Due to travel plans, there will not be an update to the TradeWinds momentum charts or Top 25 after the market close today. Our next update will be done this weekend for the market open on Monday.
We called for a little correction earlier this week after the nice run we have had, so today's action is not a surprise. Our improving momentum numbers should put a floor on this down action. Our expectation is that this is just a reloading for another run at the 50 day moving averages. We will be vigilant and watching to see if this expectation comes to pass.
Enjoy your weekend.
Thursday, February 28, 2008
Wednesday, February 27, 2008
TradeWinds for Thursday February 28th
Pretty much a text book day if you have been following this blog. We have had three strong days in a run up to today which solidified the beginnings of some nice long momentum (still just the beginning, remember). Today's market saw some ups and some downs and ending pretty blah. The good thing about that is that a month ago a day like today probably would have ended pretty ugly, but because we have erased the downside momentum, the wavering days will end up either blah or maybe even to the upside.
The old fashioned way of phrasing the above paragraph is to say buy the dips. Well I won't come right out and tell you when to buy - that is pretty much up to you, I only try to comment on how the market is behaving. Right now I think because of our momentum numbers, the market has some protection to the downside.
We here at the TradeWinds are ever watchful for the next storm on the horizon, because we know there will be one, so stay tuned for updates on when that starts to appear. In the meantime check out our Top 25 Long List and our update on our TradeWinds Black Box Portfolio.
And a final note, notice that while all the financial news sites headlines will have some story about Uncle Ben and his talk with Congress, we don't give it any notice. That is where we are different. We feel that Miss. Market charts her own course and really doesn't pay much attention to all the headlines. The mass media spends at lot of energy trying to draw correlations between the two, but they only hit about fifty percent of the time - sort of like flipping a coin.
The old fashioned way of phrasing the above paragraph is to say buy the dips. Well I won't come right out and tell you when to buy - that is pretty much up to you, I only try to comment on how the market is behaving. Right now I think because of our momentum numbers, the market has some protection to the downside.
We here at the TradeWinds are ever watchful for the next storm on the horizon, because we know there will be one, so stay tuned for updates on when that starts to appear. In the meantime check out our Top 25 Long List and our update on our TradeWinds Black Box Portfolio.
And a final note, notice that while all the financial news sites headlines will have some story about Uncle Ben and his talk with Congress, we don't give it any notice. That is where we are different. We feel that Miss. Market charts her own course and really doesn't pay much attention to all the headlines. The mass media spends at lot of energy trying to draw correlations between the two, but they only hit about fifty percent of the time - sort of like flipping a coin.
Tuesday, February 26, 2008
TradeWinds for Wednesday February 27th
I love day like today. Not only do we traders make money by following the trend that has been developing over the last many days, we also get to watch the pundit struggle to explain why the market is going up when its supposed to be going down. I have seen headlines that says the market ignored the bad news and moved up, that the market got fired up by the news from IBM on buy backs and outlook, etc. If you have been following this blog you know the bias was heading to the long side, so its no surprise when some good news (IBM) comes out, it out weighs any bad news on inflation. There will be days that are just the opposite that will confound the pundits, but you can be assured our momentum charts will be confirming the move that happens.
All of our momentum indicators are in solid long positions. Our slow or long term momentum has moved into positive readings. This is still a neutral rating until we rise above +5, but its going to take some serious reversal to prevent us from reaching that territory.
Now that we feel good, lets also be real. We can expect a little correction to happen after three nice up days in a row, so let that play out before you get too aggressive. Until proven otherwise, we are working the long side.
Now check out our Top 25 Long List for some ideas as well as an update on our TradeWinds Black Box.
All of our momentum indicators are in solid long positions. Our slow or long term momentum has moved into positive readings. This is still a neutral rating until we rise above +5, but its going to take some serious reversal to prevent us from reaching that territory.
Now that we feel good, lets also be real. We can expect a little correction to happen after three nice up days in a row, so let that play out before you get too aggressive. Until proven otherwise, we are working the long side.
Now check out our Top 25 Long List for some ideas as well as an update on our TradeWinds Black Box.
TradeWinds Bear Market Sanity Check
As I sit here watching DIA, SPY, SMH and other ETFs take on their 50 day moving averages, confirming the building long momentum that we have been documenting on this site for the last several days, I have to ponder the feared Bear Market that we read so much about.
Using the DIA as my example, since I use that to invest in the Dow 30, lets take a broad look at the numbers. October 19th, 2007 it hit all all time high of 140.24. From that point it dropped about 15 percent to a low of 118.99 on Jan. 22nd of this year. That's a big ouch if you had bought at the high in October, but of course few of us did. If you had bought at the 2007 low of 117.74 you would be up over 7 percent today and never would have gone under water.
Looking at 2006, if you bought at the high of 121.85 you would be up about 4 percent today, if you had bought at the low you would be up 23 percent. For 2005, buying at the high gives you about 20 percent gain, buying at the low gives you about 31 percent gain.
Those are not bad returns for the buy, hold and pray strategy. And we know the Dow was not the best market to be in the last few years. Where's the Bear?
To further reinforce our mantra of Don't Ask Why, read this wonderful article on the nature of Bear Markets. You will learn to never belief what you hear from the so called experts and to start loading up the truck when you hear eveyone talk about how bad the world has become.
