S&P 500 Stock Index 2/3/12

Talk about wall of worry!  I personally thought this index would turn down.  Even so, we have had a long stance for intermediate term trading since our 1/6/12 post.  Likewise, our short-term system has also been only allowing long trades lately.  After all, we don't want to fight the tape.  This is a great example of how robust tactical trading rules can help keep you on the right side of the market, even when you really want to be on the other side.   


Will it continue?  Who knows? As I write this (before market close) the Dow is within inches of taking out it's 5/02/11 high.  We really should not care too much about what it might do next.  Just follow price and manage risk. 


BTW: This is the very last of the regular weekly posts on the five markets I have been covering during 2011.  A note has been placed at the bottom of each of this week's posts explaining this change, and I will post it again at the bottom of this one.       

The weekly S&P bar chart shows prices in an intermediate term uptrend within a broader price range.  As noted, the DOW, having a similar pattern, is close to breaking above this range.  Will there be an inter-market divergence or will the S&P follow the Dow?  Who knows? 

Definitely an intermediate term uptrend.  Manage your stops.  It won't last forever.  They never do. 

Moving average envelopes are in uptrend mode on both time frames.  


Weekly RSI is testing upper resistance.  Daily RSI is definitely in uptrend range for now. 

My actual intermediate term stop is closer to the weekly Dynamic Trailing Stop level than the daily DTS level. 


Current Stance:
Long Term: Flat

Intermediate term: Long (Assertive traders only!  And with a tight stop.  I would not argue against a flat position right now!!)

Short term: 

My propriety short term system is allowing trades to the long side right now.  Changes in directional orientation as well as entries and exits occur more frequently than the weekly S&P posts to this blog. 


Goodbye to trading only one or a few markets
I've enjoyed messing around with the stock index futures for a long time, and I still plan to trade them.  Especially in the short-term trading operations.  But, I've learned something this year.  New programming skills have allowed me to back-test robust strategies across multiple futures markets.  There is a whole world of trading opportunities out there!  Ones that often outperform the stock market indexes.  It is not expected to be easy, but I am excited about new adventures in these other markets and systems.  Stay tuned.  I'll try to post what I learn here.    


Changes to the blog
My trading operations are in the process of expanding into a wider variety of markets using systematic strategies which have been designed and programmed in house.  This operational change is causing blog post inspiration to change as well.  After this week, I will no longer be posting everyday one of the five markets -Silver, Swiss Franc, Gold, EURO, S&P500- which have been covered over the past year.  


This blog was started in 2008 at the suggestion of a friend who knew I wanted to start trading again after a fairly long hiatus.  It has been a way to work through thoughts outside of isolation, and hopefully share some useful content, ideas, and materials.  Evolution of tactics over that period of time is probably recognizable through the history of the posts (although I have not reviewed the old ones myself).  Tactics have again evolved, leading new programming skills and semi-automated systems being developed over the past year. 


Although, I plan to continue programming and testing new system ideas, the primary development of our main system has ended.  As Seth Godin would say -we are going to ship it!  If all goes well in what is now the final stages of forward tests, we will soon add a new trading account that will trade a wide variety of futures markets using systematic methods centered on catching trends and managing risks.  My short-term S&P trading will continue, but will not be co-mingled with the new account.  I am very excited about this new effort.  The original idea for it came shortly after I took a hiatus sometime around 2004.  I wrote it down at that point, and did some research on what could be done.  Things happened that slowed down progress, but this past year has finally marked the point where developing this new operation could happen.  Future post inspiration will now come from these new expanded operations.  Hopefully, I will be able to share some of the things learned in a way that is interesting and helpful to those who read this blog.  

EURO Futures 2/2/12

Not a whole lot has changed in the EURO since last week's post. 

This looks like a major distribution pattern to me.  A break of the neckline would probably be pretty gnarly for the EURO.  Who ever thought cramming a bunch of fiat currencies together into one was a good idea anyway? 

We moved out of our intermediate term short stance as prices broke out of the internal trend channel.  We remain ready to reenter shorts if lead by price action to do so. 

Mixed picture out of the moving average envelopes right now. 

The Dynamic Trailing Stop indicator is an exit tool.  Daily DTS stopped out of the downtrend a week or so ago.  Now the weekly DTS has followed.  


Current Stance
Long Term: Hold Short (or simply hold a different currency)

Intermediate Term: Flat 

Definitions: 
Flat = no position / not long or short the market. 
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position     


Changes to the blog
All week I have been putting a little not at the bottom of these regular posts about changes coming in terms of content and frequency.      


