a flat formation even near the end and close to the top of the envelope.  V type tops are rare and when they happen they are quick in piercing the top line.  Nonetheless we are getting closer.  I do not honestly know when.  Everything points to soon very soon.  I am just going to wait to short.  At least a DMRM has to happen.  


The chart on the right FAZ 60 minutes from Feb 5th.  The RSI was a low 15.65 meaning FAZ is way over sold.  I have marked low RSI's and FAZ lows on the chart.  ETFs can continue to drift lower even with very low RSI.  Meaning a capitulation hasn't happened and panic selling can quite often follow when RSI is already very low.  Another interesting thing that has been happening in FAZ is that it rallies a small bit just enough to release the oversold conditions.  Then the bigger trend takes over and FAZ continues lower.  
I am still bullish and will unload very small amount of longs but am not going to short without a signal.

Tuesday, April 13, 2010

Are we there yet...


The chart on the left is daily spx from March 09 2009 till today.  I have drawn channels in the best fit I could.  1207 - 1125 number is being thrown around a lot as a possible top.  I am seeing resistance from the top line of the channel.  Some EW analysis also points to the same range for a top.  I do not subscribe to the art of picking a top even though it may be of utmost fun if you hit it.  I am not very good at it.  I put this chart up because a lot of people watch channels so it might be worthwhile to take a look.  
The chart on the right is also daily spx. 
It is from Feb 5th 2010 low at 1044.5.  Here it looks like spx has already broken the support trend line once 4 days ago.  Today the bottom was exactly on the trendline.  On the longer channel spx is hitting against resistance and the short term one we are about to break the support.  I do not trade channels. But I want to keep it in the peripheral vision. Bull ETFs did not make a new high and spx did not either,  instead we got a lower low.  One day doesn't make a trend change. But this is negative for the market.  Cycle watchers are calling for a cycle top in a day or two.  Ewers are calling for a top  very shortly.  The range has been very narrow and this is OPEX week.  Any time there could be a explosion either to the upside ( I favor this) or downside.  It is time to pay attention and watch our parameters DOMA, KOD, RSI and PPO.
I am still bullish and I will wait for the DMRM or a DOMA cross to short.

Monday, April 12, 2010

Round Number Targets

The spx is very close to 1200 and the dow is barely over 11,000.  There are some things that needs to be understood about round numbers. Spx has tendency to decline around round numbers.  Sometimes big sometimes small nonetheless a decline.  I wouldn't necessarily call it correction  may be a pull back.  Should spx close between 1199.5 and 1199.99 that is bullish.  Many will proclaim that  spx was unable to pierce 1200 and should be shorted.  On similar previous instances I found spx was just passing time for may be half a day and getting ready to sprint up by 20 points or so.  For me it is better bet to short at 20 - 25 points over the round number than below it.  Should it close just above 1200 up to 1207 on a single day move that is bearish.  For me while everyone rushes into buy because we now closed above 1200 it is a good time to short.  Either way unless I really want to take extra risk I would wait for DOMA cross and/or  DMRM 1.9% to happen to short.  Today spx traded in a very narrow range.  VIX was crushed going thru very important support levels around 15.60 all indices made new highs.  Bulls are completely in charge.  RSI, PPO showed no signs of  breaking.  The DOMA has to move up to catch up to price.  That means price has to stay flat and move in a narrow range  for a few days before any useful top can be formed.  For the time being I will stay bullish.

