So again we find the talking heads coming in droves. Reminds me of the song from talking head (the band, not the pundits of wall street).
Henry Blodget is giving us
Three basic reasons:
- Stocks are still very expensive
- Corporate profit margins are at record highs
- The Fed is now tightening
Now yours truly traveltrading will give you one singular reason
1) Japan economic index dropped 2.5 percent which effects its exporting capacity and the chief harm is done to Germany which is one of the biggest trading partners and hence we find EU indexes and Asian indexes following the US indices and hence we can see further correction.
I just made it up.
Who cares what the reasons are for our style of trading. We have only one thing to look at, and that is price. If the price is going up we buy, if it going down we sell (trend following, counter intuitive).
As i said in last post, market is in correction. I have entered into 1 new position – ultra short of QQQ.
The ticker is QID. It is not a short position, but long (bought) position.
It is double the reverse of nasdaq.
Reason for entering : It just crossed above the 75 day SMA, and market is in correction
this morning i read this in yahoo finance (note the 20/20 vision looking at the past) – “To those poor souls Trennert suggests backing up and remembering that valuation always matters. Corrections lead to selling that takes down blue chips as well as garbage names.”
I am not a poor soul, I did not get into the market. Because the market is still in correction (How long or how short time will tell).
Let me again empathize the fundamental difference. I trade based on one and only one thing – Price.
I have one and only one signal – 75 day Simple Moving Average.
DMSI, and IBD big picture help me a lot in confirming my signal.
So valuation based on opinions don’t matter in my style of trading.
I have gotten into all cash positions. Sold my etf, and mutual fund (I had one of each).
Growth funds have collapsed. Small-cap is lagging.
I have shifted all my monies into money market funds.
Stay on the side lines. Number 1 rule – Don’t lose money. Number 2 rule – don’t forget number 1. (I am not talking about cost of business or losing some money when you just got into a position and then because the market has turned on you, had to sell. That is expected).
Your only, and one and only indicator is the 75 day simple moving average (SMA). QLD and QQQ have both gone under it. Sell.
Once it comes back up the 75 day SMA – buy QLD or QQQ.
Now there is another option on the downturn – buy QID (It is reverse double of QQQ). It has just gotten above it’s 75 day SMA.
The market is in correction. Distribution days have reached and have tipped over. Get in cash, to be on safe side.
But the DMSI has not triggered. That is the signal is still 100% equity. I am not getting into cash as yet. I will wait and see.
The Delta MSI measures the position of ~3,600 stocks relative to an intermediate-term moving average crossover (MAC) point. When greater than 50% of the stocks followed are above this MAC point, the market is bullish and equities are attractive. When the indicator is below 50%, risk is elevated and stock exposures should be reduced. Manager uses discretion on asset allocation when MSI is 50% +/- 3%
Current Market Exposure: 100% Equities, 0% Bonds, 0% Cash
Since this a blog dedicated to travelers and teachers who like to make some extra buck trading, I would like to again give you a framework of expectation from this blog, the basic philosophy, and the method of trading.
I love all to visit this blog, but I particularly want you to make money knowledgeably so that you can help out your friends (In science terms – a replicable model), and also a model that can be easily taught and easily implemented.
I have heard a veteran trader say this : You pick any rule : say I will buy when it’s a full moon, and then sell in 15 days. It will make you money as long as you follow that simple rule over consistently over long period of time.
Alas, the market remains irrational as long as we remain solvent.
Since we don’t have that uninterrupted supply of money we want to first manage risk.
Today i want to just write about the philosophy of trading
Two rules (from that guy, you know who) : 1) Don’t lose money 2) Don’t forget rule number 1.
“The price is the true north star”
as a teacher or traveler – time is the most important premium we pay. So we have to make our system and keep it KISS.
Nothing else matters except one and only one thing in this system : Price
If the price is going up you buy and if it is going down you sell