The current Zweig for the NYSE is making a remarkable comeback, indicating a market that is winding up to propel us to the next heights in this bull run.

Last week we were flirting with the oversold line, know we are approaching overbought.  The last little run up to 55.50 is actually three days of movements, so there is some momentum loss.  I don’t only look at the NYSE using this indicator, I also watch several other A/D’s.  (ALL US, All Nasdaq listed, S&P500, DJIA, Russel 2000, Nasdaq 100).  Today’s close has some divergences that I usually don’t see amongst the indicators.  That was obvious following the A/D lines today.  In fact only the NYSE and DOW-30 and SP500 showed a higher close on the Zweig indicators today.  The others closed slightly lower than yesterday.

Here we have four different data sources. The SP500, like the NYSE, shows an uptick in the A/D today, while the NAZ-100 is slightly down, as well as the R2000 in the last graph.  The broadest of all the graphs, the bottom left, represents all listed US stocks.  This indicator also indicates a slightly down A/D line today.  Today’s market was a tale of two cities. Is the Dow and SPX catching up to the Nasdaq, or is the Nasdaq loosing momentum?

Check back tomorrow for the answer.

Happy Trading

-RLT

On Wednesday in the Traders room we reviewed the live ZBI indicator via the Live Charts on the members only website at http://pv.ttthedge.com.  At that time the ZBI was pushing down into a new low since the firing of a ZB Thrust; a 10 day move from oversold to overbought that occurs rarely and has been a reliable indicator of the start of a bull market.   Since that firing the ZBI has never returned to oversold, it has gone neutral and then powered up to take us to new highs.  The last thrust up however was from a lower A/D line and clearly you can see momentum is leaving this market.

Reviewing this indicator show that it likes to make higher highs and higher lows when the market is moving up (makes sense) and the reverse for a down-trending market.  We need to watch to see if the current up tick will define a new wind up to take us to a new high, or will it reverse and fail the new low, which would indicate a move down into oversold.  The market is in transition territory..  so as Sergeant Phil Esterhaus from Hills Street Blues would say “Hey.. Let’s be-careful out there”..

Happy Trading
-RLT

 

I thought we were going to do it, close the Value Line down 4% knocking us out of our latest entry on the Zweig-Davis 4% Value Line trade.  For background on this trading system you can read the blog entry: Zweig 4% trading model - Thanks to Ned Davis.  It is a very simple weekly trading system.

We are unable to trade the Value Line directly so we have been using the Rydex 2x Russell 2K EFT (RRY) as our proxy.  I am sure there are better proxies out there, but that is what I chose.  Here is an update of where we are:

As I said: I thought midweek that Friday's close would shake us out, but we ended down just 3.6% for the week on the Value Line, hence we are still in the trade and positive since our 5/29 entry.  That completes 3 weeks on the current trade which entered RRY at 22.00 on 5/29 and closed this Friday (6/19/09) at 23.03, still up $1.03.

So in total we are up 45.88% in this system, during this time the SPX is up about 24.5%, so we are almost 2x over the SPX from 3/13 to now.  From the SPX low in March to now the SPX is up about 42%, so we are a little a head of a perfect entry on the SPX.

Happy Trading

-RLT

I wanted to write a quick note about Stops.  Now that we are tracking our trades real-time you can see how four traders trading the same symbol on the same call can generate five different results.  We all get slightly different fills, we trade different sizes, have different brokers, styles, personalities, computers, screens.. etc..   These are some of the factors just on the fills!  Then there is the trade management piece, the stops and the exits.. It is impossible for us all to match up exactly to the results in the portfolios.  Some of us are consistently beating the results, hopefully none of us are consistently below.  For the most part I take almost all of Tom’s calls except the futures which I am not set up to trade.  The trades in the portfolio pretty well match my personal entries and exits.

Make no mistake, you are trading your account.  You are in control of your exit and entry and which trade you take.  We have the privilege of trading alongside Tom and learning through experience how a great trader trades, but it is us who controls our own results and must develop our own trading styles, that like Tom, becomes second nature.

