To continue with our analogy of the hurricane, the last several days has been the eye of the storm passing over the market. We saw nice reversal of the short term and long term momentum indicators. However the fast momentum indicator that I use is show that most of the ETFs and stocks have hit an exhaustion point and we will now see some downside movement. The key will be as we move into the backside of the market hurricane if we significantly reverse the momentum that we have been building up the last few trading sessions. My hunch is that we won't, but the market will tell us the truth.
There are some bright spots as we head into the next few days. Technology is one of them. Momentum is building for QQQQ, INTC, CSCO, GLW, RIMM, SMH, NVDA, XLK and they are not showing signs of near term exhaustion. They are are still facing negative long term momentum numbers, so be careful. I am also liking the Euro ETF, FXE and Utility ETF, XLU, both of which would make sense in a falling interest rate environment.
In the coming days I will be posting information about my methodology and the list of ETF and stocks that I track. Watch for that.
Thursday, January 31, 2008
Monday, January 28, 2008
Tradewinds for Tuesday January 29th
Monday's market gave us the nice follow through to the upside days of last week to begin to solidify a new short term uptrend. Now before we too excited about that, lets remember that we still have hurricane force winds blowing in our face, but they are diminishing and more areas around the edges of the storm are starting to see some sunshine. To be real, of the 80 stocks and ETFs that I follow, 63 are in mild to severe long term downtrends. So caution is still the keyword. The short term bias is up, but don't get greedy out there.
Here are the ETFs and stocks that are sailing in calmer waters, and would be nice place to do some fishing: XHB, IYR, GLD, SLV, GDX, FXE, CSX, HERO, MOS, SLW, TRA, POT, CF.
Here are the ETFs and stocks that still have a ways to go, but can see some calm weather on the horizon: IYT, XLF, XLY, IJR, IWM, XLI, DIA, SMH, MDY, AKS, PCLN, GT, ACAS, BOOM, APH, C, DRYS, INTC, GLW.
I have down trend indicators for only three securities - Bonds, IEF where I have taken a short position, retail, RTH, which triggered a short term downtrend, but is still sailing out of the storm nicely, and CCC, a small cap stock.
Happy Sailing, and remember, Don't Ask Why.
Here are the ETFs and stocks that are sailing in calmer waters, and would be nice place to do some fishing: XHB, IYR, GLD, SLV, GDX, FXE, CSX, HERO, MOS, SLW, TRA, POT, CF.
Here are the ETFs and stocks that still have a ways to go, but can see some calm weather on the horizon: IYT, XLF, XLY, IJR, IWM, XLI, DIA, SMH, MDY, AKS, PCLN, GT, ACAS, BOOM, APH, C, DRYS, INTC, GLW.
I have down trend indicators for only three securities - Bonds, IEF where I have taken a short position, retail, RTH, which triggered a short term downtrend, but is still sailing out of the storm nicely, and CCC, a small cap stock.
Happy Sailing, and remember, Don't Ask Why.
Don't Ask Why Sightings
Today new homes sales for December were released and they were terrible. You would think that would be bad news for homebuilders. Not so. XHB was up 1.5% as of the time I write this, on the news. While I don't have the exact numbers, it sure seems like everytime bad news about housing is released XHB goes up. Don't ask why, but XHB is establishing a solid uptrend. My long term trend number just moved to positive from neutral. The short term trend numbers are looking maxxed out, so don't be surprised by a pull back. If that is the case, the next leg up would be one to watch for.
I like to debunk the pundits and talking heads who have to come up with some explanation as to why the market is doing what it is doing, even when they have no clue whatsoever. Please share your favorite examples of Don't Ask Why.
I like to debunk the pundits and talking heads who have to come up with some explanation as to why the market is doing what it is doing, even when they have no clue whatsoever. Please share your favorite examples of Don't Ask Why.
Sunday, January 27, 2008
Tradewinds for Monday January 28th
This is my first post on market momentum and assessment of the basket of ETFs and stocks which I follow. The ETFs that I track were selected because they cover the broad spectrum of the market, are relatively widely traded, and can be traded with options (because I do most of my trading with options). The stocks I pick are an eclectic mix of sector leaders, momentum stocks etc. The stocks will change from time to time, but the ETFs remain somewhat constant.
You may have already picked up that I like to use the weather metaphor for discussing stocks. I like that because they are both variable, full of surprises, cyclical, and forever changing. No matter how bad or good the weather is, you can expect that it will change. It is no surprise, then, to say that today's market is in the middle of a hurricane. Nasty weather out there. But there is some good news, too. The sustained hurricane winds while not diminishing very much, are not getting any stronger, peak gusts are diminishing, and some areas on the edges of the storm are starting to see some nice weather.
My Tradewind indicator, which measures the long term strength of the market, is still at very bearish levels. My short term momentum indicator has shown a sharp improvement for the last three days, and some sectors and getting downright sunny. This indicator showed improvment even after the down day on Friday. However, because the Tradewind indicator is still very much in our face, we would look to take quick profits on any long position we take. The same would be true for any short position we would take.
The precious metals and miners (GLD, SLV, GDX, SLW) continue to have Tradewinds at their back. Previously beaten sectors that are emerging from the storm include homebuilders, real estate and retail (XHB, IYR, RTH). In fact all three of these have shown an uptick on my weekly measure of momentum. They are among the 12 of the 80 stocks and ETFs that I track that have a weekly up bias.
