Weekly Wrap

Portfolio	S&P 500	Nasdaq	Dow
0.58%	1.73%	16.56%	-3.98%

 

For about four weeks now the broad markets have been stuck in a range, between 880 on the down side and 950 on the upside.

We ended the week smack in the middle of the range at near 920 on the S&P 500. There is lots of chatter about the golden cross of the 50 day moving average above the 200 day moving average. Or the fact that we are went above the 200 day moving average and held it. Lots of reasons to be technically bullish at this juncture. Including the long bullish candle at the end of the week.

Due to all the reasons to be bullish I chose to be contrarian and bought 3000 QID (inverse Nasdaq ETF) at the close on Friday. I have a tight stop for them of about 4%. If the bullish trend continues, I will be stopped out and will look to re-enter a high beta long position. On the other hand, if we move downward from here on the broad market then my position will gain in value. It has been eight weeks since we entered this range, so I do not know if next week will take us out of it, though I am hoping for a quick resolution in either direction so that I can position accordingly.

 

As of now, my equity position is made up entirely of the QID position I entered on Friday. I have a stop order but I do not have any planned trades otherwise.

Darvas

Nicolas Darvas famously made money in the stock market by being disconnected from the news and following price patterns while on the road. I’ve been out of the country for over three weeks. I have been shut out from CNBC and the other media outlets. I am not reading stock related blogs. I have no “expert” input as far the market is concerned. All I have is the charts on my Tradestation platform.

As such, I have been feeling that I have no edge as I could not convince myself to be long the market. In fact, I let my stops take me out of my positions and proactively closed the last of them last week and did not attempt to replace the sales. Typically I would be watching Fast Money or other media shows and would find “plenty of stocks to buy”.

Looking back at the positions that I have sold, which got killed subsequent to my sales, they were also down prior to my sales erasing my profits for the year, I feel lucky for having sold and stayed out of the market over the last few days.

In retrospect, it is clear that CNBC and the other sources are not really an Edge but a distraction for any system trader. I am glad that I am following in the steps of Darvas, though with much less success… so far.

 

Looking at the broader market we see the extent of the damage over the last week. The commodity related stocks and the momentum stocks got destroyed at much harsher rate than the broader market. The chart shows that the next logical support level for the S&P 500 is the 880 level. If this is a mere pull back in an uptrend then we should be able to bounce off the 880 level and continue the upward move. If that level cannot hold we can be erasing all the move since March in a heart beat.

From this vantage point the safest action is to stay on the sidelines or to go short. Going short here gives us the advantage of having two well defined stop levels. The aggressive traders can place a stop above Friday’s high of 927. People that want to give the position more breathing room can place the stop above the swing’s high of 956.

Weekly Wrap

Portfolio	S&P 500	Dow	Nasdaq
0.04%	1.99%	-2.80%	15.88%

 

 

When in doubt, Get Out!!!. The portfolio, aided by an interest payment on one of the GMAC bonds ended the week barely in the black after another horrid sell off in commodity related stocks. Meanwhile, the S&P 500 is barely in the black for the year and the Dow is barely in the red while the Nasdaq outpaces every other major index and is still up double digits for the year.

I am in doubt of the direction of the market so I sold the remaining stock positions and now in 100% cash as far as equities are concerned. Still holding the three bond positions.

The weekly chart of the S&P 500 shows that this was only the second down week since the March lows. More importantly, while we had continuous progress to the upsides for the first part of the move we have stalled for the past several weeks. This can be a consolidation pattern after the big move that resolves itself to the upside. However it is more likely that we have stalled here and that we will correct through time (side ways action) and price (lower price action) over the next several weeks. Fall is typically bullish for stocks. So if we manage to consolidate in time and price over the next couple of months, without too much damage, we should have a nice rally towards the end of the year.

Any any rate, I do not have much clarity and will wait to see what happens next week and try to pick new positions carefully.

No Edge

The market cannot decide where it is going here and neither can I. I am going to the sidelines while this action resolves itself one way or another.

The Fly

When Dylan Ratigan walked off the set of Fast Money and quit CNBC I was quick to message Howard (aka Mr. Serial Entrepreneur) suggestion he hook up with Ratigan on a future endeavor, a real life, real traders show to replace the soon-to-be-very-lame Fast Money.

Howard of course was not sitting on his ass waiting for somebody like me to bring this up. Among his many ventures he was working on beefing up StockTwits to include a new feature, StockTwits TV.

I do not know if something is in the works to bring Dylan on board though I keep bugging Howard about it. The timing could not be any better as CNBC is becoming more pathetic than ever and there is a real need for a show (or a channel) by speculators for speculators.

CNBC this week sunk to a new low even for them when they wasted time and energy on the stupid Fly story, where Obama swatted a fly that was bugging him. The amount of coverage that CNBC has devoted to the Fly story has ushered them from the marginally irrelevant to the utterly useless.