Stops:

Yesterday near the close we traded short and both BGZ and DXD were mentioned.  I entered DXD, I think most of the room entered BGZ with Tom.  On the close Tom moved the stops to breakeven which was 35.11 at the time.   I was busy managing my DXD trade, I thought we were going 50% short when the call came for 10%.  I was already positioned and now needed to dump 40% which I did and made a couple of hundred dollars.  Thank you.  When things were settled I looked in on the BGZ trade and noticed that my afterhours candle on BGZ did indeed have a tail that spiked through Tom’s stop.   DXD didn’t spike down like that on the close, and they usually match up pretty well so I went to the time and sale window:

Sure enough nestled in the trades was a 300 share trade at 35.09 and 35.10 sandwiched between 35.20’s.  I am not sure this triggered any stops, it doesn’t look like it because we should have seen a slew of 35.11 trades go by, but it did draw the tail on the chart and  to the point, you can’t always trust what you see.

Different platforms have different data feeds and tick filters.  If you ever looked at raw tick data you might never want to trade, there are prices all over the place that get reported out of time sequence, you need to trust that the report initiator encodes the data correctly and that your data service can process the data correctly.  A misprint or bad price can ruin a good trade.

How do you protect yourself?  You need to develop your own stop strategy and rules and learn how stops work.  Did you know that NASDAQ stops are triggered on the bid and not on an actual trade?  So if you have a regular stop, not a stop limit and  all the bids disappear, your market order will be placed at any price, which could be miles away from your stop price. 

My Tradestation allows me to filter my stops.  I set it to  enter the trade after a certain number of trades at or below the stop price.  This prevents a bad print from taking me out.  Often if I only have a couple of trades going on I set price alarms on my system and trade the stops by hand.  I usually use a 1 minute close to trigger the stop.  I wait for the current violating 1 minute bar to close.  If it closes below the stop, I trade out, if it bounces back up I might still trade out at a better price or let it run until the next violation.

This brings us to the DUG trade yesterday that had a 1% trailing stop.  I was in DUG yesterday in my ETrade account and my trailing 1% didn’t trigger when my charts 1% level was clearly showing the 1% level hit.  I think I must have moved to 1% after the intraday high was hit in my Etrade account (the charts on LiveCharts are from Tradestation).  Remember when you enter a trailing stop it starts trailing from the time you entered.  The 1% trailing stop on my charts yesterday were trailing from the opening which means they included the high of the day and that set the stops at 16.65 (my Etrade was at 16.63).  This is not my point except to say “see even amongst myself trades don’t agree!”  I want to look at the price action around the 1% trailing.  DUG actually bounced twice right on the 1% line.  There must have been enough trades here to cause the price to change course.  To avoid being taken out you could have used my 1 minute rule, although you would have been taken out on the second hit, or have placed your stops at 1.1% trailing to avoid the crowd, using them as a shield or just as a rule cheat a penny or two.

There are many ways to trade with stops and each platform offers unique ways of placing stop orders, learn what works best for the symbols you trade, your style and your platform.  The most important rule is “Honor thy stops”, a penny here or there, a bad print or bad fill are minor compared to the loss an undisciplined trader can take by ignoring or not taking stops.  It is cheap money to re-enter and your mind is almost always clearer out of a trade.

Happy Trading

RLT

On Friday (6/5/2009) in our trading room at TTTHedge.com one of the fellow members questioned if “Friday could be a top?” The member had read somewhere that top’s never occurred on Fridays.  This is the kind of question that always leads me back to the charts.  If tops “never” occurred on Friday, than we should be able to exploit this to get a tradable edge.   So I wrote a quick EasyLanguage filter that found 20 day tops.  A top being defined as the highest value over a moving 20 day trading period.  Here is a chart of the NYSE index, the red dots being defined as the tops.

Here are the results of running this on a 40 year chart of the indices:

The average should be 20% and in fact Friday looks almost like any other day with the numbers hovering around the 20% value.  The $COMP looks a little favored for actually making its highs on the Friday.  The interesting result is that Monday’s are consistently under the statistical average. 

While I don’t believe there is any tradable edge, it is worthy of further exploration.. Another project..

Happy Trading

-RLT

Much has been said and written this week at the event of the crossing of the 200 day moving average, a traditional  demarcation of bull and bear territory.  I have not had a lot of time to do research, but I did put my eyes to the charts last night and this morning to learn more about this event. and this is what I saw.