Agriculture is also looking favorable after getting beat up early last week (MOO, MOS, POT, CF, TRA).
Sectors that still face some strong headwinds, but have made good progress in the last week include the financials, transportation and semiconductors (XLF, IYT, SMH).
Among the stocks that I track which appear to be on a clear course to calmer waters are CSX, HERO, CCC, PCLN, AKS, GT, GLW, WFR. I have a hunch that this list will grow in the next few days.
Sectors that are still in the teeth of the storm include health care, pharmaceuticals, and utilities (XLV, PPH, XLU). Interesting that these are the "defensive" sectors that you would think would be on the upswing if a big, bad recession was coming. The only sector that has been in calm waters, but seems to setting a course right into the storm is bonds (IEF).
You may have already picked up that I like to use the weather metaphor for discussing stocks. I like that because they are both variable, full of surprises, cyclical, and forever changing. No matter how bad or good the weather is, you can expect that it will change. It is no surprise, then, to say that today's market is in the middle of a hurricane. Nasty weather out there. But there is some good news, too. The sustained hurricane winds while not diminishing very much, are not getting any stronger, peak gusts are diminishing, and some areas on the edges of the storm are starting to see some nice weather.
My Tradewind indicator, which measures the long term strength of the market, is still at very bearish levels. My short term momentum indicator has shown a sharp improvement for the last three days, and some sectors and getting downright sunny. This indicator showed improvment even after the down day on Friday. However, because the Tradewind indicator is still very much in our face, we would look to take quick profits on any long position we take. The same would be true for any short position we would take.
The precious metals and miners (GLD, SLV, GDX, SLW) continue to have Tradewinds at their back. Previously beaten sectors that are emerging from the storm include homebuilders, real estate and retail (XHB, IYR, RTH). In fact all three of these have shown an uptick on my weekly measure of momentum. They are among the 12 of the 80 stocks and ETFs that I track that have a weekly up bias.
Agriculture is also looking favorable after getting beat up early last week (MOO, MOS, POT, CF, TRA).
Sectors that still face some strong headwinds, but have made good progress in the last week include the financials, transportation and semiconductors (XLF, IYT, SMH).
Among the stocks that I track which appear to be on a clear course to calmer waters are CSX, HERO, CCC, PCLN, AKS, GT, GLW, WFR. I have a hunch that this list will grow in the next few days.
Sectors that are still in the teeth of the storm include health care, pharmaceuticals, and utilities (XLV, PPH, XLU). Interesting that these are the "defensive" sectors that you would think would be on the upswing if a big, bad recession was coming. The only sector that has been in calm waters, but seems to setting a course right into the storm is bonds (IEF).
Don't Ask Why sightings this week
My trading mantra of Don't Ask Why the market does what it does got bolstering on two fronts this week. We now know that the worldwide market melt down this past Monday was, at least in part, triggered by a trader gone amok at Societe Generale, a French banking concern. To be sure, the markets were primed for a sell-off and anything could have triggered it, but the why it happened that day in the way that it did, was only revealed well after the fact, and was not due to the sub-prime mortgage mess or other commonly cited reasons.
Ben Stein wrote a column in today's New York Times, arguing that it is the big traders that move the market in whatever direction they want. While I agree that the bigs boys hold sway over the market, I am not sure they are always of a collective mind. I think there is this constant war going among the Greek Gods of Investing which us mere mortals cannot understand. Our only hope is to try to figure out who is winning at any point in time and sneak a little bit of the spoils for ourself with out getting stomped on by the wrestling gods. That is what I try to do in this blog. I don't care what the fight is about, I just want to know what the short term trend is and where I can grab a profit. Its not easy and I have gotten stomped on quite a few times, but in the long run, I think I will come out ahead.
Ben Stein wrote a column in today's New York Times, arguing that it is the big traders that move the market in whatever direction they want. While I agree that the bigs boys hold sway over the market, I am not sure they are always of a collective mind. I think there is this constant war going among the Greek Gods of Investing which us mere mortals cannot understand. Our only hope is to try to figure out who is winning at any point in time and sneak a little bit of the spoils for ourself with out getting stomped on by the wrestling gods. That is what I try to do in this blog. I don't care what the fight is about, I just want to know what the short term trend is and where I can grab a profit. Its not easy and I have gotten stomped on quite a few times, but in the long run, I think I will come out ahead.
About this Blog
This is a blog for trend following and momentum traders and investors who are trying to keep their investing simple. I am going to give you my opinion on what direction the momentum of the market and selected ETFs and stocks are moving. I use some momentum tracking technical indicators but I am not going to talk about a lot of technical analysis mumbo jumbo of bottom, tops, support and resistance and all of that.
I also believe that the market does not reveal its truths until way after the fact when it useless to use that information. Therefore I am not going to get into a lot of talk about whether interest rates are better going up or down, or what is happening in China, or earnings for a particular stock. In other words, find the trend, follow it and don’t ask why.
I will from time to time talk about “background noise”. Despite what I just said in the previous paragraph, it is important to keep an ear to the macro noise in the world - you need to know if its a train coming at you or the dinner bell.
When I discuss the market and particular ETFs and stocks, I will refer to their current momentum which is a short term directional assessment, usually these move last from a few to several days or more. I will also talk about the TradeWinds or momentum support. This is based on a longer term view of momentum and helps gauge whether the short term move is a good one or not using the analogy of whether the wind is at your back or in your face.
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