Monday Morning

Moving stops up to protect profit on GLD (gold), SLV (silver), DIG (long oil) and TBT (short bonds).  Out of RTN and GILD due to stops getting hit.

This Week

Based on probabilities I believe the market will bounce this week only to eventually breakdown to make new lows.  When will we hit the new lows?  I don’t know – possibly this week  – maybe 6 months from now.  In other words if your playing a bounce make sure you are using your stops.  The market is still in correction and cash is the M48’s largest percentage.  Inside the M48, Gold (GLD) and Silver (SLV) had decent moves on Friday.  The stop on TBT (short bond) will be moved to just under 40 tomorrow.  Small position again in DIG (long oil) but I’m not really all that excited about its chart pattern so be careful.  The model may have to get knocked out of DIG or DUG a couple of times before crude picks its trend direction.

At the Pro Investor Coach workshops I ask the attendees to focus on three important points:

1.  What If  – Always ask yourself “what if” – what if the market goes lower – what if the market goes higher.  What is your plan to take profit and limit loss.  Do you have a plan?

2.  Sleep – Are you able to sleep at night with your existing strategy.  Can you sleep knowing that your portfolio could drop another 40%.  If you have a plan to eliminate or reduce risk you will be able to sleep.  Buy & Hold is not a plan.  Telling yourself the market is cheap and can’t go lower is not a plan.

3.  Action – the best cure for fear is to take action.  Taking action makes you feel better which enables you to sleep.  Fear of the doctor, mechanic or the possibility of losing more money w/ your current portfolio strategy is cured by action.  Cut your losses short (using stop losses) and let your profits flow (using trailing stops) or totally eliminate the risk with the BPA product.

Cash

The trend is still down and the M48 remains in 80% cash since the break below the 50 day.  I mentioned TBT (short bonds) live on the radio show Monday.  Since then the move has been very nice.  Resistance is at 45 and not a bad place to take profit on half of your position if it hits it.

The M48 will remain in mostly cash until we see a trend change in the S&P.  The earliest would be a close above 850 with volume at which time the model would limp in.  This is also provided we hold 800.

Patience produces profits!

GE earnings tomorrow.

Financials

A free fall in the financials w/ oil stocks following.  Will we bounce tomorrow?  I don’t know.  The M48 still sits in 80% cash with small positions in GLD (gold), SLV (silver),  GILD, and RTN which are currently above stops and the 50 day.  I dumped SSO and DIG for small losses and took a small position in DUG (short oil).  Fill price was 27.09 w/ a stop at 25.66.  Close today 27.94.  How about the financials like C, BAC, JPM, GS etc.  Once again why stops just below recent support are so crucial.

The charts never lie.  Human nature is to not take small losses but my clients and subscribers do.  This is why we can sleep at night knowing we have cash for another day.

For The Trader In You

I did some scalping in the M48 model yesterday using the SSO (S&P ultra pro shares).  Half the position I closed out towards the close and the other half was stopped out this morning for a profit.

Today I repurchased some SSO along with DIG (long oil) and RTN (Raytheon).  All stops are no more than 7% back.  If we get a bounce here I will move stops up to lock in profit similar to yesterday.  Remember the market is in correction mode (below the 50 day moving average) and therefore cash is still king.  The M48 is using some of that cash to play a bounce up to the 50 day which is about 4% away from our previous exit.

This post is especially for educational purposes only and should not be considered investment advice.

Have a great weekend!

Bounce?

The market is due for a bounce Thursday.  If this occurs this would be a day trade only.  Monday I mentioned live on the radio show that the M48 is 80% cash due to the fact that the 50 day was broken.  Small positions still remain in GILD, SLV, GLD w/ very tight stops.

Lightened The Load

The SPX closed below the 50 day therefore the M48 model now has a large percentage in cash.  The ETF’s TBT and DIG stops were hit for a built in profit.  The market will most likely continue to chop provided it holds 820 to 850.  Now we watch to see how the market reacts to earnings.  Volume lighter ahead of earnings and Obama being sworn in.

50 Day

Thurs AM-

The M48 is still 60% long w/ tight stops based on closes.  If the market bounces off the 50 day with decent volume the model will look to add on a break above 920 on the SPX (S&P cash).  However based on what I see technically we could close below the 50 day very soon.  Volume will show up tomorrow w/nonfarm and unemployment.  As always the market’s reaction to the numbers is what matters, not the numbers themselves. If we close below the 50 day the model will lighten up due to the odds of the S&P retesting the 850 range.  SLV (silver), GLD (gold),  DIG (oil), TBT (short bonds) are still holding up.  Stops have been moved up to lock in profit on TBT and DIG.

Moving Stops

I have tightened up all stops on current positions inside the M48 model.  

Very simple but very important.

Increasing Percentage Long to 80%

The Model model will increase it’s percentage long to 80% from 60% during the next week, hopefully on a little pullback.

The majority of the model is currently (check previous posts) made up of the S&P 500 using the SPY and ultra shares SSO.  Other ETF positions include GLD, SLV, IWM, DIG, TBT and the stock GILD.  All stops are in place and will be managed accordingly.  Keep an eye on individual stocks that I mentioned a few weeks back such as MCD, COP, CMTL.  It is just as important to wait for a potential position to breakout as it is not to chase it.  If I have to chase the S&P with a new subscriber I use the SPY.  If the SPY fades and holds (pulls back into its base) I then suggest to the subscriber/client the option of exchanging the SPY w/ the more potent SSO (ultra ETF).

I met w/ a client today and he referred to me as the “Stop Machine.”  I laughed and said that was a great name and an even better compliment.  Unfortunately his previous adviser was not a stop machine and his account dropped 40% before he became my client/friend.  I still think (based on technical probabilities) we will eventually break the lows we put in a few months back.    Until then the M48 will ride the waves using the stop machine to protect profits and limit losses. 

Note:   These are not recommendations and should be viewed for educational purposes only.  Never chase an extended stock and always use mental or hard stops.  Exact buy and sell points along with stop levels are for paid and 7 day trial subscribers only.  Subscribers receive all trades and trade management via email. For more information you can email me at doug@proinvestorcoach.com

Videos and upgraded web site coming soon.

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Welcome fellow traders and investors!

As Money Managers and Traders, the mission of our Blog and Radio Show is to go on record and further educate our readers and listeners in technical analysis and proper money management across all asset classes.

Our methods are not the traditional advice you hear repeated and repackaged over and over again, but that’s exactly the point and the reason why we know how to advance and prosper in every kind of market.

To Your Success,

Doug & Gary