Using the DIA as my example, since I use that to invest in the Dow 30, lets take a broad look at the numbers. October 19th, 2007 it hit all all time high of 140.24. From that point it dropped about 15 percent to a low of 118.99 on Jan. 22nd of this year. That's a big ouch if you had bought at the high in October, but of course few of us did. If you had bought at the 2007 low of 117.74 you would be up over 7 percent today and never would have gone under water.
Looking at 2006, if you bought at the high of 121.85 you would be up about 4 percent today, if you had bought at the low you would be up 23 percent. For 2005, buying at the high gives you about 20 percent gain, buying at the low gives you about 31 percent gain.
Those are not bad returns for the buy, hold and pray strategy. And we know the Dow was not the best market to be in the last few years. Where's the Bear?
To further reinforce our mantra of Don't Ask Why, read this wonderful article on the nature of Bear Markets. You will learn to never belief what you hear from the so called experts and to start loading up the truck when you hear eveyone talk about how bad the world has become.
Monday, February 25, 2008
TradeWinds for Tuesday February 26th
The case for long side momentum just got stronger - much stronger. Thirty-nine of the 85 equities we track now have long momentum wind at their backs, and another 19 are in the calm or neutral waters.
I don't call bottoms or tops, or bull markets or bear markets; and I don't try to explain why the market is moving. I just try to point what is the direction and how strong it is. Our slow momentum indicator in still in neutral waters, but rising smartly. So we aren't totally without some resistance 's to our growing strength. Also, when you look just at the major indexes, they aren't as strong as the combination of the sectors. This is particularly true of the technology stocks - QQQQ in particularly. Its getting better, but a few strong tech days would put us totally over the hump.
We started our TradeWinds Black Box trial today. We selected stocks from Friday's close which were new to the Top 25 Long list and showing long or neutral momentum. We will track these for a week. Check it out on our Top 25 list page along with today's momentum leaders.
This market is frustrating alot of the so-called experts, that are just determined to call this a major bear market. I will post some of their articles later this week. Real traders don't care if its bull or bear, because within any type of market their are always swings one way or the other. A trader just wants to know which side of the trade to be on today. Long would be the answer to that question. When the answer is Short, we will tell you so.
I don't call bottoms or tops, or bull markets or bear markets; and I don't try to explain why the market is moving. I just try to point what is the direction and how strong it is. Our slow momentum indicator in still in neutral waters, but rising smartly. So we aren't totally without some resistance 's to our growing strength. Also, when you look just at the major indexes, they aren't as strong as the combination of the sectors. This is particularly true of the technology stocks - QQQQ in particularly. Its getting better, but a few strong tech days would put us totally over the hump.
We started our TradeWinds Black Box trial today. We selected stocks from Friday's close which were new to the Top 25 Long list and showing long or neutral momentum. We will track these for a week. Check it out on our Top 25 list page along with today's momentum leaders.
This market is frustrating alot of the so-called experts, that are just determined to call this a major bear market. I will post some of their articles later this week. Real traders don't care if its bull or bear, because within any type of market their are always swings one way or the other. A trader just wants to know which side of the trade to be on today. Long would be the answer to that question. When the answer is Short, we will tell you so.
Sunday, February 24, 2008
New Feature - TradeWinds Black Box
We are starting a new feature this week called the TradeWinds Black Box. I am sure most of you know what black box investing is - a method where you let some algorithm spit out your investing choices which you put you money into in a mechanical fashion. I am not a fan of black box investing, nor am I going to promote my momentum selections for such a system.
On the other hand, lets have some fun and see how the TradeWinds works for identifying stocks and ETFs to invest in. Each week, after the Friday close and momentum updates we will select from our Top 25 List the best stocks to invest in for that week. If our overall market momentum as measured by our slow momentum indicator is up, we will pick the newcomers to the Top 25 Long list that are either green or neutral. If the slow momentum indicator is down, we will select the newcomers to the Short list that are red or neutral. We will buy at the Monday open price and sell at the Friday close price. We will track how we do over several weeks.
I have no idea how this will turn out. I haven't spent any time trying to track this because I feel that successful trading is based on accurately getting the pulse of the market (momentum), then selecting a small universe of equities working in the direction of that momentum, then making a somewhat informed decision of which to invest in based on other heuristics.
The TradeWinds Black Box can be found on our Top 25 page. Check it daily for updates.
On the other hand, lets have some fun and see how the TradeWinds works for identifying stocks and ETFs to invest in. Each week, after the Friday close and momentum updates we will select from our Top 25 List the best stocks to invest in for that week. If our overall market momentum as measured by our slow momentum indicator is up, we will pick the newcomers to the Top 25 Long list that are either green or neutral. If the slow momentum indicator is down, we will select the newcomers to the Short list that are red or neutral. We will buy at the Monday open price and sell at the Friday close price. We will track how we do over several weeks.
I have no idea how this will turn out. I haven't spent any time trying to track this because I feel that successful trading is based on accurately getting the pulse of the market (momentum), then selecting a small universe of equities working in the direction of that momentum, then making a somewhat informed decision of which to invest in based on other heuristics.
The TradeWinds Black Box can be found on our Top 25 page. Check it daily for updates.
Saturday, February 23, 2008
Tradewinds for Monday February 25th
It has taken me a little longer to get around to doing my market updates. I needed to be fitted for a neck brace due to the whiplash incurred while watching Friday's market action. I was ready to write off our move to the long side and declare it time for us to get on our short pants. But just when I was losing faith, the market did what it has now done for the last four Fridays - it rocketed off the lows of the day, and this time it was a turbo rocket.