My trading operations are in the process of expanding into a wider variety of markets using systematic strategies which have been designed and programmed in house.  This operational change is causing blog post inspiration to change as well.  After this week, I will no longer be posting everyday one of the five markets -Silver, Swiss Franc, Gold, EURO, S&P500- which have been covered over the past year.  


This blog was started in 2008 at the suggestion of a friend who knew I wanted to start trading again after a fairly long hiatus.  It has been a way to work through thoughts outside of isolation, and hopefully share some useful content, ideas, and materials.  Evolution of tactics over that period of time is probably recognizable through the history of the posts (although I have not reviewed the old ones myself).  Tactics have again evolved, leading new programming skills and semi-automated systems being developed over the past year. 


Although, I plan to continue programming and testing new system ideas, the primary development of our main system has ended.  As Seth Godin would say -we are going to ship it!  If all goes well in what is now the final stages of tests, we will soon add a new trading account that will trade a wide variety of futures markets using systematic methods centered on catching trends and managing risks.  My short-term S&P trading will continue, but will not be co-mingled with the new account.  I am very excited about this new effort.  The original idea for it came shortly after I took a hiatus sometime around 2004.  I wrote it down at that point, and did some research on what could be done.  Things happened that slowed down progress, but this past year has finally marked the point where developing this new operation could happen.  Future post inspiration will now come from these new expanded operations.  Hopefully, I will be able to share some of the things learned in a way that is interesting and helpful to those who read this blog.  

Gold Futures 2/1/12

We really never know if a decision to enter or exit a trade will turn out to be a profitable idea or not.  Never! Until we can look in the rear view mirror, that is.  


In late December we moved from a slightly profitable short stance on gold to a neutral stance.  This was a great decision based on the rear view, but we didn't know that at the time.  Our decision was based on simple tactical reactions to price action.  We are still neutral on gold, but ready to go long or short whenever price action leads us to react in either direction. 

Weekly prices are now range bound.  Look for a break above or below for resolution. 

A closer look at the price range is provided by the daily bar chart.   

Mixed picture from the moving average envelopes. 

The trailing stop indicator is long both time frames and providing stops for anyone who might have put a long position on. 


Current Stance
Long Term: Flat (speaking only of futures trading positions)

Intermediate Term: Flat

Definitions: 
Flat = no position / not long or short the market. 
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position  


Questions about gold and silver 
Let me clear up questions I often get asked all the time about gold and silver.


Do I think it is a good idea to hold physical gold and silver?  Yes.  A small amount of your net worth in physical non-numismatic (not collector grade) gold and silver is something I advocate.  


Why?  for long-term insurance against currency problems. Gold is real money.  It is not by fiat.  It holds value.  It is finite and cannot simply be printed out of thin air.  


Do I think it is a good idea to put a significant amount of one's net worth in physical gold and silver? Probably not.  This type of decision, like everything else really, has to be made primarily by the person asking it.  I'm wrong about things all the time, but I prefer to be more liquid.  We do have access to suppliers if we change our mind on that.  For now, we like using only a small amount in long-term physical holdings. Price exposure can be obtained in liquid markets in which positions can be entered and exited pretty much immediately.  That's primarily what my posts on gold and silver have been about.  


If I believe gold is real money, then why have I been willing to sell it short from time to time?  Because I am a trader.  Price moves up and down.  I attempt to profit from both directions.    


Hopefully that clears some things up.  I get asked those questions all the time.  Especially these days.  


Changes to the blog 
My trading operations are in the process of expanding into a wider variety of markets using systematic strategies which have been designed and programmed in house.  This operational change is causing blog post inspiration to change as well.  After this week, I will no longer be posting everyday one of the five markets -Silver, Swiss Franc, Gold, EURO, S&P500- which have been covered over the past year.  


This blog was started in 2008 at the suggestion of a friend who knew I wanted to start trading again after a fairly long hiatus.  It has been a way to work through thoughts outside of isolation, and hopefully share some useful content, ideas, and materials.  Evolution of tactics over that period of time is probably recognizable through the history of the posts (although I have not reviewed the old ones myself).  Tactics have again evolved, leading new programming skills and semi-automated systems being developed over the past year. 


