10-2-2018 Comments

[Mike]

With major indices challenging their highs, underneath another story is unfolding. Pascal mentioned the small caps are showing weakness; indeed. NYSE new 52-week lows have climbed and have been doing so for a month. One of the indicators that counts new highs and new lows is the Hindenburg Omen, 14 of the last 20 trading days have shown Hindenburg conditions with new lows dominating. This is unheard of. The NYSE advance-decline line is diverging from the indices, this is rare in the current market. The years 2000 and 2007 saw this kind of divergence. The period prior to the 2015 intermediate top also showed a divergence.

I have almost given up trying to read the market this way, QE forced liquidity covered all market weakness. Oil price may be a factor. Today Light Sweet Crude broke out above a consolidation at $75. One year ago I made a price projection for oil based on a large inverse head and shoulders pattern of $85.50. A year ago, with oil at $50, that was hard to believe. Higher oil prices may be taxing the economy.

The shorting candidates that I uploaded to the watchlist in the in High Growth area are: ANET, EA, EXPE, FB, GDS, OLED and WTW. GLD might be a candidate with its reversal at the 50-day today. I am in three of these.

[Sophie]

Hi Mike I do not see the shorts you have bought on the HG list. Thanks David

[Mike]

Hi Mike I do not see the shorts you have bought on the HG list. Thanks David

David, this is what it looks like:
46004

I circled the two shorts that I took. I am also short GLD.

Mike

[Tompson]

Hi Mike,

A while back you posted results from taking volume breakouts and managing with 6 simple mechanical exits. This was very instructive and powerful. Do you have any recent results you could post?

Thanks,
Tom

[Mike]

Hi Mike,

A while back you posted results from taking volume breakouts and managing with 6 simple mechanical exits. This was very instructive and powerful. Do you have any recent results you could post?

Thanks,
Tom

Tom,
I don't have more recent data. I am aware of an experiment in progress that has taken those rules with some modification. That experiment is an automated trading system, currently conducting paper trades only. It uses the TD Ameritrade API for quotes and trade placement. Next time I look into it, I will try to summarize the performance here. Essentially the watch list that I post on this site (this is my real watch list) is used for the input to the automated trading system. It places trades and uses the six rules to exit. Along the side of this project is my pocket pivot watch list (volume alert list that I post on this site), it is also is being auto-traded with the TDA API.

The market may be topping. If so, nothing will work. I currently have two long positions, WWE and VRTX and three short positions, OLED, WTW, and GLD.

Another member of this site is building a chart pattern recognition system. When complete, it will be able to automatically produce a watchlist using the methods I have developed for my own trading. Essentially it will produce the watchlist format that I upload to this site every weekend using my fundamental and technical charting methods, complete with annotations for base type, the pivot point, positive and negative traits, etc.

Mike Scott
Cloverdale, CA

[Tompson]

Mike,
Thank you for your comments. I expect a little more weakness then a big rally into the cycle peak next summer ahead of the recession. Therefore I'm interested in growth stocks.

Expectations are based on earnings, yield curve trend and seasonality.

https://recessionalert.com/reflections-3/
http://blog.yardeni.com/2018/09/bear-traps-for-stocks.html
https://rrspstrategy.wordpress.com/2014/05/23/seasonality-iv-bi-annual-value/


Best regards,
Tom