The impact of this crazy day was to keep our indecisive market just that - indecisive. Now it does set it up for Monday being a day to break through the resistance on the upside and get us out of this trading range. Our slow or long term momentum chart continued to move upslope nicely. Moderate momentum took a dip, and fast momentum almost reversed its downturn from Thursday - all in all, a mixed bag.
Now there is all sorts of talk about testing the January lows. That may be what is going on right now. Tests of high and lows and resistance, support points are never about absolute numbers, but more about a range and whether the market moves decisively through whichever range you are looking at. Take a look at a chart of the QQQQ or Naz 100. You will see that the 2008 closing low for the Q's was set on Feb. 6th at 42.81. That low was tested on an intra day basis on Feb. 7th and yesterday. Both days the market moved solidly off the low to finish higher. Is that the test you are looking for? Our momentum rating for the Q's is still negative (but improving), so they have some work to do before I would consider buying it.
All in all, due to the stronger long term momentum chart, I still am inclined to believe that this market indecisiveness will be resolved to the long side. Monday should be an interesting day.
Now check out our Top 25 lists to see which way our equities are moving.
The impact of this crazy day was to keep our indecisive market just that - indecisive. Now it does set it up for Monday being a day to break through the resistance on the upside and get us out of this trading range. Our slow or long term momentum chart continued to move upslope nicely. Moderate momentum took a dip, and fast momentum almost reversed its downturn from Thursday - all in all, a mixed bag.
Now there is all sorts of talk about testing the January lows. That may be what is going on right now. Tests of high and lows and resistance, support points are never about absolute numbers, but more about a range and whether the market moves decisively through whichever range you are looking at. Take a look at a chart of the QQQQ or Naz 100. You will see that the 2008 closing low for the Q's was set on Feb. 6th at 42.81. That low was tested on an intra day basis on Feb. 7th and yesterday. Both days the market moved solidly off the low to finish higher. Is that the test you are looking for? Our momentum rating for the Q's is still negative (but improving), so they have some work to do before I would consider buying it.
All in all, due to the stronger long term momentum chart, I still am inclined to believe that this market indecisiveness will be resolved to the long side. Monday should be an interesting day.
Now check out our Top 25 lists to see which way our equities are moving.
Thursday, February 21, 2008
TradeWinds for Friday February 22nd
Just when we thought the tease was off the market, back it came. I am feeling so unsatisfied these days. So what does this teasing mean? It means that we are in a trading range of some unknown duration. We came off the January lows, fell back a bit, and now the market is trying to decide what to do. Clearly there is a debate going on between the buyers and sellers as they take turns moving the market.
The good news is that while this tug-o-war is going on our long term and moderate momentum indicators continue to strengthen. For the long term indicator we have moved into the calm water, we have a lot of our equities with wind at their back. The broad indexes, however, continue to lag, although they are improving. Its a muddled picture that needs to get resolved soon if you are a fan of the long side. You see, while we may be in calmer waters, we need to keep moving and get out of the neutral zone to having the wind at our back. For sailors and traders calm waters may be relaxing for awhile, but they don't get you anywhere - we need some Tradewinds!!
So if we stay in this back and forth for much longer, our long and moderate momentum will start to erode. What do we do with this information? If you are playing the market, the long side is the place to be, but take quick profits and solid stops (if you use them - I know I said yesterday to loosen stops, but this market is jerking us around). If your cup of tea is on the short side, you can keep a watchful eye out, your day may not be far away.
You notice that I don't use a lot of technical analysis language or charts. I figure most of you look at that stuff and don't need me to comment on it. Its easy to look at the chart of a major index today and see the obvious short term support and resistance points. Watch those to see which way this indecision is resolved. Our momentum indicators as of today are suggesting that it will be resolved to the long side, but we know that the market makes the final decision.
The good news is that while this tug-o-war is going on our long term and moderate momentum indicators continue to strengthen. For the long term indicator we have moved into the calm water, we have a lot of our equities with wind at their back. The broad indexes, however, continue to lag, although they are improving. Its a muddled picture that needs to get resolved soon if you are a fan of the long side. You see, while we may be in calmer waters, we need to keep moving and get out of the neutral zone to having the wind at our back. For sailors and traders calm waters may be relaxing for awhile, but they don't get you anywhere - we need some Tradewinds!!
So if we stay in this back and forth for much longer, our long and moderate momentum will start to erode. What do we do with this information? If you are playing the market, the long side is the place to be, but take quick profits and solid stops (if you use them - I know I said yesterday to loosen stops, but this market is jerking us around). If your cup of tea is on the short side, you can keep a watchful eye out, your day may not be far away.
You notice that I don't use a lot of technical analysis language or charts. I figure most of you look at that stuff and don't need me to comment on it. Its easy to look at the chart of a major index today and see the obvious short term support and resistance points. Watch those to see which way this indecision is resolved. Our momentum indicators as of today are suggesting that it will be resolved to the long side, but we know that the market makes the final decision.
Wednesday, February 20, 2008
TradeWinds for Thursday February 21st
No teasing today. The market gave us the real deal, if you are inclined to the long side. Well, actually there was a little teasing in the early going of the session, but our momentum indicators were not to be denied and we had a very nice day indeed. Our slow or long term indicator has moved decisively into neutral or calm waters. We now have 54 of the 85 equities that we track in neutral or wind-at-the-back territory. The one caveat to all this good news for the longs is that the broad indexes are still struggling to get into the calm waters. They as a group are still facing a stiff headwind, although showing steady improvement. I want to see these indexes in the sunshine before the celebration really begins.