Sunday, April 11, 2010

The system


I wanted to answer this for those who read my blog and to put it on paper what my trading system is.  What am I guided by?   I will talk  about FAS  here but I use the same for TNA and occasionally BGU. 
Overarching rules are:
1. I only trade ETFS mostly FAS and TNA.  2.  I only have one position open at any time  3.  Never enter an order to buy without predetermined (e.g. DMRM)  stop loss.
The trades:
1.  DOMA 77 on the hourly:  When price after being in a down for a while (time wise)  crosses this DOMA line I buy.  This is my longer term trade and I sell when I get a cross on the down side.  I have been letting these trades stay open for while 6-10 weeks.  I sell these after a very good profit say 25% or more. The conditional stop on this is DMRM on spx  which is 1.9 - 2%.
2.  Doma 77 on the 15 min chart: When price after being in a down trend for a while , crosses this line on a upward move  I buy.  This is my short term trade.  I will sell these if I get a DMRM of 3.2%  or a DOMA cross on the down side.
3.  DMRM :I buy when the DMRM is met which is at 3.2% for FAS.  ( price moves 3.2% from the the recent low) The buy is a a stop buy progressive 3.2% good till canceled. This is usually in conjunction with (2).  I will do (2) or (3) rarely (2) and (3).  I sell when I see a little profit or DMRM or 15 min DOMA cross.
4. Envelopes:  I buy when price hits the very bottom of envelope.  Hoping to catch the exactly low.  This is high risk and when it is hit precisely it makes me feel like a million. Stop is very tight about 1.5% below the line. 
5.  Dino's KOD:  I trade this religiously and every chance I get.  When FAS establishes the low for the day within 5 minutes early in the morning  and irrespective if it closes positive or negative for the day I buy at close and sell within one  to 7 days.  It is a high probability trade.  stop is set to starting days low or DMRM.
I do not trade all these simultaneously all the time.  (1) is on its own track and Only one of 2,3,4 is active at any given time. (5) is my pet so I trade it almost always.  I gave a matrix for DMRM a few days ago.  I have mentioned KOD a number of times and shown you the results.  The 60 min chart shows we have only traded 3 times this year.   System that  is presented without showing exact results is just an theoretical exercise.  After all I am not here to get a Phd or win a fictitious money contest.  I am still bullish.  The market is showing some signs of weakness.  The moving avg line needs to get very close to actual price.   BUT I will wait.  I short nothing before its time.  .   

Friday, April 9, 2010

Continuing on..


I wanted to finish up our trade from yesterday.  FAS never came all the way to the bottom of the envelope and we barely got a break on the DOMA 77 with those in mind I covered at 104.17 and picked up some change.  As FAS crossed the DOMA 77 with conviction I went long at 104.32  on DOMA crossing and at 105.32 DMRM kicked in so I stayed long and took the long home.  FAS did not make a new high. Todays high was 107.33 and yesterday's high was 107.44. We had LH and LL and closing at the upper end of the range.  I conclude that is slightly bullish.  SPX did not give a DMRM of 1.9% that is bullish.  Internals were positive.Option expiration is next week.  It has generally been bullish around that time.  Bears had something this morning but things didn't pan out.  I will continue to unload at the highs some that  I bought at 1070 on spx.  There is a EW count that looks at the decline from 107.44 to 102.05 as an (A) and the rally to 107.33 as a (B).  I do not fully subscribe to that.  I will go back to being a bull with a keen eye to see if we rally towards top line of the envelope or go thru the DOMA 77 and give a new DMRM signal at 103.87.  Those are our stops for now.  I am bullish but fearful that we are overextending our stay as guest.  
MY computer is busted with all my charts and software and I am not settled-in on this even older machine.  It will be a few days before things get back to normal for me and my blog.

