Nov 9

Did the SPX consolidate above the 200 day MA? Nope.
Did the support level that it established yesterday hold? Nope.

Chop, chop, chop. This is was a nasty one since the gap down this morning went against the long signal from yesterday. Sell long signal was given at the open, see here, for a 1.8% loss. Not fun.

My 60-min Trend System then issued a short signal today. My main indicator continued to roll over all day long and issued a short at 1:50. See here and here. (These updates are sent out as part of my Trend System Notifications).

.... chop, chop, chop .....

Looking at the levels again (which didn't work out so well yesterday) it seems like the market is still working on a range. The failure yesterday confirmed the top part of the range, and I think the bottom was established a few weeks ago. I think that this move will likely revisit the bottom of the range.

In fact, this is eerily reminding me of Silly Season 2009 (recall the Dubai world 'default' that November with a similar parallel here on Italian bond fears).

So if that parallel were to follow, then we are establishing a large range for silly season, and basically the market moves will be inscrutable and range bound for the next few weeks. We'll see how that plays out.


EW count for anybody who cares.

Nov 8

My 60-min Trend System issued a buy signal today. See here and here. (These updates are sent out as part of my Trend System Notifications).

Looks like we did get a reversal off support. Follow through tomorrow to consolidate the close above the 200 day MA will be key.

Nov 8 - Levels

The action the last 3 weeks has been very choppy and confusing, and trying to decipher it has not been easy. But with the move up yesterday and the move down today, this might be what is going on:

Trend System Performance

I wanted to show the performance of my 60-min Trend System since the end of the last confirmed major turn in the stock market: the beginning of May 2011

From an EW perspective, I was calling a major wave ending in real time. See:

-- May 2
-- May 5 (and a Long Term View Update)
-- Regarding Tops and Sloppy / Misleading EW Practices

So while I had the expectations of a top, my system doesn't care about expectations, it only trades the trends present in the market. Same deal with the most recent bottom in October, while my expectations are that it is a significant bottom (see Revisiting the Large Count), my system doesn't trade expectations.

Here is the performance on the SPY:


What is interesting to see if you dig into the data is that it gave correct signals for the two biggest waves since May. It held both the July and October trends for 10% gains each, one being a short and one being a long.

And that is the philosophy I used when building the system. Try to find trends and give them the leeway to develop, but to cut them early if the entry setup turns out to be a fakeout. And the average winning trade rate is only 50%, but the average winning trade is much larger than the average losing. (And while this is only a 6 month sample size, the same pattern holds true on a backtest to 2001).

What I like about my system is that it consistently gives me an edge, especially when EW counts are ambiguous. And it helps me sort out what is happening in reality vs. my expectations: Regarding Trading Positions and Long Term / Macro Outlook

Nov 7

Rough day. After several hours today my system finally issued a signal ... and it turned out to be the wrong one. Short signal issued at 1:00 (here) and not even an hour later it was cancelled (here). Tuff sledding. Cut the losers early when they go against you and wait for the next setup, and that's what I'm doing.