Weekly Wrap

Posting continues to be sporadic as I am travelling and busy on some projects.

The portfolio ended the week up just over 7% for the year, besting the Dow and the S&P 500 yet lagging the Nasdaq which is now up just under 18% on the year:

 

Portfolio	S&P	Dow	Nasdaq
7.24%	4.76%	0.62%	17.87%

 

The broader market continues its assault on support at the 950 level. While the markets couldn’t break through this level to the upside they were not turned away by it. If it wasn’t for the seasonally low volume this action would’ve been quiet positive for the longs as it indicates consolidation before breaking above the 950 level and continuing the upward trend.

I am personally assuming that this congestion will resolve itself to the upside as we break above 950 and continue higher. However if proven wrong the markets have done us a great favor by defining clear stop levels for us. Aggressive traders can set stop loss levels below the action of the last two weeks at 920. Traders that want more breathing room can use the most recent swing lows of around 880 for their stop. Either way it the stops are a long way from the March lows and definitely much higher than eventual lows if indeed we turn lower and resume the larger bearish trend.

In the portfolio I did not like the way LVS and DRYS behaved over the last two weeks during a moderately bullish action for the broader market. So I have been tightening my respective stops in both. LVS stop got hit on Friday, at the low of the day exiting this losing position, for now. I may go back into LVS if it breaks out to the upside, but for now I am letting it go.

My stops on DRYS are getting very tight as well as you can see by the horizontal line in the graph.

 

While I still own DRYS it will probably get stopped out this week. I am currently researching other choices to replace LVS and potentially DRYS if it gets sold.

TCK on the other hand continues its upward march and I continue to adjust my trailing stop accordingly. This stock has gone up over 400% since the March lows and it does not show signs of slowing down. I am inclined to put some (or all) of the money raised from selling LVS into TCK. Still debating and will tweet my trades when I make them as always.

Interesting note this week, the Dow has finally climbed back into positive territory for the year, if barely, and now all major averages are in the green for the year.

Earlier in the year I was getting spammed by all those “think tanks” putting out position papers on how the Obama economic plans are destroying life as we know it and are the sole cause for the declines in January and Feb. of 2009. My replies to all those people was the same, if you did not speak up during the Bush regime fiasco’s and raping of America then shut the fuck up. I wonder if all those so called thinkers are busy drafting new position papers attributing the massive rally since early March to Obama’s plans?

Weekly Wrap

Propelled by strong moves in DRYS and TCK the portfolio ended up positive on the year again this week. This time leaping past the S&P 500 and setting its sights on catching up with the Nasdaq. The lowly Dow continues to lag and is still negative on the year.

There have been no trades in the portfolio this week and barring a speedy collapse and/or pull backs in the portfolio stocks there will be no trades next week either. I am going to start marking my stop levels on the charts of my positions so that you can see where my exit points are and how close/far they are from getting hit.

 

People keep talking about volume and about reasons for this market to pull back. But as we can see from the charts, the market is holding its own and continuous to consolidate on its way for a break out above 930. If that happens, 1000 on the S&P 500 could be within easy reach. If you are anticipating the end of this bear market and are aggressive with your trading the markets gave you a gift this week by defining a good stop level on the S&P 500. The 880 level which has held up all of May is now the perfect stop level for people anticipating the end of this rally. If we hold that level we can continue to be bullish. If we firmly close below that level we can turn bearish.

 

After six months of zig zags, ups and downs, and bunch of horrid losses in SRS and DRYS, the portfolio ended the first half of the year up nearly 9%. Not the most exciting thing in the world but I will take it. The portfolio is powered by DRYS, TCK and LVS.

TCK continues to defy gravity and rocket up. My buddy asked me today if I am going to book profits in TCK. I mentioned that the last time I booked profits was right before the stock doubled in a month’s time. I am going to stick to my system and wait for trailing stops to take me out of my positions, fully knowing that I am going to be leaving 20-30% on the table when the stock finally comes back to earth.

LVS is still consolidating but with too much volatility for my taste. I am worried as this pattern often indicates topping action and resolves itself to the down side. None the less, I am not going to anticipate direction and act on those thoughts. My stop as indicated on the chart is around $7.50. I am going to hold on to the stock and see if it will continue to move higher or take my stop out.

 

Meanwhile, DRYS, which lost almost 40% in three days right after I bought it earlier in the month looks like is going back higher. I love the volume pattern on this chart even though the price pattern has not cooperated. You can see the volume on up days outpacing that on down days. This is a classical accumulation pattern where big money is flowing into and accumulating the stock.

I am holding the stock now with a stop loss below the recent swing’s lows. The idea is for this pattern to resolve to the upside starting a longer term up trend.

 

No planned trades for next week unless one of my stops gets taken out.