S&P 500 Stock Index 12/30/11

Not much has happened in the S&P since last week's post. A trend-line has kind of been broken. A prior intraday high representing some resistance has kind of been broken as well.  But with zero follow-through. My short-term trading was also slow this week.  


What about the broader trend?  That's what I try to cover here anyway.  Well, it's kind of no-man's land right now.  Sideways.  We need a break one way or the other to clue us in.  We will be watching key intermediate term price levels and follow-through action should those levels be broken to the upside or downside.  

Weekly bar prices have poked their head above the trend-line connecting recent lower highs, but nothing happened as a result.  Some folks would say the following bar's low needs to also be higher than the trend-line to confirm.  Clues will likely come from the behavior of next week's bar around this line.

A valid intermediate term trend following play would be to go long should prices break back above the 12/27/11 high.  Just make sure your risk is properly manged and also that initial stops are tight in here. This market has been churning.


A break below the 12/19/11 lows would be an intermediate term downtrend signal, but not without broader risks.  To reduce those risks, you would need to be looking to broader areas like the 11/25/11 lows or even the 10/04/11 lows.  All of these areas represent boundaries established by the current sideways price range. 


My general intermediate term orientation for is for uptrend. Why? Because prices have been pushing those boundaries.  In other words, I'm just following the price trend.  Recent problems at resistance areas have given me short-term caution though.  Is this a forecast?  No!  Just follow price.

Our moving average envelopes have moved into uptrend mode on the S&P 500's weekly and daily bar charts.  This is a change from last week, and is in line with my current intermediate term orientation, as skeptical as that orientation may be.


If we get any short-term pull backs in here, and I am not saying we will, which do not lead to daily or even weekly RSI falling back below their lower line (I have it at an unconventional level here), we would have a trend signal.  RSI finding support on that line during any pullback that then reverse back into intermediate term uptrend would be constructive for anyone long or looking to go long this market.  If, and, or, but......

The Dynamic Trailing Stop is giving us a mixed picture right now, but one that is in line with other comments regarding intermediate term uptrend potential with short-term downside risks. But it's just an exit device really, so I might be reading a little too much into it.  Are technical analysis and trading more art or science?  Or both?  


When I first got into this game, I thought art.  Then, as I learned techniques and measures, I thought science for sure.  As I realize none of us know much of anything, I realize that it's both.  Why pigeonhole it into one category?  The way DTS (a simple exit tool) is relating to the view created by other observations right now is a great example of this.  Whatever it is you do, you are all artists!  Do your art!  This where mine is at right now.  It will change.  Hopefully improving in the new year!


ADX is sending a message of no-trend right now.  We already realized this from our price bar observations. Can too many indicators sometimes lead to analysis paralysis?  I think so.  In my programming work (I'm a beginner) I recently tried to improve a fairly robust (robust = works, across markets and time frames, but has significant drawdown periods) system by adding a new code for an additional trend filtering indicator. Results did not improve. They got exponentially worse in fact!  Keep It Simple Speculators (KISS)!


Current Stance:

Long Term: Flat

Intermediate term: Flat

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   

Stock Market Is Not Physics: Part IV
By Elliott Wave International

Most people's thinking simply defaults to physics when analyzing financial events. But when we take the time to examine the results of applying that model, we find that it is not useful either for predicting or explaining market behavior. Read More.

EURO Futures 12/29/11

Our short EURO position continues to be rewarded.  

Still looking like a long term distribution pattern to me. 

Our stop for the short EURO position remains at 1.3472 for now.  Profit is locked, so let's give this a little room to breath.  

Moving average envelopes remain in downtrend mode over both time frames.  The RSI indicator is also in downtrend range.  We need to keep an eye on possible positive RSI divergence forming on the daily bar chart.  Such a velocity divergence may indicate pending short to intermediate term rally potential.  

Dynamic Trailing Stop (DTS) is providing tighter stops than I suggested earlier in the post.  I'm somewhat tempted to use one of these right now, especially given the possible RSI divergence.  


ADX registers trending behavior on both time frames. 


