I agree with this projection. Recent rallies are oversold rallies with really no buyers. This model projects a retest of the Jan lows...with more downside afterwards. The main question is when.
Sunday, February 24, 2008
SP-500
I agree with this projection. Recent rallies are oversold rallies with really no buyers. This model projects a retest of the Jan lows...with more downside afterwards. The main question is when.
GOOG
GOOG is in a compressing wedge. The top line represents the declining tops while the bottom line is a long term trendline. Which ever way it leaves the wedge, I'm sure the move will be very substantial.
PIVOT POINTS
PROJECTIONS
BIDU
BIDU is also in a compressing wedge ala GOOG. Both are high flyers that have been grounded this month. Volume is a little better in GOOG...but not by much.
PIVOT POINTS
PROJECTIONS
GS
Samething...same story...ala GOOG...ala BIDU...however, it just finished testing the lows succesfully. It needs follow-through on Monday.
PIVOT POINTS
PROJECTIONS
Monday, February 18, 2008
Tuesday, February 12, 2008
TECH ANALYSIS
Shows the move off a bull flag/20ma along with a head and shoulders move...break down off the neckline/50.
Saturday, February 9, 2008
Friday, February 8, 2008
TRADING MISTAKE
Which trading mistake is worse?
a) Taking bad trades
b) Failing to take good trades
Psychologically, these are very different mistakes. Taking bad trades (overtrading) is most often a function of overconfidence, frustration, or sheer impulsivity. It represents a relative absence of control.
Failing to take good trades, on the other hand, can be viewed as an overcontrolled behavior pattern. Anxiety and a lack of confidence are common reasons for not taking trades with an edge.
Many traders cycle between these modes: They become overaggressive, take bad trades, undergo losses, and then become overly risk averse and fail to take good trades. This is a deadly cycle, both emotionally and financially.
So which is worse? Neither: as we can see with those traders that cycle between the two, they're variations of the same trading problem--a loss of rule-governance. When we become emotionally stimulated--whether with anger or anxiety--we are apt to act in flight (don't take the trade) or fight (take any trade) mode. We no longer stay connected to trading rules and sound practices.
Neither mistake need be deadly if it becomes a cue to observe yourself and figure out why you are veering from your rules. Trading mistakes can be opportunities for self-analysis if you're able to catch yourself and enter a reflective mode. That is why I like to take a time out when I'm getting away from my goals and rules. We can't undo mistakes, but we can turn them into learning experiences.
a) Taking bad trades
b) Failing to take good trades
Psychologically, these are very different mistakes. Taking bad trades (overtrading) is most often a function of overconfidence, frustration, or sheer impulsivity. It represents a relative absence of control.
Failing to take good trades, on the other hand, can be viewed as an overcontrolled behavior pattern. Anxiety and a lack of confidence are common reasons for not taking trades with an edge.
Many traders cycle between these modes: They become overaggressive, take bad trades, undergo losses, and then become overly risk averse and fail to take good trades. This is a deadly cycle, both emotionally and financially.
So which is worse? Neither: as we can see with those traders that cycle between the two, they're variations of the same trading problem--a loss of rule-governance. When we become emotionally stimulated--whether with anger or anxiety--we are apt to act in flight (don't take the trade) or fight (take any trade) mode. We no longer stay connected to trading rules and sound practices.
Neither mistake need be deadly if it becomes a cue to observe yourself and figure out why you are veering from your rules. Trading mistakes can be opportunities for self-analysis if you're able to catch yourself and enter a reflective mode. That is why I like to take a time out when I'm getting away from my goals and rules. We can't undo mistakes, but we can turn them into learning experiences.
Thursday, February 7, 2008
Tuesday, February 5, 2008
HOTTO SPEAKS
First I'll repeat my story of March - July 2003.. There's a point : ) I was working on an engineering consulting job in early March, 2003. Details are in past chat logs. So.. I missed the Impulse rally from 3/12/03 to 3/21/03 .. 7 days.. 1100 points. I took that rally to be an Impulse Rally to start a new Intermediate Term rally.. 5 weeks to 13 weeks. But.. it had become Overbought.. so I waited for a PB... maybe to sma50.. about half the rally. We got the PB to sma50.. And OBV held most of the gains of the Impulse rally. I started buying on April 1 or 2.. after Missing the wonderful Impulse rally completely. During the whole month of April, 2003.. the DJIA did Not make highs Over the top of the Impulse rally in March. But.. we (in Hotto Club).. made big gains in SWGC during April.. as small stocks played catch up with the Blue Chips.. as the Blue Chips Consolidated the Impulse rally gains. By July, 2003.. I was up about 140% from April.. I forget exactly.. It's in the old Logs. Again.. That all came After missing the Impulse rally completely. During April May June, 2003.. there were lots of doubters.. thinking it had been just another Bear market Rally. It was not until August.. on the BO.. that I was sure we were in a new Bull Mark et.