Although, I plan to continue programming and testing new system ideas, the primary development of our main system has ended.  As Seth Godin would say -we are going to ship it!  If all goes well in what is now the final stages of tests, we will soon add a new trading account that will trade a wide variety of futures markets using systematic methods centered on catching trends and managing risks.  My short-term S&P trading will continue, but will not be co-mingled with the new account.  I am very excited about this new effort.  The original idea for it came shortly after I took a hiatus sometime around 2004.  I wrote it down at that point, and did some research on what could be done.  Things happened that slowed down progress, but this past year has finally marked the point where developing this new operation could happen.  Future post inspiration will now come from these new expanded operations.  Hopefully, I will be able to share some of the things learned in a way that is interesting and helpful to those who read this blog.  

Swiss Franc 1/31/12

Our stance remains neutral on the Swiss Franc as we wait at watch to see if the recent low will be lasting in the intermediate or longer term.  We are warming up moving into a long stance here, but want to see more clues.  Traders always want to do something, but sometimes it is best to do nothing.  Such is the internal battle we constantly struggle with. 

  


We might have an impulsive Elliott Wave pattern on the weekly chart.  Such a pattern would not be a good sign for CHF in the long-term, but would allow for significant intermediate term rally from current levels.  A break below recent January lows would further indicate the impulse pattern.  As long as prices can remain above those levels, odds seem to favor an intermediate term rally or consolidation. 

The daily chart above gives us a little closer look at the possible five waves down as well as the current line in the sand at the January lows.  Going long against that line is certainly a valid trade.  I am personally just looking for more clues from upcoming price action.  

  
Mixed picture from moving average envelopes and RSI.  

Dynamic-Trailing-Stop indicator is providing either a loose or a tight stop for anyone long this rally. 

1 USD = 0.92110 CHF at the time of this post. 


Current Stance:
Long Term: Flat 

Intermediate Term: Flat 

Definitions: 
Flat = no position / not long or short the market. 
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position      


Changes coming to this blog:
Last year I decided to learn to program trading systems so as to develop a robust systematic / semi-automated strategy for trading a wider variety of markets.  After learning the programming / scripting language, building a number of systems, and producing an even larger number of back-tests, we are now in the final stages of development and testing.  We are running a simulation under current market conditions as our final test.  After the simulation, we plan to open an additional account where this system will be deployed.  My short-term e-mini trading will continue as well (rarely talked about here).   


My tactics have evolved in some ways since this blog was established.  That evolution has been gradually represented.  My approach is much more reactive and tactical than before, lending itself more to systematic and automated approaches.  Although there was always a great deal of respect for price trend, I previously leaned further into predictive tactics than I do now.   As the new operations get underway, there will be further evolution in what is posted here. 


I have been routinely covering five different markets here over the past year or so.  Although much of my trading during that time was short-term trading in the e-mini S&P futures, there were other reasons I needed to keep an eye on those markets.  Soon, those five markets, several other markets, and several other sectors will be traded on a regular basis in the new systematic account.  I don't yet know how this will change how and what I post here, but there will be a change.  I will wait and let the new operations inspire that change, but it is likely coming sooner rather than later. 

Silver 1/30/12

We are still neutral on silver, but starting to warm up to the idea of going long.  

Weekly prices are in a range between previous resistance and support.  

Glad we closed that short stance at the beginning of the month.  "As long as prices stay above previous pattern lows, an uptrend could form." - Captain Obvious 

The weekly signal line has moved in-between the moving average envelope lines.  Weekly prices are starting to poke above the upper envelope.  Daily MA envelope is in uptrend mode. 


RSI is still in downtrend range on the weekly chart, but is in uptrend range on the daily chart.  We could see a battle in here as this gets worked out, or at least some backing and filling.  

The Dynamic Trailing Stop indicator is providing exit levels on either weekly or daily silver futures prices for anyone currently long.    


Current Stance
Long Term: Flat
(comments here are about trading liquid markets, and do not relate to any views we have regarding the holding of physical gold and silver).

Intermediate Term: Flat

Definitions: 
Flat = no position / not long or short the market. 
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position 

Changes coming: 
In several months there will be some changes to post frequency and what is covered.  We are very likely going to be expanding trading operations into a number of markets with semi-automated systems which I have learned to program over the past year.  I do not plan to cover all the markets we will be trading (agriculture, energy, interest rates, metals, meats, currencies, etc....) in the same way gold, silver, S&P 500, Euro, and the Swiss Franc have been covered here.  I don't know exactly what the changes will be, but I do currently expect the blog to remain active at some level.  