All plays need to be to the long side now. You might loosen your stops a little bit to give some working room for your trades, but with the indexes still lagging a bit, there still is a caution flag flying on the beach. I think you will find lots of good trade ideas on our Top 25 long list, so check it out.
All plays need to be to the long side now. You might loosen your stops a little bit to give some working room for your trades, but with the indexes still lagging a bit, there still is a caution flag flying on the beach. I think you will find lots of good trade ideas on our Top 25 long list, so check it out.
Tuesday, February 19, 2008
TradeWinds for Wednesday February 20th
Lordy this market likes to tease us. Just when we have all of our momentum indicators lining up for a long side run, we get a nice opening and it looks like we are ready to romp, then the air comes out of the balloon. What is a trader to do other than don't ask why and take a look at which way the tradewinds are blowing. And guess what, our momentum indicators continued to strengthen to the long side. Particularly our fast momentum indicator, after a two day respite turned upwards again. Our slow or long term indicator is just a fraction away from a neutral or calm water reading. If you are a long trader, you still have to like the way things are shaping up.
We are out of the January hurricane and my indicators don't suggest we will be returning to that storm in the next few days. Not everyone agrees with that. This article from Mark Hulbert on MarketWatch suggests otherwise. I am not the sharpest tack in the box, but I can say this, when we hit the January lows all of my momentum indicators were is a sharp downslope leading up to that low. As you can see they are all now moving upslope. Things can change, but I just don't see it.
Once again, check out our Top 25 lists for long and short ideas, although I don't recommend any short side plays at this time.
We are out of the January hurricane and my indicators don't suggest we will be returning to that storm in the next few days. Not everyone agrees with that. This article from Mark Hulbert on MarketWatch suggests otherwise. I am not the sharpest tack in the box, but I can say this, when we hit the January lows all of my momentum indicators were is a sharp downslope leading up to that low. As you can see they are all now moving upslope. Things can change, but I just don't see it.
Once again, check out our Top 25 lists for long and short ideas, although I don't recommend any short side plays at this time.
Saturday, February 16, 2008
Tradewindsfor Monday February 18th
Friday was a very nice consolidation day for the market. Our slow and modertate momentum indicators continued an upward slope, while our fast momentum moderated its downward slope. Interestingly, the last three Friday's the market has bounced off its lows of the day in the second half of the session. This tells me that fear of holding over the weekend lest some bad news about things like another bank having trouble has abated.
Our long term measure of momentum as shown in the slow momentum chart, is nearing neutral or calm waters. So caution is still required, but if the market continues to consolidate I think you can feel comfortable picking up your favorite underpriced stock, or picking one from our Top 25 lists. Also, if you see the market start to make a strong long move, you can feel confident jumping on it.
Friday, February 15, 2008
Don't Ask Why Editorial
Time for a little editorializing. One of my premises for this blog is that on any given average day, its just about impossible to say what is moving the market. There will be headlines and pundits that try to give you the reason du jour, but for the most part they are only guessing, and more importantly as an investor or trader that information does you no good. Furthermore, at any point in time during "bull" markets or "bear" markets you can always find plenty of learned people who are arguing that the best of times or the worst of times is about to descend upon us. Since, at best fifty percent of what you read will be true, it makes it pretty frutiless task to read to much of these opinions.
Now I know that there are "forces" that move markets. Forces like economic cycles, political cycles, great events (e.g. 9/11) and groups of individuals, working together or alone, try to influence the markets (e.g. Presidents, the Fed, large speculators, or anyone with a lot of money). All of these things collide together on any given day in the market. Sorting out which one will be today's winner is just about impossible.
I am struck by all the talk of is there a recession or is there not, and how bad is this credit crises. There are a lot of doomsayers out there, but comments by two respected men in the trenches of the economy caught my attention. First, John Chambers of Cisco in their most recent earnings call said "I think we're talking ourselves into this slowdown". This was in a call where they called for solid sales growth (although slower than "expectations"). And Warren Buffett who recently said flat out that we are not in a credit crunch. These are pretty credible people who deserve to listened to. So lets listen for a second.
If were are talking ourselves into a slowdown and there is no credit crunch, why would we do that? Well one scenario would be that if you are a Republican in power and want to have your party to stay in power, its a pretty good scenario to raise the specter of the economy driving to the cliff's edge, but due to your decisive actions (e.g. stimulus plan, rate cuts), you pull the economy back from the brink and its starts perking along later in the year, just about the time people start voting. Sounds good, but economic forecasts are saying that the economy will pick up in the second half of the year. Forecasts don't sell on the campaign trail, you need to give money to people, but you know you really can't throw rebates and deep interest rate cuts at people unless there is a good reason. So you take a real, but manageable problem and make it into a big deal requiring immediate action. Sound cynical? Well just remember these are the same people that orchestrated the run-up to the war in Iraq. There needed to be a good reason to send men and women into combat and that was created by taking a small, manageable problem and blowing up to visions of mushroom clouds.
Its a no lose plan, just like Iraq. The forecasts already say the economy will pick up by itself in the second half, giving it some added juice can't hurt. Right? Maybe, but then the plan was we couldn't lose in Iraq either.