Key points...
It's not disastrous to miss out on the Impulse Rally.
If Intermediate Term signals are given... it's possible to make good gains beginning After the Impulse Rally is over.
Same old thing.. When the market gives important Signals.. it often uses up a lot of energy to give the signal.. and next needs to retrace part of the move that produced the signal... Or at least Consolidate for a while.
Friday we got the new ZBT.. first true complete one in over 20 years. ZBT is "Zweig Breadth Thrust" signal. I discussed the Zweig Indicator over the weekend.. T2103 is the ticker on TCNet. I'll go over ZBT more now. Marty Zweig did his research back in the days before PCs could be used to help trading. Zweig did a lot of work on Momentum indicators.. adding to other earlier research by others. The ZBT takes a lot of buying to achieve the buy signal. Zweig's signal needs a surge.. within 10 days to go from Oversold to Overbought.. in the A/D measures. He was not interested in very Short term trading.. but in longer term Trends that would support gains over time. So... the ZBT signal - in my words - Looks for a solid Impulse Rally.. with Breadth support.. that makes it very likely that a LT Rally is under way.. even Longer than My "IT Rally" of 5 weeks to 13 weeks. The ZBT forecasts a higher market .. months ahead. Average gains have been 24.6% in average 11 months.. After the ZBT is given. I'm used to trading in much shorter time frames. My goal has been to discover the start of Intermediate Term Rallies.. 5 weeks to 13 weeks. Then.. often.. I trade 3 day to 5 day swings within that Intermediate Term trend. But.. the ZBT can be helpful to us.. in a high probability Big gain over the next 11 months.
Theoretically, I take the ZBT to be a show of urgent Short Covering.. And Buying by big investors. As discussed in the PR31b discussions and related.. we expect to see the Tigers "Pounce" more than once before the larger trend emerges. The 2003 example I discussed earlier shows how it may evolve. Impulse Rally.. then 5 weeks of sideways Consolidation.. Then the Uptrend emerged. But.. during the Consolidation in the Blue Chips.. the small stocks were playing catch up. T2100 shows what happened.. away from the Blue Chips during April May of 2003. T2100 continued higher during April 2003.. while Blue chips consolidated. T2100 is the A/D line.
I'll go over some cases of the ZBT signal
First some more detail...
Zweig defined the ZBT using a 10 day Exp Average of the ratio.. ( A / (A+D)). Again.. that had to do with few investors having Computers. It's much easier to compute Exp Average by hand.. than Simple MA. In the years since Zweig defined the ZBT.. the PC took over. Other market researchers began using Simple MA on the ratio to create the Zweig Index. Using sma gives different results from Exp Average. So.. if you dig into the topic on the Internet.. be aware of the differences. There are other variations out there. Zweig "Continuation" has been defined - not by Marty Zweig.. but by others. Others have used an 8 day window.. or 12 day or 15 day. So.. be careful in comparing results from various sources.
In May, 2004 there is a Near-ZBT showing. 5/10/04 T2103=31.31... then 11 days later.. 5/25/04 .. T2103=61.62. That was 11 days.. Just outside the Zweig window of 10 days. If you start from 5/11/04 , T2103=40.48.. That gets it down to 10 days up to 5/25.. But.. 40.48 is Just Over the lower limit of 40. So.. it's tempting to call it a ZBT on 5/25.. and go on with life. : )
Now.. look at DJ-30.. from 5/25/04 .. forward. The DJIA closed at 10,117 on 5/25/04 .. ..paused the next day.. Down 7; then moved up for 8 days.. to 6/8/04 .. to 10,432. So.. it was Not useful to wait after the signal on 5/25/04 .. at least not ST. But.. after market moved a bit higher.. it then moved back Down in August, 2004.. to just Under the May, 2004 lows. That proved to be an important "double bottom".. and DJIA moved much higher into December, 2004. Interesting.. it was the May, July, August period in 2004 that led me to invent PR31b and PRN 31b. My discussions about that may be in the Hotto Club logs from then.. Or in Hottoworks Club Logs. PR63b came after KR63.. for Intermediate Term lows during Bull markets. PR31b was needed to help with double bottoms or Consolidation periods After Intermediate Term bottoms.