Perhaps we will be talking about what is learned in the new trading operations.  Perhaps periodic system results will be posted.  Very likely, we will at least talk about the general principles that have gone into our system and strategy designs.  But blogging is just a fun and therapeutic part of my trading life.  The number one focus is continuing to move towards getting the new operations up and running.  I'll continue to post as normal for a little while longer, and then I will post a notice when this finally changes.  Just know that it is coming. 

S&P 500 Stock Index 1/27/12

We have continued to reluctantly and cautiously trade the long side of the S&P 500 index futures with our intermediate and short-term operations.  In terms of long-term investments, we are out of the stock market.

Weekly prices continue to hold above trend line.  I've learned not to argue with price trend to much, but that does not mean the gut filter is totally turned off.  We will trade it up, but we are not counting on it to stay there.  I'm ready to turn on a dime whenever price decides to change direction. 

The most recent parallel trend channel you see above (the tight one around most recent price action) is my intermediate term line in the sand.  If prices break below that channel, I will be out of longs. It would not cause me to start selling short right away, but it would take me to the sidelines. 

Moving average envelopes are in uptrend mode, but look at the back and forth play between the weekly signal line and the upper envelope line.  Sign of weakness? 


Weekly RSI is neutral.  Daily RSI is in uptrend range. Will weekly RSI be able to break above resistance, or is this where we see some weakness in price?  Will daily RSI hold above upper support?  These are all questions that come to mind when viewing this chart. 

Weekly and daily DTS are providing useful stop levels for anyone who is long this market at the moment.  


Weekly ADX is begining to show early signs of registering trend.  Daily ADX registers trending behavior.  Remember, this is very much a lagging indicator.  All indicators are lagging, but this one really seems to be.  It's mostly something I put here so I could monitor it for a while.  

Complacency is the message of the VIX right now.  

There has been a slight uptick in the Put/Call ratio since last week's post, but it still sits at relatively low levels.  Not the place I want to buying for the long term, that's for sure!


Current Stance:
Long Term: Flat

Intermediate term: Long (Assertive traders only!  And with a tight stop.  I would not argue against a flat position right now!!)

Short term: 

My propriety short term system is allowing trades to the long side right now.  Changes in directional orientation as well as entries and exits occur more frequently than the weekly S&P posts to this blog. 

Definitions: 
Flat = no position / not long or short the market. 
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position

Hold Short = hold a short position     

Swiss Franc 1/26/12

We have been preparing for a possible low in the Swiss Franc for a number of weeks, and the low is now at hand.  Is the low part of a corrective rally that will ultimately be reversed, or is it the beginnings of a new uptrend?  Those are questions will will probably be trying to answer for several weeks at the very least. 

Weekly price bars are now above the downtrend line.  It's possible to label the pattern on the way down from the highs as an Elliott Wave impulse.  If so, the rally we get from here could be substantial, but would not be expected to make new highs prior to resuming the larger downtrend.  It's not necessary to have the Elliott picture in mind to trade this, but it helps.  It also helps if you are trying to decide which currency to hold currency related savings in.  

Daily price bars are no longer making lower highs.  As long as the current low holds, we could start seeing higher lows form.  That's one thing we will be looking at -the next low that gets reversed.  


A break of the current lows from here would send us into short positions as it could mean things are accelerating to the downside.  As for now, we are still neutral on this market as we watch to see what price does from here. 

Moving average envelopes show a mixed trend picture right now.  Will the weekly catch up with the daily, or vice versa?  We never really know until it happens, at which point we need to be ready to react appropriately. 


Weekly RSI is also still in downtrend territory.  Daily RSI is pushing against upper resistance.  If I had to take a trade on this market, I would go long against the recent lows.  But I don't have to!  

Mixed picture out of the dynamic trailing stop indicator as well.  Daily ADX is perking up a bit. 

At the time of this post, 1 USD = 0.92042 CHF.  


Current Stance:
Long Term: Flat 

Intermediate Term: Flat 

Definitions: 
Flat = no position / not long or short the market. 
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position      

Dedication, Sacrifice, Hard Work

Over the past two nights it was my pleasure to watch documentaries on some of the world's best motorcycle racers.  It was a purposeful endeavor in an effort to learn and be encouraged by what it took these guys.  Work is being laid down for an expansion of my trading operation right now. Encouragement from stories like these is just what the doctor ordered.  It's unbelievable the amount of work, the time, the sacrifices, the 2nd and 3rd jobs, and support from family and friends it took to get these guys to their lucrative contracts and seemingly superhero like status.  