I am not blind to the real economic problems that are out there, but then there has always been a basket of problem for the economy to deal with. Nor am I saying that the scenario I painted above is true. But iff you are going to ask why the market does what it does, then you need to look closely at the people that are trying to move it and what their motives may be for the headlines they write or the rates cut they make. There is always more to the story than gets reported.
For me, I ponder this stuff outside my trading world because its too complex to base trading decisions upon. That is why I watch short term momentum trends and jump on and off for short term gains. Whats going on out there is like a battle between Olympian Gods. Us mere mortals will get squashed if we stay on the playing field for too long. Don't Ask Why there is a battle, or who is winning, just grab some of the coin that falls from their pockets.
Now I know that there are "forces" that move markets. Forces like economic cycles, political cycles, great events (e.g. 9/11) and groups of individuals, working together or alone, try to influence the markets (e.g. Presidents, the Fed, large speculators, or anyone with a lot of money). All of these things collide together on any given day in the market. Sorting out which one will be today's winner is just about impossible.
I am struck by all the talk of is there a recession or is there not, and how bad is this credit crises. There are a lot of doomsayers out there, but comments by two respected men in the trenches of the economy caught my attention. First, John Chambers of Cisco in their most recent earnings call said "I think we're talking ourselves into this slowdown". This was in a call where they called for solid sales growth (although slower than "expectations"). And Warren Buffett who recently said flat out that we are not in a credit crunch. These are pretty credible people who deserve to listened to. So lets listen for a second.
If were are talking ourselves into a slowdown and there is no credit crunch, why would we do that? Well one scenario would be that if you are a Republican in power and want to have your party to stay in power, its a pretty good scenario to raise the specter of the economy driving to the cliff's edge, but due to your decisive actions (e.g. stimulus plan, rate cuts), you pull the economy back from the brink and its starts perking along later in the year, just about the time people start voting. Sounds good, but economic forecasts are saying that the economy will pick up in the second half of the year. Forecasts don't sell on the campaign trail, you need to give money to people, but you know you really can't throw rebates and deep interest rate cuts at people unless there is a good reason. So you take a real, but manageable problem and make it into a big deal requiring immediate action. Sound cynical? Well just remember these are the same people that orchestrated the run-up to the war in Iraq. There needed to be a good reason to send men and women into combat and that was created by taking a small, manageable problem and blowing up to visions of mushroom clouds.
Its a no lose plan, just like Iraq. The forecasts already say the economy will pick up by itself in the second half, giving it some added juice can't hurt. Right? Maybe, but then the plan was we couldn't lose in Iraq either.
I am not blind to the real economic problems that are out there, but then there has always been a basket of problem for the economy to deal with. Nor am I saying that the scenario I painted above is true. But iff you are going to ask why the market does what it does, then you need to look closely at the people that are trying to move it and what their motives may be for the headlines they write or the rates cut they make. There is always more to the story than gets reported.
For me, I ponder this stuff outside my trading world because its too complex to base trading decisions upon. That is why I watch short term momentum trends and jump on and off for short term gains. Whats going on out there is like a battle between Olympian Gods. Us mere mortals will get squashed if we stay on the playing field for too long. Don't Ask Why there is a battle, or who is winning, just grab some of the coin that falls from their pockets.
Thursday, February 14, 2008
TradeWinds for Friday February 15th
No surprise to see the market drop today. Our short term indicators were stretched yesterday after a nice run of a few days. Don't go with all the headline nonsense about what Bernanke said or didn't say. The market lets off steam from time to time, whether its going up or down. Don't Ask Why.
Our slow or long term and moderate momentum indicators continued their march in favor of the bulls, undeterred by today down day. Our fast momentum indicator took a slight downturn, but that is healthy. The fast momentum needs to reload every now and then to push the other indicators higher.
We are now up to 43 out of 80 equities that I track with favorable winds or neutral. In our Top 25 lists those are the ones highlighted in green or white. Yes the prevailing wind is still in our face, but it is down to a strong gust. This is measured by our slow momentum chart (which is having trouble being published from my google spreadsheet). Once it rises above -5 we are in neutral or calm seas. Barring a significant turn around here we should reach that in the next few days.
I still see the market as improving and its time to start buying the dips - cautiously. Check out our Top 25 Longs for trading ideas.
Our slow or long term and moderate momentum indicators continued their march in favor of the bulls, undeterred by today down day. Our fast momentum indicator took a slight downturn, but that is healthy. The fast momentum needs to reload every now and then to push the other indicators higher.
We are now up to 43 out of 80 equities that I track with favorable winds or neutral. In our Top 25 lists those are the ones highlighted in green or white. Yes the prevailing wind is still in our face, but it is down to a strong gust. This is measured by our slow momentum chart (which is having trouble being published from my google spreadsheet). Once it rises above -5 we are in neutral or calm seas. Barring a significant turn around here we should reach that in the next few days.
I still see the market as improving and its time to start buying the dips - cautiously. Check out our Top 25 Longs for trading ideas.
Wednesday, February 13, 2008
TradeWinds for Thursday February 14th
Well today we got the move we have been waiting for to solidly put in a good long momentum base. We are not completely out of the strong head winds, but we are getting improvement everyday. 42 of the 80 equities I track are now either in calm water or have wind at their back.
If you want all kinds of analysis as to why this is happening or how long it will go on, you will have to visit some other blogs. My job is like the weather man. I want to give you just enough information to know what the trend is going to be for the next few days. If you only want to know that the weather will be warm for the next few days, but don't want to bother with isobars, and fronts and troughs, then this is your place.