Back to the Near-ZBT of May, 2004..
So.. After the ZBT on May 25, 2004 ... it took 5 months to Consolidate to a final low.. in October, 2004.. before Q4 Rally into December 2004. That December high was 7 months after the May ZBT. Then came a PB in early 2005.. and another pop to new highs in March , 2005. That was 10 months after the May, 2004 ZBT. Some features during the Consolidation period were that the market did not make Much lower lows.. we have the benefit of hindsight with Charts.. to see the overall Consolidation. During that period.. trading SWGC off ST lows was profitable. Then.. in October , 2004.. we came into the Seasonal rally period.. and that worked well for us. I showed this example to get across the longer term nature of the ZBT. In this case.. there was an immediate move up.. over 2%.. but then back down to slightly lower lows.
One more comment on the May, 2004 ZBT case.
May, 2004 came just 2 months after the March, 2004 top... which was After the Huge Bull Mark et Leg up from March, 2003. So.. looking for another big Intermediate Term rally from the May, 2004 lows was asking a lot. What did happen.. was the Correction continued to the October, 2004 Low.. 7 months of Consolidation/Correction off the March , 2004 High. So.. I take the May, 2004 ZBT as a First "Pounce" of Tigers.. And first Short Covering after the two month decline. It was strong enough to suggest there would be More upside to come. It paid off within 7 months.. and more in 10 months. Meanwhile.. it was good to buy the dips.. and sell rallies.
Question: These signals mean the tide is changing? High tide in a few months ahead? If so, we buy on pullbacks....sell on rallies. right?
Answer: Well said. : )
Next... I'll go to another case.. with different conditions coming into the ZBT.
There was a ZBT on 1/8/1987 .. after only a Six day pop from 39.73 on 12/30/86 .. to 63.25 on 1/8/87 .
Now the DJIA chart..
DJIA closed at 2002 on 1/8/87 .. then just kept on Going up.. No pause at all. The DJIA reached new ATH of 2746 on 8/25/87 .. 7 months later.. one of the great Bull Runs ever.. over 35% After the ZBT.. and over 40% overall. Of course.. it was very overbot.. and Breadth deteriorated during the runup.. and then the Fed hiked Rates .. and Inflation popped up.. And then the market gave back the whole rally.. into the "1987 crash".. back to January lows. But.. meanwhile.. the ZBT paid off Big time... according to Marty Zweig's core idea. He wanted to fine those sudden surges.. that would lead to more gains over the next year or so. He noted that most investors are frightened after the First big surges.. and they stand back.. awaiting a big correction.. that may never come... and they get left standing on the sidelines. Zweig's goal was to find signals that would give investors confidence of a longer uptrend ahead... so if they bought stocks on the signal.. they could stay in for a longer time.
Now.. the setup conditions in January , 1987.
There had been the great Bull market move from August 1982.. to July, 1986.. more than Double in 4 years. Then.. the DJIA Consolidated for the rest of 1986.. did not Correct badly.. but no new highs.. just Consolidation pattern... into December, 1986. So.. in January, 1987.. there had been a 5 to 8 month Consolidation Before the ZBT in January 1987. And.. the up move that gave the ZBT.. was a BTBO.. over the Consolidation base of 1986. So.. we have a suggestion.. about what may come Immediately after a ZBT.. based on the Setup conditions when they occur.
Another ZBT occurred on 8/6/1984 . That was after a 7 month Correction.. After the huge Bull Mark et Leg of August, 1982 to January, 1984. After 8/6/84 .. the DJIA Consolidated for 5 months.. into December, 1984.. before moving higher into January/February 1985. Then Consolidation again for 3 months.. before moving up into July, 1985. July, 1985.. that was 11 months after the ZBT in August, 1984. DJIA was Not done yet... it kept moving up.. over 30% into 1986.
It's always hard looking at the period just after 1982.. Interest rates were falling.. Inflation was falling... the USA was growing fast.. after big unemployment in 1980-81. So.. the stock market kept moving up and up.. with the better conditions. Still.. the ZBT did it's job.. kept investors in stocks to benefit from coming gains. There was a ZBT on 8/20/1982 .. The market moved higher.. paused a week.. then marched higher into June, 1983.
Key points...
It's not disastrous to miss out on the Impulse Rally.
If Intermediate Term signals are given... it's possible to make good gains beginning After the Impulse Rally is over.
Same old thing.. When the market gives important Signals.. it often uses up a lot of energy to give the signal.. and next needs to retrace part of the move that produced the signal... Or at least Consolidate for a while.