Current Stance

Long Term: Hold Short 

Intermediate Term: Hold Short (stops mentioned in post) 

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   

The Light Bulb Moment for the Eurozone
EWI's free EU debt report sheds some light on what's in store
By Elliott Wave International

How many European bankers does it take to change a light bulb? That's a joke in search of an answer, but EWI's European analyst Brian Whitmer explained five months ago that the "light bulb moment" was coming -- that's the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone. Read More. 

Tightening Stops on Metals Shorts

I don't often post details between regular weekly posts, but I thought it a good idea this time. 


If you follow this blog, you know we have been short Silver and Gold futures.  Stop levels have been mentioned for gold here and silver here.  Both markets have now broken below their September lows, further confirming our position on the short side and the downtrend in general. 


We have unrealized profits in these positions and see two possible trend outcomes here.  Either these markets will treat this as a further trend break out (to the downside), or there will be an intermediate term reaction to the upside.  We want to accomplish two goals: 1) lock in intermediate term profits and 2) allow the trend some room to continue running in case there is follow through.  


Our new stop price at which we will cover gold shorts is: 1594.71.  For silver, the new stop for our intermediate term short positions is: 28.78.  

Gold Futures 12/28/11

We remain short the gold futures market.  This downtrend is going in our favor, but do we know how far it will go? Of course not! We only know that a wave / a price trend started to form and we decided to ride it. Did we analyze news stories or economic models to make our decision? Nope! Just price trend.


Chart sizing note:
Response to extra-large charts in the last couple of posts has been mixed. I have personally decided I don't like the extra-large charts. They just don't seem to fit.  It's like they takeover and breakup the flow of the post. Big charts are great, but things need to fit. Therefore, we are going back to the previous chart size for regular posts. Perhaps we will use the extra-large ones for special posts, such as the recent programming update. If you disagree and prefer the extra-large charts, let me know. Enough people on either side (its been about 50/50 so far) might cause me to reconsider. 

As long as gold remains below the solid white trend-line drawn across recent lower highs on the weekly bar chart, we can consider the trend to be down. 

Our stop/loss level to cover the short position remains at 1760.50.  Let winners run; cut losses short.  

Moving average envelopes in downtrend mode.  RSI in downtrend range. 

Stops provided by the Dynamic Trailing Stop are a bit tighter than the one I suggested earlier.  Using the DTS stops is completely valid.  I just want to give the trend a little more room to breath right now. 


ADX registers non-trending action on the weekly chart, but trending behavior on the daily chart. Negative-DMI is trending above positive-DMI on both time frames. 


The basic automated trend following systems I started programming earlier this year are also short this market right now.  


Current Stance

Long Term: Hold Short (stops mentioned in post)

Intermediate Term: Hold Short (stops mentioned in post)

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     


"Market Manipulation" Is Not Why Most Traders Lose 
A look at EWI president Robert Prechter's requirements for successful trading
Elliott Wave International 

Swiss Franc 12/27/11

Although we have respected the Franc's downtrend, we have also recently been presenting the idea that that trend may be at maturity.  Let's see what it looks like this week (charts taken prior to final close).

Price bars are starting to poke their head above our trend-line drawn across recent lower lows.  

Last week we said a move above 1.0905 would indicate a possible change in intermediate term trend.  We still like that level.  Our reasoning is simple.  While pushing above that level is not a definitive confirmation of trend change, we want to lock in profits when a trend matures.  I usually have tight stops early in a trend trade, then keep them loose after stops have moved to slight profit area, only to then tighten them again after the trend has produced more significant profits or shows technical signs of maturity.  


We want to cut losses short and let winners run.  We also want to lock in profits when a trend starts to show possible signs of turning.  In this case, we have a possible Elliott Wave impulse pattern down that could be complete.  We also have other indications of technical deterioration of trend, including the velocity divergences seen in the next chart.  Even with these signs of trend deterioration, we are giving the trend a little room to breath and continue to run at our stop.  

Moving average envelopes are still in downtrend mode on both time frames in the Swiss Franc, but the daily moving average signal line is starting to move back into that neutral area between the envelope lines.   Note the RSI velocity divergences present on both charts.  Such divergence is typical behavior in an Elliott 5th wave. 