I have ridden motorcycles off and on most of my life, racing them at one point.  Participation and competition in other similar sports has also marked other significant periods of my life.  It seems to me that what it takes to have success in trading is very similar to what it takes to have success in these sports. The documentaries further confirmed that. Encouraging.  


My father was the first one to expose me to trading (he liked options, I like futures).  He was also the first one to expose me to all these sports including -motorcycle racing, water-skiing (and barefoot water-skiing), and snow-skiing.  Dad has since passed, but we talked about these things a lot and I made sure to thank him for the exposure.  He was also always encouraging, telling me to go for things that others warned against.  Watching the story of racer Troy Bayliss reminded me of all of this.


What's the moral?  If you really want to do something, realize there is no easy path.  It just looks easy until you know the whole story.  So you want to trade?  Roll up your sleeves and get ready to sacrifice, put in hard work, and commit lots of dedication for what you want.  It's not easy. You should probably turn off the TV.  I threw mine out something like six years ago.  Oh, and there is probably no way to do it alone without some type of encouragement and support from family and friends. Thank the ones that encourage you. Stay away from the ones who tell you you can't do it.  There are a million miserable nay-sayers for every one person who decides to get in the ring. 

Gold futures 1/25/12

Good thing we closed that short gold stance in late December.  We have a little rally on our hands now.  

Weekly gold prices are breaking above trend lines.   A new uptrend?  We don't know yet.  I will be watching for either a break above prior highs, such as the mid-downtrend high in early November, or a correction to the current rally that gets reversed. 

The mid November high is marked on the the daily bar chart above.  A break above that would be constructive for the bulls.  A break to new lows would have us following the bears and entering to the short side again.  We don't really care which way it goes; we just trade it. 

Mixed picture from the moving average envelopes.  Isn't it interesting how basic price bar analysis often leads us to the same basic conclusions as fancy indicators.  Hey, I understand wanting some confirmation; some hand holding.  That's why these indicator charts are here.  


RSI shows a mixed picture as well.  Daily RSI just now starting to really poke into the uptrend area. Let's keep an eye on how pullbacks in price and RSI form from here.  

The Dynamic Trailing Stop indicator is now in uptrend mode on both time frames.  


Weekly ADX is still trending down.  Daily ADX has turned up a bit.  +DMI is gaining strength over -DMI on both time frames at the moment.  


Current Stance
Long Term: Flat

Intermediate Term: Flat

Definitions: 
Flat = no position / not long or short the market. 
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position       


My medium to long-term automated system is also out of this market at the moment. 

EURO futures 1/24/12

Our stops for the short EURO stance were hit, taking us out for profit.  Stops are used to limit losses on initial trades, and to lock in profits on trades that have worked out for profit.  I would not at all be surprised if price action again broke down to take us back into a short stance, but we respect stops.  

The weekly bar chart is a major distribution pattern.  This is my story and I'm sticking to it until proven wrong (not that uncommon in trading).  A break of the neckline would be a major ugly sign for the hodgepodge currency.  A break above the highs from last year would have us a little concerned that the distribution pattern idea might be faulty.  Pattern highs were made in 2008 and  the neckline had its first low mark in 2005.  This is a big one. 

We can see that daily bar prices have pushed above the internal trend channel.  

A mixed picture.  The weekly moving average envelope in downtrend mode; the daily now breaking into uptrend mode.  RSI levels definitely don't have me wanting to buy this market.  Time to sit out and watch from the sidelines until new clues present themselves. 

Weekly stop still hovering above prices that seem to be closing in.  Daily Stop hit.  My stop was between these two, and it was also hit. 


Weekly ADX registers the downtrend that has been underway.  Will it resume?  Daily ADX is being banged up a bit by the recent bounce.  


The current design of my automated intermediate to long term system has also exited this market.  This system is still under development and testing, but getting we are getting closer to starting to trade it -stay tuned, as I am sure certain aspects of that experience will be chronicled here.  More markets than we currently talk about will be traded by that system, so I'll probably figure out how to do monthly reports on the system and what we have learned from successes and failures in running it.  


Current Stance
Long Term: Hold Short (or simply hold a different currency)

Intermediate Term: Flat 

Definitions: 
Flat = no position / not long or short the market. 
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position