Friday we got the new ZBT.. first true complete one in over 20 years. ZBT is "Zweig Breadth Thrust" signal. I discussed the Zweig Indicator over the weekend.. T2103 is the ticker on TCNet. I'll go over ZBT more now. Marty Zweig did his research back in the days before PCs could be used to help trading. Zweig did a lot of work on Momentum indicators.. adding to other earlier research by others. The ZBT takes a lot of buying to achieve the buy signal. Zweig's signal needs a surge.. within 10 days to go from Oversold to Overbought.. in the A/D measures. He was not interested in very Short term trading.. but in longer term Trends that would support gains over time. So... the ZBT signal - in my words - Looks for a solid Impulse Rally.. with Breadth support.. that makes it very likely that a LT Rally is under way.. even Longer than My "IT Rally" of 5 weeks to 13 weeks. The ZBT forecasts a higher market .. months ahead. Average gains have been 24.6% in average 11 months.. After the ZBT is given. I'm used to trading in much shorter time frames. My goal has been to discover the start of Intermediate Term Rallies.. 5 weeks to 13 weeks. Then.. often.. I trade 3 day to 5 day swings within that Intermediate Term trend. But.. the ZBT can be helpful to us.. in a high probability Big gain over the next 11 months.
Theoretically, I take the ZBT to be a show of urgent Short Covering.. And Buying by big investors. As discussed in the PR31b discussions and related.. we expect to see the Tigers "Pounce" more than once before the larger trend emerges. The 2003 example I discussed earlier shows how it may evolve. Impulse Rally.. then 5 weeks of sideways Consolidation.. Then the Uptrend emerged. But.. during the Consolidation in the Blue Chips.. the small stocks were playing catch up. T2100 shows what happened.. away from the Blue Chips during April May of 2003. T2100 continued higher during April 2003.. while Blue chips consolidated. T2100 is the A/D line.
I'll go over some cases of the ZBT signal
First some more detail...
Zweig defined the ZBT using a 10 day Exp Average of the ratio.. ( A / (A+D)). Again.. that had to do with few investors having Computers. It's much easier to compute Exp Average by hand.. than Simple MA. In the years since Zweig defined the ZBT.. the PC took over. Other market researchers began using Simple MA on the ratio to create the Zweig Index. Using sma gives different results from Exp Average. So.. if you dig into the topic on the Internet.. be aware of the differences. There are other variations out there. Zweig "Continuation" has been defined - not by Marty Zweig.. but by others. Others have used an 8 day window.. or 12 day or 15 day. So.. be careful in comparing results from various sources.
In May, 2004 there is a Near-ZBT showing. 5/10/04 T2103=31.31... then 11 days later.. 5/25/04 .. T2103=61.62. That was 11 days.. Just outside the Zweig window of 10 days. If you start from 5/11/04 , T2103=40.48.. That gets it down to 10 days up to 5/25.. But.. 40.48 is Just Over the lower limit of 40. So.. it's tempting to call it a ZBT on 5/25.. and go on with life. : )
Now.. look at DJ-30.. from 5/25/04 .. forward. The DJIA closed at 10,117 on 5/25/04 .. ..paused the next day.. Down 7; then moved up for 8 days.. to 6/8/04 .. to 10,432. So.. it was Not useful to wait after the signal on 5/25/04 .. at least not ST. But.. after market moved a bit higher.. it then moved back Down in August, 2004.. to just Under the May, 2004 lows. That proved to be an important "double bottom".. and DJIA moved much higher into December, 2004. Interesting.. it was the May, July, August period in 2004 that led me to invent PR31b and PRN 31b. My discussions about that may be in the Hotto Club logs from then.. Or in Hottoworks Club Logs. PR63b came after KR63.. for Intermediate Term lows during Bull markets. PR31b was needed to help with double bottoms or Consolidation periods After Intermediate Term bottoms.
Back to the Near-ZBT of May, 2004..
So.. After the ZBT on May 25, 2004 ... it took 5 months to Consolidate to a final low.. in October, 2004.. before Q4 Rally into December 2004. That December high was 7 months after the May ZBT. Then came a PB in early 2005.. and another pop to new highs in March , 2005. That was 10 months after the May, 2004 ZBT. Some features during the Consolidation period were that the market did not make Much lower lows.. we have the benefit of hindsight with Charts.. to see the overall Consolidation. During that period.. trading SWGC off ST lows was profitable. Then.. in October , 2004.. we came into the Seasonal rally period.. and that worked well for us. I showed this example to get across the longer term nature of the ZBT. In this case.. there was an immediate move up.. over 2%.. but then back down to slightly lower lows.
