ABX off to the races

A nice pattern of gold stock ABX, the longer term chart shows a breaking of a downtrend, while the longer term chart also still shows a down trend based on the ADX, it shows a bullish trend on the daily six month chart.

As a position is held longer, you must go to longer term signals, this one is close to being no longer held based on a daily chart but on a 3 year weekly chart. While on the longer chart the stochastic is already overbought that can last for months. Gold stocks are volatile enough that you must start looking at overbought RSI or breaking away from upper bollinger bands to denote profit taking. And both of those are a long way from occurring

The Discpline of Investing

Chart, charts, and more charts. The next time you think investing, speculating or trading your way to riches is as sexy as Miami Beach, spend some time with a chart reader. It as dull as dirt, tedious as teaching, and there are no bikini clad models serving you sushi and maritinis.

A good habit to get in in weekly reviewing the charts of your holdings and your best prospects, cull your watch lists to about the same amunts of prospects as your holding when fully invested.

Once a month review your trades from the month, see your mistakes and your successes, keep notes or a spreadsheet.

Nothing happened and nobody should care

I can see nothing in the charts of any interest whatsoever. Others can, of course they either have TV shows that need ratings or trading platforms that need to be sold. Listening to them leads on to believe there is always a trade that had better not be overlooked, which is why there are so many discount brokers. Pushing trades will lead to the end of your trading account, concentrate on your job instead and wait for a true signal.

The crossroads continue

The short term outlook does not apear overly positive. The market never re-gathered itself, to make another attempt to break out. The longer term out look however is more positive as the market remains stubbornly in the upper zone of the recent trading range.

Insurance has been bought, profits have been taken, albeit it some ones. And the waiting game is on.

The Seduction of Back Testing

Back testing is as old as charting. However it is now the rage of your online discount broker, like it is the hosanna of trading. It is oh so seductive, putting in your trading ides that are probably fairly good, then you can see how they would have done the last x number of years. Then you can tweak it until you make unbelievable returns. And you then quit your job put all your money into your new system and look up villa on the south of France to retire to. Okay you might not go that far, but you get the gist.

The problem is the system did an unbelievable job of pinpointing profitable trades in the rear view mirror,like a Monday morning quarterback, anyone can be a genius in the rear view mirror. But the only thing you can really bank on, is your system will not perform that well, or even near that well going forward.

To be fair there might be a good trading theory in there and it might be something to trade off of, but don't bet your retirement on it. One thing about systems trading is they lose lots of money every now and then, and lately it has been more now and will be a lot less then because all of the trading capital is bye bye.

There is and never will be a machine that can play quarterback, nor is there one that can trade going forward like they could looking backward. And chances are if you put your system to work and lost everything the FED would not give you access to TARP funds.

A watched market never moves

Paying inordinate attention to the market is a recipe for disaster. Unless you are a day trader which in itself is almost a certain way to quick poverty, watching every tick of the market will induce you to initiate trades before their time. It is easy to become bored with the tediousness of the market and desire action when none is required.

Allowing your trades to set up is a must for successful trading no matter your style or time frames. You cannot force it. Trading the markets for excitement is a form of gambling. Trading the markets for profit requires discipline, not adrenaline.

The cost of market insurance

With action this morning closed out one of the last two short ETF positions I had DXD, short industruials. The last remiaing one was SRS short real estate which ws stopped out on the afternoon's rally. Our third short position was stopped at a profit on 12/12/ The price of insurance using the pro shares ultra short etf's has come down in my opinion. With twice the volatility of the underlying shares and no ultra high premiums they are a better than options or short shares out right when you are just heding your portfolio. Using the qqqq put option is often very expensive and precision like timing to profit plus even though the option is highly ilquid the bid/ask spead is still high, compared to using the pro shares etfs.

The market at crossroads

The market is at a crossroads right now. How it resolves it might have major implications, but will certainls have short term implications. The nasdaq has been hugging the upper border of its trading range for an extended period of time. And is now at the low reaches of this upper trading zone. Tomorrow the Fed will cut rates, lately that has menat market declines. But there has no pre-announcement market increase this time around, so its anybody's guess where it will go.

The Non-Oil Trade

Much is being made at the recent interest in oil. Taking a look at the USO chart one can see barely a dent was made in the down trend. There was a noticeable volume spike which is of interest. But playing it long right here is irresponsible. While this might very well be the bottom there is no behaivor on the chart to create a basis for trading. A blindly thrown dart hits a bullseye just as often as it hits anything else. The problem with trading using that model is your money becomes the darts and unless you won a dart factory it will run out.