Wednesday, April 7, 2010

Shaky Situaion

These are FAS charts.  The one on left is 15 minutes with a DOMA 77 period and an envelope where the top is at 6% from mean and bottom is 3% from the mean.  First thing I notice is the top of the envelope is at twice the distance away from the mean as the bottom of the envelope is from mean. That tells me the trend is positive.  Sideways will be when they are both are approx. the same distance away from the mean and the if the trend was down then the lower channel would be farther away from
the mean. Uptrend is little shaky here I didn't short at the top.  My computer broke and I didn't have a chart to watch.  I shorted at 105.94 when the rally failed.  I shorted again at 104.21 when FAS went thru the DOMA.  My stop is at 3.2% progressive from the bottom.  There is a big difference between  the 103 top when FAS bounced at the mean at 96.9 and went to 100.9  and then came back and went down thru the mean again  to make a bottom at the lower end of envelope at 94.43.   This time FAS went right thru the mean and is bouncing up to the mean line.  The internals RSI, PPO recovered quite a bit.  The one big bothersome number is call to put ratio at 275+ and that is very high and negative.  Eliiot wave counts are inches away from finishing the 12345 ( or corrective ) rally  from 1044 bottom on spx.  All in all it is time to take money off the table.  I have a sense we might go lower than the lower line of the envelope. But my opinion probably reflects my position.  On the right is FAS 60 mins with DOMA 77 which is at 99.19.  That is an important chart for me.  It has a high probability of success on price crossing DOMA. My current view is "not bullish".   

Monday, April 5, 2010

Cha Ching..


Nope You are not looking at a flags of some countries these are our everyday trading vehicles FAZ/FAS. On left is FAS. It is getting closer to the top line of the upper band of the envelope which is approx at 105.5 The way to play this is to take a short when it touches the upper band with tight stop of $1. Sometimes one can hit these exactly. That is very high risk. The traditional method is to go long above the channel and sell when it enters the envelope back in. Both the methods are equally good. I will also be keeping the DMRM 3.2% in the corner of the page to go short. As of now there is no change in position of long. On the right is FAZ which honestly is falling apart. We backtested the DOMA 77 on the hourly and failed. That is negative. Add to that today was a negative KOD ( middle chart). I don't short FAZ instead I go long on FAS. There is no compelling reason to go long on FAZ. All bull ETFs and SPX made higher high a postive for longs and none of the indicators PPO, RSI and STO turned negative. The position is still the boring one staying long and cha ching on every tick.

Saturday, April 3, 2010

Need and Greed

I hear this a lot “I have a new system” and then a elaborate details of how the system would work. I read about systems on the blogs that consistently make profits. In my books there are 2 types of systems

System I - This is the mother of all systems. It is called buy and hold for ever. Up, down or sideways we just buy and hold it forever. We put all our efforts in determining the “right” thing to buy. JNJ, AAPL, GE etc.

System type II - All other systems. They try to catch the price moments over time. 1) buy low sell high 2) buy lower than the previous high and sell high 3) short high and buy low 4) short higher than previous high and buy low. Some just do 1 and 2. Most try to do 1,2,3 and 4. and IMHO that is greedy. It is cool. The risk is high and rewards are satisfying. Now I leave it to ones own imagination about the odds of being correct 4 times as compared to once in the buy and hold system. Yet it is the alchemy that drives us all. Gann, Elliot, Adi, you, me and all of us. That’s the fun part of it.

FAS 60 min DOMA 77FAZ 60 min DOMA 77

These are two charts of FAS and FAZ. The evil twins. Extremely dangerous but boy does the fruit taste good. These look very simple and indeed they are very simple. Most pundits and statistical experts will probably find hundreds of imperfections in it. The biggest test they fail is that they are not complicated enough. A system that doesn’t have a huge set of equations and lines flying everywhere in the graphs and large number of rules for when to buy and sell somehow is not considered impressive. I am not in a competition to win the most money. I have a simple test Does this make you money. Yes. Then it is a good system. That is all there is to it. These are 60 minute charts with DOMA 77. To me if FAS/FAZ breaks the DOMA I will buy some FAZ for situation trade. MOST bull ETFs made new highs for the week and with no change in any of the indicators I will stay bullish.

This is an excel I created to show how DMRM works. I start with low of 59.82 (Row3 Col 7). The buy points are 3.2% above the low and shorting points are 3.2% below the high. The max profit is selling at the high and minimum profits is selling at the other side at the shorting signal. I found you get a series negative or very minute profits at bottoms and at tops as if to take away the profits one made in the middle. At this point if FAS were to fall below 96.36 I would buy FAZ. This complements my DOMA trading real well. This is an example of a slightly complicated system. I would require that all systems provide this kind of data for proper evaluation.