One more comment on the May, 2004 ZBT case.
May, 2004 came just 2 months after the March, 2004 top... which was After the Huge Bull Mark et Leg up from March, 2003. So.. looking for another big Intermediate Term rally from the May, 2004 lows was asking a lot. What did happen.. was the Correction continued to the October, 2004 Low.. 7 months of Consolidation/Correction off the March , 2004 High. So.. I take the May, 2004 ZBT as a First "Pounce" of Tigers.. And first Short Covering after the two month decline. It was strong enough to suggest there would be More upside to come. It paid off within 7 months.. and more in 10 months. Meanwhile.. it was good to buy the dips.. and sell rallies.
Question: These signals mean the tide is changing? High tide in a few months ahead? If so, we buy on pullbacks....sell on rallies. right?
Answer: Well said. : )
Next... I'll go to another case.. with different conditions coming into the ZBT.
There was a ZBT on 1/8/1987 .. after only a Six day pop from 39.73 on 12/30/86 .. to 63.25 on 1/8/87 .
Now the DJIA chart..
DJIA closed at 2002 on 1/8/87 .. then just kept on Going up.. No pause at all. The DJIA reached new ATH of 2746 on 8/25/87 .. 7 months later.. one of the great Bull Runs ever.. over 35% After the ZBT.. and over 40% overall. Of course.. it was very overbot.. and Breadth deteriorated during the runup.. and then the Fed hiked Rates .. and Inflation popped up.. And then the market gave back the whole rally.. into the "1987 crash".. back to January lows. But.. meanwhile.. the ZBT paid off Big time... according to Marty Zweig's core idea. He wanted to fine those sudden surges.. that would lead to more gains over the next year or so. He noted that most investors are frightened after the First big surges.. and they stand back.. awaiting a big correction.. that may never come... and they get left standing on the sidelines. Zweig's goal was to find signals that would give investors confidence of a longer uptrend ahead... so if they bought stocks on the signal.. they could stay in for a longer time.
Now.. the setup conditions in January , 1987.
There had been the great Bull market move from August 1982.. to July, 1986.. more than Double in 4 years. Then.. the DJIA Consolidated for the rest of 1986.. did not Correct badly.. but no new highs.. just Consolidation pattern... into December, 1986. So.. in January, 1987.. there had been a 5 to 8 month Consolidation Before the ZBT in January 1987. And.. the up move that gave the ZBT.. was a BTBO.. over the Consolidation base of 1986. So.. we have a suggestion.. about what may come Immediately after a ZBT.. based on the Setup conditions when they occur.
Another ZBT occurred on 8/6/1984 . That was after a 7 month Correction.. After the huge Bull Mark et Leg of August, 1982 to January, 1984. After 8/6/84 .. the DJIA Consolidated for 5 months.. into December, 1984.. before moving higher into January/February 1985. Then Consolidation again for 3 months.. before moving up into July, 1985. July, 1985.. that was 11 months after the ZBT in August, 1984. DJIA was Not done yet... it kept moving up.. over 30% into 1986.
It's always hard looking at the period just after 1982.. Interest rates were falling.. Inflation was falling... the USA was growing fast.. after big unemployment in 1980-81. So.. the stock market kept moving up and up.. with the better conditions. Still.. the ZBT did it's job.. kept investors in stocks to benefit from coming gains. There was a ZBT on 8/20/1982 .. The market moved higher.. paused a week.. then marched higher into June, 1983.
Monday, February 4, 2008
GOOG
Goog broke out of a 3 year trendline from earnings. It looks to seek support around 460. Based on past patterns, I would seek entry when it does not make new lows on daily.
Friday, February 1, 2008
FOCUS
I quickly reminded myself how true this is when trading as too many investors focus on the short term results or the money won and lost in each trade rather than the net result.
The idea of the game is to make the right choices and understand that some of those choices will turn out to be losers. Losers are part of the game and must not affect you emotionally as long as the decision was correct. You must study, analyze and focus on your decisions, not on the amount of money won or lost on each individual trade. As long as your decisions are correct and consistent, you will be a winner over the long term.
The idea of the game is to make the right choices and understand that some of those choices will turn out to be losers. Losers are part of the game and must not affect you emotionally as long as the decision was correct. You must study, analyze and focus on your decisions, not on the amount of money won or lost on each individual trade. As long as your decisions are correct and consistent, you will be a winner over the long term.
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