Bull Pen - Fall 2006

[weatherweenie]

The broken red line represents the previous day's closing price.

 

[dell]

Roger that. Thank you.

 

[Birchtree]

Dell,

If we are in a 3 wave the Santa rally will hardly matter - seasonality is out. We are in a bull leg that will carry into Spring - little price decay on any corrections making it difficult to get in. The game now is pay to play.

 

[ATCJeff]

I apologize for this, but I need to ask a stupid question: the charts at the bottom of the page which track the funds daily moves; what does the broken red line signify?

TIA - Dell

yesterday closing figures

 

[robo]

NDX (Nasdaq 100) found precise resistance at 50% projection October, 1807.15. Consistent support for the past five days was the 5 day moving average, now at 1790. That's your momentum MA and it held up very well as put sellers worked hard at pinning the 1800 level by the end of the week. As mentioned on Friday, I think we should do a quick pullback to the 10 DMA, now 1766.50, which is also the old 2006 highs established in January (NQ 1770/1775). This bellwether tech index has now climbed 10% off that 2005 close, a few percentage points shy of the S&P, which is up 12%. My guess is NDX holds 10 DMA support after a brief consolidation and goes for next resistance at 1821, which would also correlate nicely with NQ (NDX futures) 1830 price objective outlined last week. If 1766 does not hold then the highs could be in and we are in for some nasty weather as the bull flag pattern of pullbacks in place since September gets negated. So there is your line in the sand, trade accordingly. A break below 1745 would set up a chain reaction of sell-stops, not very likely before January, but set your alarms just in case. There is the distinct possibility that some investors will decide to take the tax hit this year as opposed to waiting for a possible hike on capital gains and dividends by a democratic congress. I fact, I think this distribution is going on every day at the open.
VIX 10 and VXO 9.85 accompanied by an equity pc ratio of .47 are the harbingers of a correction. Don't get burned by ignoring this latest development. Chart.

It is a little disturbing that NDX/QQQQ lags SPX for 2006, even if it is only by 2%. Techs should be ahead of the broader market in percentage gains by this time of the year and they are not. Furthermore, financials have not made new highs as the BIX closes below its 10 DMA after a somewhat inconclusive test of the important 20 DMA level. That index is still in a solid upward channel, nevertheless put it on our radar. The DOW is cracking new all time highs, but keep in mind that it is a price weighted index and only a couple of stocks have actually made all time highs. GE is still down significantly from 2000. Very few investors actually bought the DOW itself, so they are still behind their 1999/2000 holdings if they held on at all. The erosion of the dollar over the past few years is another supportive argument for the secular bear market proponents. If you take your savings from 2000 and moved to Europe, you have lost another instant 30%.
It is still a trader's market and buy and hold investors must constantly be on their toes and shuffle their holdings to keep up with sector rotation. But perma-bears should also lose the silly idea that we will one day test the 2002 lows. Even a 20% crash would not come close. Next year, we will wrestle with stagflation or just plain inflation, so don't fall in love with what you have now either.

http://aheadofthenews.com/index.html

 

[Birchtree]

Money fund assets equal 16.8% of the Wilshire 5000, well above the neutral liquidity zone. Since 1980, the market has rallied more than 60% of the time when fund's assets have exceeded 12.8%of the Wilshire's value. The average gain during these stretches was 13.2$. A sizeable stash of sidelined cash is good news for share prices as it is available to invest at a moment's notice. If even a fraction of these funds flow into the market, stocks are apt to keep climbing to new records. These figures confirm the underlying health of the market for the next three years. Snort.

Dennis - permabull #1

 

[Birchtree]

This last hour move up today doesn't feel like a head fake - but I wouldn't be surprised. This bull is not going to be easy to ride. As long as you know you are prepared to handle the blind side quickies then the sacrifice is tolerable, you just get on the cycle.

 

[SkiUtah]

Just came from Best Buy, store is full, they have called all personell in for Black Friday, and are expecting the biggest day of the year. I see restraunts full, gas is cheap, discretionary income up, the soft landing has arrived.....I think the bull is going off steroids an onto crack...

 

[Show-me]

But, do the market need a reasonable rest before going higher? I'm hearing 3-5% maybe more.

 

[SkyPilot]

No, they do not... :nuts:

 

[Fivetears]

Nothing lower than 1390 on the S&P.

 

[robo]

But, do the market need a reasonable rest before going higher? I'm hearing 3-5% maybe more.

Depends on who you ask. I'll PM you with what the top timers are saying. The trend remains up for now.

 

[SkiUtah]

Looks like 1400 is support now. Last weeks resistance, this weeks support. Life is good.

 

[fabijo]

A sizeable stash of sidelined cash is good news for share prices as it is available to invest at a moment's notice. If even a fraction of these funds flow into the market, stocks are apt to keep climbing to new records.

I wonder how much money flows into the markets on a regular basis because of personal retirement accounts and college funds. There has to be some information out there that shows an increase in savings for retirement and college. The more people on that wagon, the more money flowing into the market and buying shares. And most people don't manage their account as much as we do, so their money is buying shares on a continuous basis. Shouldn't that help share prices for years to come - at least until the number of people retiring is more than the number of people pumping a portion of their paychecks into retirement accounts (401k, IRA, Mutual Funds, etc.).