Here is where we are on several indices

Every index excepting the Dow is now up and over the 200 DMA, with the Nasdaq related indices leading the way.  We are waiting for the Dow to confirm.  So we are there now.. correct?  We are in bull territory and we are in a bull market.  Right?  Not quite so fast, there are two types of 200 DMA crossings and we need to know which one we are experiencing.

Let's look at the first type of crossing:   The Bull Crossing.  These crosses are very distinct they cross and they never look back.  In April of 2003 the SPX made such a crossing.  After 3 days it was up and over and no tail ever touched it again for  over a year. Here is a picture of that crossing:

Here's another crossing in January of 1991:

This time the 200 DMA is more horizontal, but clearly a strong bull market had taken over and there was no turning back.  On this particular crossing the 200 DMA was not touched for another 10 months.  There was another similar crossing in January 1970,  February 1975,  April 1978, August 1982 (14 months without re-touching),  June 1988, all on the SPX.  Remember I am just eyeballing this data for now.. It is worth a spreadsheet study, but time does not allow that.  That being said, I may have missed some crossings.  A crossing for this study has to have the 200 DMA in a negative slope. We have crossed this line many times, but to find crossings, or to even find a negative sloping 200DMA is a little more select.

Let's look at the second type of crossing the bear crossing.  This is when the price crosses the 200 DMA  but fails to stay .  Here are the dates when this has happened on the SPX.: Oct 1973 (16 days),  July 1977 (3 days), Jan 2002 (1 day), March 2002 (13 days)

The concerning part about a bear crossing is every single failure began a run to a new bear low and that would put us below 666!

Let's look at a recent failure and see how the other indices looked at the time..

Noticed that on these crossing there is not enough positive price action to turn the 200 DMA up.  Here is a shot on how this bear crossing played out:

The scary part of this picture, just doing a quick study this morning is that the timing of the low I labeled as March 09, which is really Sept 2001, comes close in timing, about 12 months from the 200 DMA crossing to the bear side.  So there is time alignment here between the two date segments.  You can see that this failure lead to new lows. 

I need more time to study this crossing. I send this out to begin the discussion.  Odds favor a "Bull Type" crossing here, but we need to be aware of the failure issue too.  The 200 DMA is a very strong psychological line worthy of respect and careful study.

... to be continued

Happy Trading

-rlt

Powered by CFDs Pros - The CFD Trading Portal.

Since Monday's 10:15 candle close we have been trading in a fairly tight range between 940.50 and 948.

  Yesterday we spent the afternoon skimming along the top.  So today we will watch for a breakout of this area which will be necessary to climb to the next level, but first this morning we are trading below that line.. here is the same picture for the ESMO9 contract viewed in the equities market time frame (9:30 til 4:00pm)

The ES range being from 939 to 947 roughly.  As I write this we are trading at 938.00 even, so down a point.  So we watch on the ES or the SPX if the 939/940.50 acts as resistance or we just slice through.  That will be our early indicator.

The A/D line opened weaker on Tuesday compared to the Monday's'  trend day, and it stayed weaker all day.  This put my Zweig into neutral yesterday. We will watch how the A/D opens and how it performs in that first 1/2 hour, I would expect an attempt to fill the gap by heading up at the open.. a test usually occurs between 9:40 and 9:50, I find the strength of this first counter-trend test can reveal the strength of the original direction and begin to reveal the buying/selling sentiment.... but it is still amateur hour...

All odds have this as a down day, maybe a failure of that 940 or 947.50 will send us down the 3-5% correction that would be normal, even for this bull run (that should put us green in most everything we have), or maybe the start of a bigger correction.

One list graphic, for those of us trading SDS the same chart and numbers:

We all have different average prices, the TTTHedge portfolio has an average price around 53.30 so we are going to want to protect those profits.  These numbers in the chart are hard to read but they are 53.62 on the high end and 52.62 on the low side.  As I continue to write the pre-market is selling off even harder, the ES is down to 935 now and our SDS is trading at near 54 at 53.98.

Looking good for the open.. watch for a gap closing move or a trend down day... (hoping for the latter, preparing for the former).

Happy Trading

-RLT