Buyers In Control - December 2, 2011

[Billy]

Forum Clusters 111202.xlsx

The IWM robot could enter a new long position at 73.14 in the lower end of the consolidation day’s trading range while the day’s money flow strength was just average. The stop is now at 68.97.

All the strong floor support confluences remain potentially active just below the entry price and should temper any aggressive selling raid. Further support could be found at the close on the declining trendline from the October 27th top which was also the much commented resistance of the triangle that developed in early November. Even more significant was the close above the 2-day VWAP ( blue line at 73.10) which means that the average buyer since Wednesday’s gap up opening is above break-even and this remains a market controlled by the bulls. Notice how Tuesday’s consolidation also found support at the 2-day VWAP. Weekly R3 (73.67) capped prices yesterday and remains the only serious resistance for Friday. It won’t matter anymore next Monday with the new weekly pivot levels.

The IWM robot found no edge for entering a new position today and is neutral. This is not a sell signal for the existing position which must be held. With neutral settings, risk-adverse leveraged traders might consider booking some leveraged profits on strength today.

The GDX robot is in cash. Please read Pascal’s comments on the new GDX robot evolution.
Billy

[Pierre Brodeur]

This morning we have the following

These are the settings for managing the stop loss of an existing position in related ETFs.
These settings are calculated from the IWM settings. Note that we do not keep track of the original position entry level. :
RWM: Trailing stop loss for a trade that started on 12/1/2011: 32.01
UWM: Trailing stop loss for a trade that started on 12/1/2011: 30.25
TWM: Trailing stop loss for a trade that started on 12/1/2011: 44.99
TNA: Trailing stop loss for a trade that started on 12/1/2011: 36.32
TZA: Trailing stop loss for a trade that started on 12/1/2011: 33.74

As suggested by Billy (if I understood correctly, I took a BASE position in IWM and added a 2/3 position in TNA.
-1- Under what condition(s) are we to enter the last 1/3 position in TNA, if your care to comment Billy?
-2- I am somewhat surprised that the system would suggest stop losses for SHORT positions which are the opposite of what the robot has suggested. It adds to confusion IMHO and I think only the long positions should be showed.
This is a positive constructive suggestion

[Pascal]

This morning we have the following

These are the settings for managing the stop loss of an existing position in related ETFs.
These settings are calculated from the IWM settings. Note that we do not keep track of the original position entry level. :
RWM: Trailing stop loss for a trade that started on 12/1/2011: 32.01
UWM: Trailing stop loss for a trade that started on 12/1/2011: 30.25
TWM: Trailing stop loss for a trade that started on 12/1/2011: 44.99
TNA: Trailing stop loss for a trade that started on 12/1/2011: 36.32
TZA: Trailing stop loss for a trade that started on 12/1/2011: 33.74

As suggested by Billy (if I understood correctly, I took a BASE position in IWM and added a 2/3 position in TNA.
-1- Under what condition(s) are we to enter the last 1/3 position in TNA, if your care to comment Billy?
-2- I am somewhat surprised that the system would suggest stop losses for SHORT positions which are the opposite of what the robot has suggested. It adds to confusion IMHO and I think only the long positions should be showed.
This is a positive constructive suggestion

Pierre,


I use the "short" positions limit a lot myself when the Long signal is issued: I would simply short TZA or TWM.
Therefore, these stop loss on the TWM/TZA shorts are important for my own trading.

Do not forget that when a BUY signal is issued, going SHORT TZA should be more profitable than going LONG TNA. However, shares availability might be limited.


Pascal

[Pierre Brodeur]

Pierre,
Do not forget that when a BUY signal is issued, going SHORT TZA should be more profitable than going LONG TNA. However, shares availability might be limited.
Pascal

Thank you. Now I understand

[nickola.pazderic]

The most bullish statement I've ever seen this year:

As Macbeth said, It is a tale told by an idiot, full of sound and fury signifying nothing. Fading the "Grand Plan" rally worked very well. There was a couple days of pain and then generally the market followed a nice path lower. Last week the market had felt oversold and was looking for a reason to rally. I thought that Monday was overdone, and that Wednesday was extremely overdone, but I started cutting shorts yesterday, and am now getting long. Everyone seems to understand that the "globally coordinated rate cut" plan was not a big deal in of itself, yet the market didn't give up any of the gains. Even some of the perma bulls downplayed the move. I think the move was meant to be more pre-emptive than a strong show of future support, but Ben is not dumb, and he has seen the outsized impact such a simple move had. Cracks will appear in this rally, and we will ultimately figure out the problem with the current attempts to fix Europe, but right now it is too vague to fight, positioning has been too extreme, and Bernanke and Draghi have to see the opportunity to push things forward while the market is behaving positively.

