Wednesday, November 16, 2011

Cash is King!

Summary of the market:

  1. The market did not break out above /ES 1260 as expected. Rule # 1: There is no gift horse in the stock market.
  2. I had mixed signals throughout the day, from buy to sell to buy to sell...that for a period of 1 full day makes me suspect if the market goes up or down tomorrow. I had not gotten such type of day with mixed signals for a long long time. Till there is clarity, move to cash. I was stopped out today at the end of the day. Down but like I mentioned in my previous posts, I am able to afford it.
  3. In the chart below, look at the highlighted triangle. If SPY falls below, I see a big air pocket below the break down. Target can be anywhere but lower at ~ 110. SPY could breakout above as well but that is to be determined. When there is big TBD, I am moving both VST and ST models to cash.

4. I could not get this post on time because of rapid move during the last hour. What does this tell you? Nobody but you will be able to close positions when needed. You should be able to organize stops for your portfolio. If you can't do that, stay out of the stock market.

ES update

A picture speaks thousand words. Over the weekend, I decided to ignore the news that is coming out of our media. I have always followed my proprietary signal but going by the psychology, news will take a toll on our brains. Hence, this decision to not open any news websites. My charts will dictate my path and I will follow the charts with adequate allocation and discipline to get stopped out. There are always going to be challenges and if any traders/ investors thinks it is a cakewalk to win continuously in stock market, they are lying to themselves. Having said, it is our aim to maximize the returns of our hard work and I must say I have been quite successful in doing that. 

Another point I would like to make is I am catering to a specific set of audience. I managed funds from my families, relatives and friends. I used to explain my decisions to them using emails. I had to learn how to blog because it was getting hard to post my views only in emails. I could keep this blog open only to them but when I am doing the hard work, it is fair to say that I would like my views to reach outside that group. It is no harm to open my blog to everyone on the www. However, unless you tell me what your needs are, it is hard for me to understand what issues I have to address. For example, I have an ongoing conversation with AH on one of the blog posts. His capital is less than 25k, it is not unusual to have a capital of less than 25k $ invested in the market especially in the wake of problem scenarios like MF Global.    If day trading is not what you do or you are restricted to only less than 3 round trip day trades, unfortunately I must say that you need to stick to swing trading. I will do my best to include my swing trading signal in my blog posts as I am already looking at the charts from all time frames.

I am looking at /ES hourly chart above and what a mess it has been overnight. I was getting mixed signals overnight, as of now the signal is on buy. Like I said above, the food doesn't come to your mouth so easily. I decided to look outside my signals, I found something interesting and reliable. RSI is not my signal but I look at different patterns every single day to find any clues. On Tuesday, RSI formed a positive divergence with the /ES price on the hourly. I have marked it on my chart above. RSI formed a double bottom while the price posted a lower low. Since then, RSI has been in a higher low pattern which is encouraging on the long side. I remain on alert, open to both long and short possibilities to change positions as needed. I am long at this time, having taken 65% off the table yesterday. I have nothing to lose after a great run in the last week but I adhere to my stops and suggest everyone to follow adequate market discipline as always.

A close above 1260 on the daily time frame and I will add more money on the longside with adequate stops.

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