Momentum now favors longs, with still a touch of caution thrown in. Don't be surprised to see a little down turn tomorrow as we have had a nice run. Start thinking of those down turns as cautious buying opportunities. Check out our Top 25 Longs for some ideas.
With that said, I will also let you know that we are now watching for the next storm on the horizon, because we know that every sunny day will come to an end. We will let you know when we see those clouds gathering on the horizon.
If you want all kinds of analysis as to why this is happening or how long it will go on, you will have to visit some other blogs. My job is like the weather man. I want to give you just enough information to know what the trend is going to be for the next few days. If you only want to know that the weather will be warm for the next few days, but don't want to bother with isobars, and fronts and troughs, then this is your place.
Momentum now favors longs, with still a touch of caution thrown in. Don't be surprised to see a little down turn tomorrow as we have had a nice run. Start thinking of those down turns as cautious buying opportunities. Check out our Top 25 Longs for some ideas.
With that said, I will also let you know that we are now watching for the next storm on the horizon, because we know that every sunny day will come to an end. We will let you know when we see those clouds gathering on the horizon.
Tuesday, February 12, 2008
Tradewinds for Wednesday February 13th
Okay all you guys out there, if you haven't done your Valentines shopping yet, go out and get that down and then come back and read the rest of this post!
Let me tell you back in my college days I had a girl friend who I though was the biggest tease ever. Well, this market has just moved her aside. Just when my mo indicators are getting ready to show some real power to the upside, we get a pull back. Now it still was a good day and all of our momentum indicators - slow, moderate and fast are all headed in the direction of the longs. But we need just a big more before we can get real excited. I still think that is going to happen, but we will let the market make the final decision. Once again, I remind everyone that the prevailing long term wind is still in our face, although it continues to diminish. On the plus side, of the 80 equities I track, 39 have entered calm waters or have wind at their back.
Check out my Top 25 lists for what is moving in the market that I track and maybe you will get some new ideas.
Let me tell you back in my college days I had a girl friend who I though was the biggest tease ever. Well, this market has just moved her aside. Just when my mo indicators are getting ready to show some real power to the upside, we get a pull back. Now it still was a good day and all of our momentum indicators - slow, moderate and fast are all headed in the direction of the longs. But we need just a big more before we can get real excited. I still think that is going to happen, but we will let the market make the final decision. Once again, I remind everyone that the prevailing long term wind is still in our face, although it continues to diminish. On the plus side, of the 80 equities I track, 39 have entered calm waters or have wind at their back.
Check out my Top 25 lists for what is moving in the market that I track and maybe you will get some new ideas.
Monday, February 11, 2008
Tradewinds for Tuesday February 12th
We are so close to being able to ring the bell for upside momentum, but we are not quite there. Our fast and slow momentum indicators are strengthening to but our moderate indicator is stubbornly sticking to its downward path. This indicator will change on a dime, so another flat to up day should swing it.
The top listings in our top 25 longs should be under consideration for trading now. My reading of the market does not suggest that short is the place to be right now. However, don't get too excited to the long side either. Gale force winds still blow in our face for 35 of the 80 stocks and ETFs we track. The good news is that 45 are in either calm water to having wind at their back. We need some more momentum in the broad indexes before we get real active to the long side.
Today's advice to pay close attention and be honing your list of long plays.
The top listings in our top 25 longs should be under consideration for trading now. My reading of the market does not suggest that short is the place to be right now. However, don't get too excited to the long side either. Gale force winds still blow in our face for 35 of the 80 stocks and ETFs we track. The good news is that 45 are in either calm water to having wind at their back. We need some more momentum in the broad indexes before we get real active to the long side.
Today's advice to pay close attention and be honing your list of long plays.
Don't Ask Why Sightings
I just love this blog post. It goes through all this earnest analysis and concludes, "Until the level of inventory declines significantly, housing prices will continue to decline and the outlook for new residential investment will remain grim."
Ah yes, the housing crisis. Now, if the market was writing a headline it would be something like "Homebuilders are one of the best performing sectors of the 2008, up nearly 8% in a down market."
Which of these assessments is more important to an investor or trader that wants to be on the right side of the of a position? I personally go with what the market wants to tell me. Lets see, at last check XHB is up 4% today, comfortably above its 50 day moving average.
Ah yes, the housing crisis. Now, if the market was writing a headline it would be something like "Homebuilders are one of the best performing sectors of the 2008, up nearly 8% in a down market."
Which of these assessments is more important to an investor or trader that wants to be on the right side of the of a position? I personally go with what the market wants to tell me. Lets see, at last check XHB is up 4% today, comfortably above its 50 day moving average.
Sunday, February 10, 2008
Tradewinds for Monday February 11th
It looked for awhile on Friday that we would get the kind of day that would turn our momentum indicators in favor of the longs. In the end, we ended up with another mixed bag. Fast momentum ticked up but moderate momentum continued unabated on its downward trek. Our slow or long term momentum is still heading down but at a moderating pace. All of this means that the market has not decided as to which way it will head next. One convincing day either way will be decisive. So sit tight and don't make any big bets one way or the other.
We are seeing strength in the precious metals (GLD, SLV, SLW), oil and oil service (USO, OIH, HERO, BTE), agriculture related (MON, MOS, CF) and a smattering of tech (GLW, RIMM, IGN, QQQQ).