Well, now. Incidently, /ZB (30 year treasury futures) fell below 140.

Do I yet want to take off that TNA position?

Good morning, all!

[taw55]

The Sector page of the PascalA_List spreadsheet, and the Sector List, are great tools, but in a strong trend, almost all sectors tend to go into buy or sell mode. I wondered if you or Pascal had any thoughts on the best way to approach creating a ranking of sector forecasts (i.e., how they are likely to perform over the next few days or weeks) for those of us who might want to rotate into the best sectors, or hedge by going long the best (forecast) sectors and short the weakest ones. Thanks!

[Billy]

This morning we have the following

As suggested by Billy (if I understood correctly, I took a BASE position in IWM and added a 2/3 position in TNA.
-1- Under what condition(s) are we to enter the last 1/3 position in TNA, if your care to comment Billy?

Pierre,
There are no position-sizing rules from the robot. All position-sizing and leverage decisions are your own responsibility.
I previously gave an example of my own discretionary guidelines in the current conditions.
First, I always enter a full TNA position at the initial limit, say 1,000 shares at 43.77 yesterday. I place my initial stop for 666 shares just under the first support cluster and for 334 shares at the robot’s stop.
Once I see a higher low from my entry followed by higher highs, I exit 333 shares at a 39% retracement and 333 shares at a 51% retracement. The remaining 334 shares are managed exactly like a robot position.
The proceeds of the 666 shares should only be reinvested at a robot’s entry limit if there are buy settings and the same stops and retracements guidelines apply from there.
Today, 1/3 of my TNA (entered at 43.77) was stopped out at 45.29 and 1/3 at 44.99. I am still long 1/3 position but wont scale back-in my 2/3 position before a new active buy limit price.



The first retracement line is at 23.6% retracement and puts me on alert for potential stops triggering.

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
Billy

[Pierre Brodeur]

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
Billy

First of all, thank you for answering my question given my past history. I am used to trading 2x leverage which are dangerous. This is the second time I trade 3x (the first was TZA) and those are VERY dangerous. It is known that you are an "expert" in trading these instruments and therefore your knowledge of managing the risk of that trade is invaluable to me and others, I am sure.

This explanation now makes it very clear to me. Thank you

[Billy]

The Sector page of the PascalA_List spreadsheet, and the Sector List, are great tools, but in a strong trend, almost all sectors tend to go into buy or sell mode. I wondered if you or Pascal had any thoughts on the best way to approach creating a ranking of sector forecasts (i.e., how they are likely to perform over the next few days or weeks) for those of us who might want to rotate into the best sectors, or hedge by going long the best (forecast) sectors and short the weakest ones. Thanks!

Taw 55,
The best indicator I know for sector rotation is relative strength.
The best book I know on the topic for multi-month investment timeframes is by Michael J Corr:
http://www.amazon.com/Smarter-Invest...2853400&sr=1-1
But the paradox for short term trading is that you must buy the worst short term RS sectors on a 20 DMF buy signal when confirmed by Pascal’s sector lists.
Billy

[jerpk]

Pierre,
There are no position-sizing rules from the robot. All position-sizing and leverage decisions are your own responsibility.
I previously gave an example of my own discretionary guidelines in the current conditions.
First, I always enter a full TNA position at the initial limit, say 1,000 shares at 43.77 yesterday. I place my initial stop for 666 shares just under the first support cluster and for 334 shares at the robot’s stop.
Once I see a higher low from my entry followed by higher highs, I exit 333 shares at a 39% retracement and 333 shares at a 51% retracement. The remaining 334 shares are managed exactly like a robot position.
The proceeds of the 666 shares should only be reinvested at a robot’s entry limit if there are buy settings and the same stops and retracements guidelines apply from there.
Today, 1/3 of my TNA (entered at 43.77) was stopped out at 45.29 and 1/3 at 44.99. I am still long 1/3 position but wont scale back-in my 2/3 position before a new active buy limit price.

Attachment 11690

The first retracement line is at 23.6% retracement and puts me on alert for potential stops triggering.

Again, these are not backtested rules but just an example of my current handling of leverage in the context of the robot because I was asked and tried to help.
Billy

Billy--I don't understand how you determine the point from which you draw the fibonacci lines to determine your exit points. You mentioned a higher high and higher lows, but I see lots of them. Forgive the stupid question but I have a lot to learn! Thanks for all the great teaching on this site. Jerry Kuhn