04-13-14 Trade Plan

Seems things are always exciting when the bears are in control.. and they are for now.  For the first time since we were in rally mode off the Feb lows, we have a trend defined by swing highs and lows.  The trend is down for now, especially in the leadership indices like the NASDAQ and Russell 2000.  From a portfolio perspective I am staying away from this kind of market until we see buyers are back in control.  It is also important to know what you want to be buying if the buyers do take back control and for now it is still the energy stocks as my number 1 target, then staples after that (if that isn't enough for you then utilities are strong as well).  We don't know how much more selling is going to come through the market so we just have to be patient about buying the stronger sectors.  For strong sectors to really perform we need the S&P backing them up with at least small, consistent rallies.  Since most of the sectors are just breaking down right now I won't list out of a bunch of stocks at the end like I usually do.

Why All The Hate?

I am seeing a trend starting to emerge of people hating on the trend following traders (see what I did there?).  From my perspective there is a very simple explanation for this and thought I would just put it out there.  It drives them absolutely crazy that there is a strategy out there that is irrespective of what anyone thinks.  The entire way up people have been fighting this rally, shorting it, hating the people that were long, being childish about the whole situation because their emotions were completely taking over as their account diminished.

04-06-14 Trade Plan

To start, I think this title is much more fitting since all I really try to do here is explain the plan going into the next week along with some analysis.  In the markets I think the feeling is the same among most traders and trend followers alike.  We are all looking at the NASDAQ (leadership) thinking, "man this thing looks like toast" but then looking at the S&P (broad market) it is more along the lines of, "I'm not seeing any toast".  So it is a tug of war between the two and what you should be doing while we wait it out to see what is going on is managing risk and knowing where your stops are.

Personally I am feeling like the risk of the leadership dragging down the rest of the markets is greater than the worry of missing out.  Especially after we worked all week to move higher out of that range in the S&P only for the NASDAQ to take everything down with it on Friday.  On top of that the QQQ traded over a 100 million shares today and we haven't seen volume like that in about 2 years, so shorts are looking at that feeling confident having a stop loss above today's high or right around $90.  Something else I want to mention about the S&P is that it is really getting sloppy up here.  Instead of a nice clean consolidation we are getting these wide swings back and forth and sellers are selling with good velocity, this is not a sign of bullish consolidation even if we haven't breached the key swing low.  With all that said, anticipating either direction is what needs to be done.

03-30-14 Weekly Review & Watch-list

It seems like as we continued to get deeper into March, the more boring things got and I'm hoping we just hit the climax of boring as March comes to a close and we get into Spring time trading.  In hindsight the most profitable moments would have been to short the strongest market leaders right into their rising 50 day averages (ex. $FB, $FEYE, $GOOG etc.) and I feel that is a sin to do even if there is a rotation happening.  So for me, aside from some bond trading I didn't have much to do.  A clear theme we are seeing is money moving out of the high growth areas and into big cap tech and energy stocks.  This is overall a good thing for the market since the money isn't just leaving the market but I just don't care to build a portfolio around them until the market is participating to some extent as well.

Using Relative Performance to Trade Professionally

Using relative performance is a primary tool that I use to know what I should be trading right along side with trend analysis using multiple time frames.  I find that it isn't appreciated or talked about to the extent that multiple time frames and trend analysis is talked about so I'll do what I can to bring more light to it.  To start, I believe for swing trading in a 1-4 week period there is a larger picture of what is going on that you have to stay on top of, which I will try to explain better in this post.  Relative performance is a big part of this picture as is sector analysis and where the money is flowing.  For this post, since it is supposed to be giving you a feel for how to use this; I will be looking at the relative performance between Dow stocks and the Dow Jones Industrial Average as the index.

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