Weekly Dynamic Trailing Stop (DTS) is still in downtrend mode, but with a fairly tight stop level. Daily DTS has moved into uptrend mode.  Yet another indication of trend maturity.  ADX registers non-trending behavior for both time frames.  Although, not a leading indicator, daily ADX / DMI has weakened significantly since last week. 

At the time of this post, 1 USD = 0.93416 CHF.  Will it reach parity before turning?  Who knows? Who cares? Trade the trends; forget everything else. 


Current Stance:
Long Term: Flat (hold short against stop if you are short)

Intermediate Term: Flat (hold short against stop if you are short)

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  

What Is Backing Your Deposits in the Bank? By Elliott Wave International

Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe. Read More.

Silver Futures 12/27/11

We are still short silver.  This has been a decent trade so far, but silver has not yet broken below the 9/26/11 intraday lows, and appears to be in some type of short-term consolidation.  I am posting this early in the session, so charts will not reflect final market prices. 


You might notice that I am trying out larger chart image sizes here.  Hopefully this makes the charts (most important part of these posts) more reader friendly.  I have not decided if I like it better like this or not, so let me know if you have a preference.    

As long as prices hold below the solid white trend lines on the weekly silver futures chart above, we can consider prices to be in a downtrend. 

We are keeping the stop to cover these shorts at 32.030, while we wait to see if this downtrend is going to get going or not.

Both the moving average envelopes and the RSI indicators are in downtrend mode on both time frames. 

Dynamic Trailing Stop indicators are providing tighter stops than the one I suggested earlier.  You decide what's best for you. 


Weekly ADX is turning up, meaning that it is starting to register trending behavior.  Daily ADX definitely registers trending behavior right now. 


Current Stance

Long Term: Hold Short

(Note that these comments are related to trading futures markets; we advocate the idea of having a small portion of one's savings in physical metals for the ultra-long term as a form of currency insurance.)  

Intermediate Term: Hold Short (stops mentioned earlier in the post)

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   

"Market Manipulation" Is Not Why Most Traders Lose
A look at EWI president Robert Prechter's requirements for successful trading
By Elliott Wave International

How often have you heard analysts refer to a down day on Wall Street as "traders taking profits"? Sounds great, but the sobering fact is that most traders -- in futures, commodities, or forex -- lose money. Yet some traders do win; some even set records. In 1984, Elliott Wave International's president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account. Here is a link to the free report where he lays out his requirements for successful trading. Read More.

Ron Paul: "Arguing on Principle"

I don't really like the title given to this video, but it is one of the better interviews I've seen so far.  Always seeking to speak the truth, Ron Paul is a true champion of free-markets and liberty.  It's long, but worth watching if you are interested in free-market principles or the current political cycle.     

Occupy Wall Street & Capitalism

"Don't let the fox guard the hen house". 



"What we need is constraints on government". 

Programming Efforts Are Coming Along

Today I did some more work on the long-term / intermediate term trend following systems.   Shown below are some screen shots.  These examples do not have a money management code module added in yet, so you will only see single contract position sizes indicated on the charts.  I'm simply working with various entry and exit techniques today, but I have been able to write code modules for variable position sizing based on specified % risk to capital balance. 


Catching trends in the Swiss Franc:

Getting whipsawed during a sideways trend in Soybeans (part of trading; manage your risks!!!), but notice that, like the Swiss Franc, this system currently has a profitable short position on in beans as a result of catching the most recent breakdown wave:

Soybeans in a profitable trending phase just before the chop shown above:

The Stock Market Is Not Physics: Part II

By Elliott Wave International

In the world of physics, action is followed by reaction. Most financial analysts, economists, historians, sociologists and futurists believe that society works the same way. They typically say, "Because so-and-so has happened, such-and-such will follow." Read More.

S&P 500 Stock Index 12/22/11

We came into the week with a short position and a tight stop.  As noted last week, the tight stop was due to our being "extremely skeptical" of the position.  Our stop was taken out, and we ended spending most of the week moving in and out of short-term trades to the long side.


