making money in a down market

when market falls it does so quickly.

Now you see in the previous posts how all macro signs pointed this right before 10th October 2018.

it can be found in three parts – part 1  part 2 and part 3

now i made money during this fall (anyone interested to see the proof, please contact me at exlporingdesh at gmail dot com ) or leave email address in  comment section.

how does one make money when market declines.

there are three straight forward ways  A) buy an inverse ETF like QID. B) buy puts on NASDAQ or C) short NQ futures.

Only B has limited risk limited reward.

Let me show you how

happy trading travelers

 

market is in rally

A follow through day is a gain in major indexes for 1.25 % or more in high volume. The market did just that today.Â

IBD says this

The midterm election results and a 2.6% gain for the Nasdaq composite delivered a nice present for stock market bulls Wednesday. The Nasdaq 100 did even better, up 3.1%, helped by strong moves from FANG stocksAmazon.com(AMZN), up nearly 7%, and Netflix(NFLX), up 5%.

The Nasdaq composite followed through on the seventh day of its rally attempt as several top-rated growth stocks made explosive moves in the stock market today. The S&P 500 also followed through with conviction, and the Dow Jones industrial average surged also, both with gains of 2.1%.

lets look at if other stocks in S&P 500 are participating in the action yesterday .

Look at the chart below – 13 % increase in the number of S&P 500 stocks above their 50 days SMA!!

Screen Shot 2018-11-08 at 8.34.10 AM

i have gotten into the market from all cash position yesterday.

Red flag Research shows that a distribution day in any of the first three sessions after a follow-through day can foretell a failed rally. A distribution day that comes later is easier for a rally to overcome. THE RISK DROPS OFF SHARPLY from the 6th day or so

Red flag 2 : top rated stocks action :: in early stages of new uptrend strong action of leading stocks is CRUCIAL. Top rated stocks should be breaking out of bases in big volume.

A confirmed uptrend can weather an occasional sell-off every week or two and still show the fight to keep rising.

THERE WERE 7 distribution days many times in 2017 yet it rose 37% !!

I have gotten in the market yesterday. Good deepavali gift!!

happy trading

 

lessons learnt in market crash – Part 3

Hello traveling traders

Good morning from Sunny Hyderabad. Yesterday was festival of light (deepavali) here and lots of fireworks and goodies to eat!

Part 1 and Part 2 can be found here.

today lets look at russell 2000 a bench mark for small caps

Screen Shot 2018-11-08 at 8.39.54 AM

It will not escape your attention that it is going down since 9/04/2018, a month before the actual crash!! and it drops down the 55 day SMA on 9/26 and stays down there and goes down for 10 days before the general market crash!!

wow!

 

Lessons learnt in market crash – Part 2

Hello travel traders

Good morning from Hyderabad India. Nov 6th is a big day for the USA. it is sunny at about 10:00 am here.

Part 1 can be found here

Screen Shot 2018-11-06 at 9.44.21 AM

FFTY is the growth stocks ETF. It is passively managed fund and tracks the IBD 50 – The best growth stocks in the market. the holdings are updated weekly

you see, Growth stocks break down about 2 – 2 1/2 times that of market. as the market is falling they hold up well for 3-4 days and are resilient. But they start collapsing the faster as the bear market sets in. Why? because market drops 4 times faster then it goes up – because markets climb the wall of worry and fall of the cliff.

Look at the bearish engulfing candle stick pattern at the  tops – a solid red candle after a small green one.

Along with $S5FI this is a reliable portent.

For market  bottoms Growth stocks are first to break out after a follow through day.

Follow-through signals are more likely to fail if distribution days occur in the first few days of a new uptrend. This is one key red flag. A distribution day, which points to institutional selling, involves a drop of 0.2% or more in the Nasdaq or the S&P 500 in higher volume.

Generally, a distribution day within a few days of a follow-through leads to a failed rally. The risk drops off sharply after the fifth day.

A second red flag? In the early stages of a new uptrend, strong action among leading stocks is crucial. Top-rated stocks should be breaking out of bases in big volume. This is a clear sign that professional investors are stepping back in to buy stocks.

have a wonderful day and please vote!

 

Lessons learnt in market crash

S&P 500 Stocks DAILY Above 50-Day Average BEFORE FALL

Price is the true north star and her sisters are a few – one particular one is how many stocks in S&P 500 are above their 50 days SMA ($S5FI)

The first big red candle and a drop of 10 percentage points in the number of stocks above their 50 days SMA happened 12 days  before the actual market crash!

Market lost its floor on October 10th and you see in the above chart that the big red candle appeared on 9/24.

Do you see the gradual descent in the above chart! It falls below all the Moving Averages (MA)..the green 10 Days Exponential MA and also the 22 days SMA and 55 days SMA.

It falls below 50 % on 10/04.

there are other signs that go along with this. More in the coming days posts.

now a drop of more than 10 points in $S5FI occurred  in 4 days by 02/01/2018 and NASDAQ dropped to the low 765 points in the next 6 days!

Similarly $S5FI dropped more than 10 points on 02/27/2018 and NASDAQ dropped to the low of 246 point in the next 3 days.

similarly in 4 days by 03/15/2018 it dropped by more than 10 points and then in next 11 days the NASDAQ dropped by 676 points!

and it dropped by more than 10 points in 4 days by 6/19/2018 and in the next few days NASDAQ dropped 362 points

and it falls by more than 10 points on 9/24/2018 and NASDAQ drops 1000 points in the next 18 days!

I am staying in cash