Interestingly, we are seeing a lot weakness in the defensive stocks that would normally be havens for the big, bad recession that is coming (PPH, KMB, XLV, XLU, XLP). We also seeing weakness in big cap areas (XLI, DIA, SPY, C).
Again, its a mixed bag. We still have strong winds in our face which are slowing diminishing, some areas showing improvement, but no big push going up or down. Lets see what the next week brings. In the meantime, Don't Ask Why, just follow the tradewinds.
We are seeing strength in the precious metals (GLD, SLV, SLW), oil and oil service (USO, OIH, HERO, BTE), agriculture related (MON, MOS, CF) and a smattering of tech (GLW, RIMM, IGN, QQQQ).
Interestingly, we are seeing a lot weakness in the defensive stocks that would normally be havens for the big, bad recession that is coming (PPH, KMB, XLV, XLU, XLP). We also seeing weakness in big cap areas (XLI, DIA, SPY, C).
Again, its a mixed bag. We still have strong winds in our face which are slowing diminishing, some areas showing improvement, but no big push going up or down. Lets see what the next week brings. In the meantime, Don't Ask Why, just follow the tradewinds.
Thursday, February 7, 2008
TradeWinds for Friday February 8th
The market gave us what we needed to salvage our budding upward momentum. We held the bottom on the QQQQ and the 50% retrace on the SPY and DIA. In looking at our charts, our slow and fast momentum indicators slowed their decline significantly. Our moderate indicator continued its sharp downward path. IF the market continues to rally I expect all indicators to turn upward as we head into the weekend. The market will tells us what it wants to do, of course.
We do want to note that CSCO, which was the big negative news in the morning, actually posted a nice gain for the day and nearly made our top 25 longs list.
We do want to note that CSCO, which was the big negative news in the morning, actually posted a nice gain for the day and nearly made our top 25 longs list.
Don't Ask Why Sightings
We have all heard about the sub-prime mess and the liquidity problems it has supposedly created. Well, as in all things financial, you can always find reputable positions on both sides of an argument. Check this out, Warren Buffett says we are not in a credit crunch, that money is plentiful and down right cheap.
Next time you read an article on gloom and doom for the financial market and how it will take years to work off the problem, take it with a grain of salt. And while we "don't ask why" the markets behave the way they do, we are allowed to ask why people say the things that they do......
Next time you read an article on gloom and doom for the financial market and how it will take years to work off the problem, take it with a grain of salt. And while we "don't ask why" the markets behave the way they do, we are allowed to ask why people say the things that they do......
Wednesday, February 6, 2008
TradeWinds for Thursday February 7th
The market didn't do our momentum indicators any favors today if you are a long investor. I am still curious to see how our fast momentum indicator reacts over the next day or two. It is near its normal oversold level (but not as severe as the recent bottom). If it gets back to behaving normally we should see it bounce and with it begin to level out the moderate and slow momentum indicators. Also if you are into the technical analysis you will see that we have retraced about 50% from the low to the recent highs. It would be nice to see a move up from here. We will let the market tell us what its going to do. For now its another sit on the sidelines day. I don't have confidence that the market will move strongly one way or the other right now.
In the on-going saga of "don't ask why", I offer up the tech sector as the latest example. It remains the most beaten up sector (even financials and housing have recovered somewhat), despite the fact that some of the big players have reported solid earnings and forecasts (IBM, MSFT, GLW, JDSU among others). Tonight CSCO beat earnings and projects 10% sales growth (albeit under "expectations"), but yet it gets beat up. Come on now - 10% sales growth when we are heading into a recession sounds good to me. Anyway, we don't ask why - we will continue to track Cisco and let you know when its perking up.
In the on-going saga of "don't ask why", I offer up the tech sector as the latest example. It remains the most beaten up sector (even financials and housing have recovered somewhat), despite the fact that some of the big players have reported solid earnings and forecasts (IBM, MSFT, GLW, JDSU among others). Tonight CSCO beat earnings and projects 10% sales growth (albeit under "expectations"), but yet it gets beat up. Come on now - 10% sales growth when we are heading into a recession sounds good to me. Anyway, we don't ask why - we will continue to track Cisco and let you know when its perking up.
TradeWinds for February 6th
Yesterday's brutal market turned all of our momentum indicators down. We not quite ready to call a new down trend, but clearly the eye of the hurricane has passed over us and the back side of the storm is now hitting us. Whether it will be bad as the initial hit is to be seen. Nevertheless, today is a day to sit back and watch what happens. The next day or two will tell us if the momentum has taken a shift and if we should shift our trading accordingly.
By the way, true to our name we will not ask why the markets took a whack yesterday. We know the conventional wisdom was that it was because of the ISM report. However, the ISM is such a weird indicator that its hard to imagine that it could move the market the way it did.
By the way, true to our name we will not ask why the markets took a whack yesterday. We know the conventional wisdom was that it was because of the ISM report. However, the ISM is such a weird indicator that its hard to imagine that it could move the market the way it did.
Tuesday, February 5, 2008
Tradewinds for February 5th
Yesterday saw a not surprising down day in the markets. Our mini-rally was getting overheated, so there was some therputic release of the the overbought pressure. You can see that our fast momentum graph has taken a down turn, but that our moderate and slow momentum indicators were unfazed by yesterday's action. This is healthy. The momentum indicators can go in different directions for a few days as the excess is worked off, when they all get back in unison (either up or down), then we have another good entry point.