It's been a difficult market lately, but I've found it kind of fun.  Going into street fighter mode -accelerating stops to break-even / slight profit, willingness to take the short-term trades that set up- has been essential in what has been a profitable month for us so far.  As the holidays close in, this difficult market leaves us with two simple questions right now: Will prices consolidate within a range until after New Years? Or, will prices to break into a rideable intermediate term wave?

Expect some follow through if prices break above the solid white trend-line connecting recent lower highs.  The only real alternate for prices facing up against a down sloping line in time is for there to be at least a short-term decline from near current levels.  

When I say follow through, it is a bit of a subjective statement.  If prices break through the trend-line, they then need to not only close above that line, but also break above the 12/07/11 intraday high (blue line on daily chart above).  


If prices do not break through these resistance levels, then we need to look at support.  Intermediate term support is the intraday low from 12/19/11 (dashed red line on chart above).  If prices decline in the short term, but do not break this line, then we really have no clue what happens next and are therefore still waiting for a breakout in one direction or the other.  


If prices break below the 12/19/11 intraday lows, then we at least know a potential intermediate term downtrend is forming.  Such a trend would be further confirmed with a break below the 11/25/11 lows.  


In summary, we have no idea which way the market goes from here.  But we do have lines in the sand! To me that is a great Christmas present.  We have a fairly tight intermediate term range with defined boundaries for us to organizes our various battle plans around. 

Moving average envelopes on the S&P 500 index continue to show a rather choppy / trendless situation at the moment.  Good thing we are in street fighting mode right now! 


RSI is still in downtrend mode on both charts, but consolidating just like price action right now.  

The Dynamic Trailing Stop indicator is providing valid stop levels on both charts for long side trades. Notice how much it has been whipsawed around this month!  Keep those stops tight, don't let the market chip away too much at your capital in this environment.  


ADX shows non-trending action on both charts. 


Current Stance:

Long Term: Flat

Intermediate term: Flat

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            

How to Identify and Use Support and Resistance Levels

By Elliott Wave International

Since 1999, Elliott Wave International senior analyst and trading instructor Jeffrey Kennedy has produced dozens of Trader's Classroom lessons exclusively for his subscribers. While commodity markets are known as some of the toughest trading environments around, these actionable lessons from a skilled veteran can help you trade commodities, or any market for that matter, with more confidence. Read More.

EURO Futures 12/22/11

We remain short the EURO.  Our stop to cover the short is fairly tight. 

I know I repeat this every week, but the chart above looks like a long term distribution pattern.  Could it be a continuation pattern instead?  Sure; why not! We trade in the here and now as much as possible. Right now, the odds favor distribution. 

Our current stop is at 1.3472.  If prices break below the channel lines drawn above, then we will be drawing new trend-lines.   

Moving average envelopes and signal lines register downtrend on the weekly and daily EURO futures charts.  RSI is also in downtrend range on both charts.  


Riding a wave moving in the direction of our trade is often much easier, and more fun, than doing all the work to catch it.   

I like the stop provided by the weekly EURO chart's Dynamic Trailing Stop more than the daily DTS stop right now.  Current daily DTS is just too tight.  Our stop mentioned earlier in the post is in-between the two DTS stop levels, but closer to the weekly level.  If you think this stage of the downtrend is complete or near complete, then use the daily.  I have no idea if the trend is going to run from here or not, so I am giving it some room to breath. 


ADX registers trending behavior on both time frames.  


Current Stance

Long Term: Hold Short 

Intermediate Term: Hold Short against level mentioned in post. 

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   

The Light Bulb Moment for the Eurozone 
EWI's free EU debt report sheds some light on what's in store
By Elliott Wave International

How many European bankers does it take to change a light bulb? That's a joke in search of an answer, but EWI's European analyst Brian Whitmer explained five months ago that the "light bulb moment" was coming -- that's the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone. Read More.

How to Identify and Use Support and Resistance Levels

By Elliott Wave International

Since 1999, Elliott Wave International senior analyst and trading instructor Jeffrey Kennedy has produced dozens of Trader's Classroom lessons exclusively for his subscribers. While commodity markets are known as some of the toughest trading environments around, these actionable lessons from a skilled veteran can help you trade commodities, or any market for that matter, with more confidence. Read More.

