Moving Stops

Moving trailing stops up on DIG to lock in profit on 66% of the position.  If it makes it to up to 30 I’ll dump some for a 10% profit and let the balance run w/ a trailing stop.  FYI -this method is used in each position in the M48 model.

800

Pretty much the same since the last post.  Need to hold 800 on a close in the S&P to maintain the models long position.  The market contiues to be under pressure based on what I see technically (price and volume).  You guys know that price and volume is all the matters.  Forget the other noise.

I did move the trailing stops up on SLV and TBT to lock in more profit.  I’d like to see DIG take a run at 30 this week.  Close today was 27.22.  In order to do that I also believe it needs to hold yesterdays low of 25.84. GILD did hold its 50 day (support) and a looks like it wants to challenge new highs. This is not a recommendation but instead an observation for educational purposes.

During a recent interview I was asked to distinguish myself from other advisers in one sentence.  My response was: “If I’m wrong I don’t stay wrong”  – please expand – “That means I don’t let my ego get in the way.  When I’m wrong it’s OK because I know I’m only going to be wrong by a small percentage.  In other words I don’t buy and hold and tell my clients that they’re in for the long haul.  Instead we preserve capital by cutting our losses short and letting our profits flow.”

Choppy

Bought some SSO today when the S&P was off 20 vs. 28.  The only good news if any was that the volume was lighter today.  The S&P positions consist of 29% of the M48 model as of the close today.  The metals, oil and short bonds make up 14% with the balance in cash at 57%.  I don’t want to buy on weakness beyond today.  800 on the S&P is a key level to hold on the downside and 850 is what we want to see hold in order to add.   Add above 850 (w/ increased volume) and dump it on a close below 800.

Here is what it takes to be successful in these markets and to sleep soundly at the same time:

When the market (S&P) trades in a range (roughly 800 to 900) like it has for 12+ weeks it can be very frustrating because you are constantly getting bounced around with small losses and small gains.  However, it is very important to take every breakout because you never know if that particular breakout is the start of a new trend.  In other words if you snooze you lose.  If the trend (rising prices) continues the model then increases its exposure long as the institutions pile in (volume).  THIS PRICE AND VOLUME INCREASE ALONG W/ PATTERN RECOGNITION IS OUR EDGE (INCREASED PROBAILITIES).  Remember that the model is not looking to catch the top or the bottom, but instead all the fat in between.

Now on the flip side it is actually more important to exit the market if support is broken.  In other words you have to preserve capital in order to have cash to jump in and take the next trend whenever that occurs.  If you buy & hold you have unlimited risk and more importantly you do not have the cash to buy back in.  This is a very simple common sense method that the majority of advisors ignore due to lack of knowledge and more importantly discipline. It is more profitable for them to collect your money and have you sit in the market (mutual funds) and ride her down while they continue to collect fees. 

Once a trend is achieved all the little losses are soon wiped out at which time the model moves stops up to protect profit – hence recent moves in GLD (gold), SLV (silver), DIG (long oil), and TBT (short bonds).

As always cut your losses short (preserve capital) and let your profits flow (trailing stops).

This is why my clients/subscribers slept soundly in 2008.

All numbers referenced are for educational purposes only.  Always read the risk disclosure above.

-Have a nice weekend.

Adding SPY & SSO w/ Volume

The M48 model still remains in 80% cash as of the close today.  Proceeds from GILD and RTN were used to purchase SSO and SPY as mentioned live on the Pro Investor Show Monday.  I’m going to split my stops on the SSO because I see a gap that could get filled below 23.75.   Due to the chart pattern I’m able to safely place my stop on the SPY tighter than 7% from original entry.  Based on probabilities I think the market will eventually break 800 and go to new lows.  Until then the model will increase its long positions in the SSO and SPY provided price and volume hold up.  In other words we’ll add and ride her ’til she bucks.  Fill price and stops are emailed to subscribers.

Still long TBT, GLD, SLV and DIG w/ stops in place to protect profit.  Interesting how crude sold off yesterday but DIG held up.  Let’s see how the market reacts to QCOM and SBUX Thursday.

Thanks to those who attended our recent seminars on no risk and controlled risk.

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.

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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