Not surprisingly, a lot of the ETFs and stocks that I track also posted a down turn in the fast momentum and fell into the neutral category. Not a big deal, just means we sit on the sidelines for a day or too and see if the this downturn is just the "pause that refreshes" or is a reversal to a downward trend.
Overall the negative momemtum continues to burn off, but we still have strong long term winds in our face, so if you are long be cautious.
We saw a lot of the agriculture stocks move into our top 25 yesterday - POT, MOS, MON, TRA, MOO. I am also detecting a revival of the solar industry in the rise of CCC, WFR and FSLR. Biotech, BBH has made a nice move. And transports remain strong - IYT, CSX and GT.
Not surprisingly, a lot of the ETFs and stocks that I track also posted a down turn in the fast momentum and fell into the neutral category. Not a big deal, just means we sit on the sidelines for a day or too and see if the this downturn is just the "pause that refreshes" or is a reversal to a downward trend.
Overall the negative momemtum continues to burn off, but we still have strong long term winds in our face, so if you are long be cautious.
We saw a lot of the agriculture stocks move into our top 25 yesterday - POT, MOS, MON, TRA, MOO. I am also detecting a revival of the solar industry in the rise of CCC, WFR and FSLR. Biotech, BBH has made a nice move. And transports remain strong - IYT, CSX and GT.
Sunday, February 3, 2008
Tradewinds for Monday February 4th
Last week we saw a continued reduction in the hurricane force winds that have been buffeting the market since the first of the year. This came much to chagrin of the doom sayers and secular bull aficionados. I can speculate why the market rose the way it did last week, but remember the mantra of "Don't Ask Why". We only care which way the wind is blowing now and for as long as we can reasonably look into the future - a few days to a couple of weeks at best. Remember when reading all those stories of doom that bad news sells papers, clicks on the Web and all sorts of advice on how to not lose your money. Well anyone that has been watching closely knows that while everyone is crying crocodile tears over the sub-prime mess and the collapse of housing, some smart people have been making a bunch of money as the financial sector and homebuilders have zoomed off their lows. I bet you a lot of those pundits of doom have been among those.
Okay, lets get on to the Tradewind forecast. The storminess has definitely begun to subside, but there are still dark clouds out there. All of the broad index still have significant headwinds, so caution is still the word. We are seeing more stocks and ETFs moving into calmer waters. Of the 80 securities that I track, 29 are either rated neutral or the favorable zone. Check out the graphs to the right. You see that moderate momentum is sky rocketing and the long term slow momentum has turned up nicely. The fast momentum gave a little head fake in the middle of the week, but is moving up nicely. Remember the first rule of momentum, a body in motion tends to stay in motion until something stops it.
The top rated stocks and ETFs, to no surprise see plenty of representation from financials and real estate. Also three of the broad market ETFs that I track, IWM (Russell 2000), MDY (Midcaps) and SPY (S&P 500) have joined the top tier list. Others in the top tier list are: XHB, RTH, IYR, XLF, IJR, SMH, CSX OI, ACAS, C. I am excited to see SMH on this list, because that just may mean that the techs are getting ready to catch fire.
My second tier of stocks and ETFs are as follows: GLW, EOI, GT DRYS, HERO, RIO, PCU, IYT, XLI EWJ, EFA, IGN XLK. I like seeing RIO and PCU on this list as it indicates a revival in the industrial metals. Once again, not something that you would expect if a big bad recession was coming.
I do not have any sell signals flashing for the securities that I track.
A note on my methodology. I use a combination of slow, moderate and fast momentum indicators. For this I use the True Strength Indicator (TSI), Fisher Transform, and Trix. There are others that you can use that would probably work just as well. The key is to look at momentum over multiple dimensions and timeframes (I look at daily and weekly momentum). I score the securities that I track and thats how I come up with these lists.
Okay, lets get on to the Tradewind forecast. The storminess has definitely begun to subside, but there are still dark clouds out there. All of the broad index still have significant headwinds, so caution is still the word. We are seeing more stocks and ETFs moving into calmer waters. Of the 80 securities that I track, 29 are either rated neutral or the favorable zone. Check out the graphs to the right. You see that moderate momentum is sky rocketing and the long term slow momentum has turned up nicely. The fast momentum gave a little head fake in the middle of the week, but is moving up nicely. Remember the first rule of momentum, a body in motion tends to stay in motion until something stops it.
The top rated stocks and ETFs, to no surprise see plenty of representation from financials and real estate. Also three of the broad market ETFs that I track, IWM (Russell 2000), MDY (Midcaps) and SPY (S&P 500) have joined the top tier list. Others in the top tier list are: XHB, RTH, IYR, XLF, IJR, SMH, CSX OI, ACAS, C. I am excited to see SMH on this list, because that just may mean that the techs are getting ready to catch fire.
My second tier of stocks and ETFs are as follows: GLW, EOI, GT DRYS, HERO, RIO, PCU, IYT, XLI EWJ, EFA, IGN XLK. I like seeing RIO and PCU on this list as it indicates a revival in the industrial metals. Once again, not something that you would expect if a big bad recession was coming.
I do not have any sell signals flashing for the securities that I track.
A note on my methodology. I use a combination of slow, moderate and fast momentum indicators. For this I use the True Strength Indicator (TSI), Fisher Transform, and Trix. There are others that you can use that would probably work just as well. The key is to look at momentum over multiple dimensions and timeframes (I look at daily and weekly momentum). I score the securities that I track and thats how I come up with these lists.
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