"Market Manipulation" Is Not Why Most Traders Lose

A look at EWI president Robert Prechter's requirements for successful trading
By Elliott Wave International

How often have you heard analysts refer to a down day on Wall Street as "traders taking profits"? Sounds great, but the sobering fact is that most traders -- in futures, commodities, or forex -- lose money. Yet some traders do win; some even set records. In 1984, Elliott Wave International's president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account. Here is a link to the free report where he lays out his requirements for successful trading. Read More.

Gold 12/21/11

Gold remains in a downtrend. 

Gold is below trend-line on the weekly chart, but has not yet broken the September low.  

We are keeping stops for our short position at 1760.50.  Prices are either consolidating within a new and developing trend here, or the new trend is a fake.  We simply don't know yet. 

Both of the above gold futures time frames show moving average envelopes and signal lines now in downtrends.  The RSI indicator is also in downtrend range on both charts.  

   
The Dynamic Trailing Stop is in downtrend mode on both gold charts.  I like the stop mentioned earlier in the post more than I like either of the DTS stops at the moment. 


Weekly ADX still seems to be trending down (non-trending behavior), but weekly -DMI nas recently converged with and crossed above +DMI.  Daily ADX registers trending behavior.  


Most of the automated systems I have been developing are also short the gold market. 


Current Stance

Long Term: Hold Short (stops mentioned in post)

Intermediate Term: Hold Short (stops mentioned in post)

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    


"Market Manipulation" Is Not Why Most Traders Lose 
A look at EWI president Robert Prechter's requirements for successful trading
Elliott Wave International

The Stock Market Is Not Physics: Part I

By Elliott Wave International

People default to physics when predicting social trends. The Law of Conservation of Momentum makes possible our modern technological world. People rely on it every day. Despite its use in so many areas, however, it is inapplicable to predicting social change. Read More.

Swiss Franc 12/20/11

The Swiss Franc is currently in what one might consider a mature downtrend.  Will it continue or is it near it's end?  Know one knows of course, but we look at the clues.  Our main guide will be price action itself. 


Charts will not reflect final closing prices for today.

A downtrend in the Swiss Franc Futures is clearly still in place on the weekly chart.  One Indication maturity in the current downtrend is a possible Elliott Wave five wave pattern to the downside. Prices are currently testing a downtrend line drawn across recent lower highs.  A second clue would be in place If prices successfully close above this line.

In recent trading operations, I have been able to increase profitability by using tight stops at the beginning of a possible trend (make it work straight away), and then again after a trend has run and is starting to show the signs of aging and maturity (cut losses to unrealized profits short).  Loose volatility based stops are deployed in the middle of a running trend.  


Last week, I mentioned that a move above 1.0905 would be one indication the downtrend in the Swiss Franc had ended.  Prices remain below that level at the moment.  I unfortunately missed this trade.      

Moving average envelopes are in downtrend mode over both time frames in the Swiss Franc Futures. 


Another indication of maturity is offered by the RSI indicator located below the price bars.  Positive velocity divergence is being registered on both the weekly and the daily Swiss Franc Futures charts. Do these divergences always result in a trend termination?  Of course not.  We deal in probabilities, not certainties.  Divergences like this are typical in fifth wave positions, and are typical as trends draw to an end or consolidate.  But sometimes the trend just keeps on trucking. Therefore, tight stops are useful here, but to try to "call" an end to the trend is not the best practice.  Be prepared to react and follow the market's lead. 

The weekly Dynamic Trailing Stop is providing a stop level that is a little wider than the one suggested earlier.  The daily DTS has moved into uptrend mode.  Chalk daily DTS up as another clue that the trend might be ending.  


Weekly ADX shows no trending behavior.  Daily ADX has turned down.  Likewise, daily +DMI and -DMI are starting to converge.  

 At the time of this post, 1 USD = 0.93078 CHF. 


Current Stance:
Long Term: Flat (hold short against stop if you are lucky enough to be short)

Intermediate Term: Flat (hold short against stop if you are lucky enough to be short)

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  


What Is Backing Your Deposits in the Bank? By Elliott Wave International

Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe. Read More.