 

[robo]

Just came from Best Buy, store is full, they have called all personell in for Black Friday, and are expecting the biggest day of the year. I see restraunts full, gas is cheap, discretionary income up, the soft landing has arrived.....I think the bull is going off steroids an onto crack...

I agree 100%. My only concern is they are charging everything. I'm Bullish, but the Market on Steroids has me concerned. The trend is up for sure. I thought 1400 would end this leg, but 1420 looks possible now.

 

[robo]

But, do the market need a reasonable rest before going higher? I'm hearing 3-5% maybe more.

Successful Market Timing DEPENDS On Change
Historically, The Markets Are Usually In Trends

Trend traders depend on change to make their strategies work. Simply said, a market that just goes sideways can not be timed. But a market that trends up and down can be.

History shows us the financial markets are usually in trends. You can go back hundreds of years. You can look at stock markets, commodity markets, Dutch Tulips, you name it, they are more often in trends, than not in trends.

History also shows us that trends usually last much longer than anyone expects.

For example, after a huge upward trend through most of the 1990s, the U.S. stock markets were in a down trend (bear market) from 2000 into early 2003. Any chart can easily show you the trends. For the last several months, the financial markets have been in a solid uptrend.

Over all, financial markets are in defined trends "about" 80% of the time. This has been the case for many, many years.

Sideways Markets Are Actually GOOD news

But what about those sideways times? The times that try our patience and our will?

The good news is that sideways markets are always either the base or the top of a new trend. That means the next trend is around the corner when we are enduring a sideways market. We just have to make sure we are on board and profiting when it happens.

"...Think about how powerful such a trading strategy is. You never miss a trend, either up or down."
That is where trend trading comes in. We establish a set of rules that identifies when a trend has begun. If the trend fails, we exit. If it continues, we stay with the trend no matter how long it lasts! Months... even years. After the trend fails, according to our preset rules, we exit.

Cut your losses short and let your winners run. Ever heard that saying?

Think about how powerful such a trading strategy is. You never miss a trend, either up or down. At tops and bottoms you may get some small whipsaws as the market becomes volatile and false trends occur as the markets consolidate and decide which way the next trend will go.

Those whipsaws, however numerous, result in minor losses and/or small gains. But they are just the precursor to the next trend. In fact, they could be considered exciting times because we KNOW that they are just setting up our next big trend and big profit.

80/20 Rule

Have you ever heard of the 80/20 Rule, also known as the Pareto Principle? Dr. Joseph Juran developed the Pareto Principle after studying the work of Wilfredo Pareto, a nineteenth century economist.

The Pareto Principle states that a small percentage of your efforts (typically around 20 percent) will create a large majority of your results (usually around 80 percent).

Expanding Pareto to trading, it follows that roughly 80% of your profits should come from only 20% of your trades.

That means there will be numerous small whipsaw losses and gains, but 20% of the trades will make ALL the profits.

"...After several small losses it is human nature to feel like giving up. This is the psychological battle that market timers MUST win! "
Think how import that makes every trade!

After several small losses it is human nature to feel like giving up. This is the psychological battle that market timers MUST win!

The markets are powered by emotions (fear and greed). But trend traders use the changes caused by those emotions, to make their profits.

If you give in to those emotions, you lose!

Here at FibTimer, where we have been market timing for over 20 years (since 1982). We always know when a new trend with huge profits is near. Subscribers become nervous. Financial news becomes overly positive or negative. The number of reasons why the markets cannot go higher (or lower) increase.

That is just when the big trade occurs, and we make our big profits for the year. It happened during the bull market top in 1999-2000. The ensuing decline, a strong and powerful trend lasting two years, realized a 100% gain as the stock market collapsed.

We had that big trade when we turned bullish on July 31st of this year. No one thought the market could mount a sustained rally. Many are still out and waiting for a decline.

Conclusion

We are currently in the midst of a huge rally. We are not smart enough to know when it will end.

Our strategies stay the trend until they end, and that is exactly what we are doing.


http://timing.typepad.com/timer/

 

[FUTURESTRADER]

selling options strangles is THE strategy during sideways markets.

 

[robo]

Some of the Best TA work around!

November 25, 2006
Market Update: Still Bullish Despite All These Bears

By Dominick


The Nov 18th update stated:


I would like to see the S&P’s make a new high early next week, hopefully Monday, followed by a retest of Friday’s low (support at 1392 SPX), then rally nicely to a new high at roughly the 1415/1420 area. We’ll be adjusting the target in the forum as soon as we see where we find support, but whatever THAT high is, it will be the first time the Elliot pattern from the summer lows might seriously be at risk.

As promised, I raised the 1360 level, but we still haven’t seen a signal to go short this market. We sure did get a new high first thing Monday, followed by a pullback and then another high. Even though this week’s action generally followed my plan, and we expected every move the market made, it still looked pretty random and sloppy.


http://tradingthecharts.com/phpBB/viewtopic.php?p=24580#24580

 

[mlk_man]

Robo, when are you gonna start your own account thread?

 

[Birchtree]

Dow Theory - The performance of the Transports have improved over the kast couple of weeks and the old highs are now well within striking distance. All three indexes will kick at the same time - how great is that?