Friday, December 31, 2010

Intermediate Stock Indicators Turn Slightly Bullish; A Bit on Time-Frames

Our intermediate-term stock indicators flipped from slightly bearish to slightly bullish at the close of trading for 2010. Our long-term indicators remain strongly bullish, as they have been for a while. As a result, our stock trading will be biased to the bullish side, with short-term trends -- and stock index movements, completing the picture.

Our trading strategies are diversified in terms of time-frame as well as technical trend-following approaches. Our typical approach focuses on the intermediate and long-term, with short-term approaches used for diversification.

Our Short-Term Program also uses the various time-frames, with a stronger emphasis on short-term research. Because of the focus on shorter-term systems -- this program targets liquid markets that show volatility -- such as financials and energy (with a focus on the S&P 500).

Adamah Capital uses Collective2 as a third-party tracker of trading strategies developed by Carlton Chin and George Parr.

Thursday, December 2, 2010

Overbought Indicators flip to slightly bearish 12/2/10

With the S&P reaching new recent highs in the 1220 area, our overbought / oversold stock market indicators are flipping to slightly-bearish from a moderately-strong bullish signal. Our long-term indicators remain strongly bullish. Both indicators have followed the market higher, with the intermediate-term overbought/oversold indicators flipping to bullish on 10/25, when the S&P was 1185.

The long-term models remain strongly bullish, having ridden the current market from the 1148 level, when the model went long on 9/24 -- to the current levels of 1220.

Please keep an eye on this blog, as well as our page, and Twitter -- for updated information on our stock market indicators, managed futures, commodities, and trading strategies.

Wednesday, November 17, 2010

Stock Indicator Update; Twitter 11/17/10

Earlier today, we "Twitted" about our stock market indicators changing. Note that we will always post changes to our long-term or intermediate-term overbought/oversold indicators on our blog or Twitter.

In particular, our oversold indicators turned fully bullish after a modest long position posted several weeks ago. This is interesting because many analysts believe that the market is "turning over" to the downside.

Our long-term stock market indicators remain fully long as well. These indicators have been long as the market rallied to recent highs.

Check out our blog and/or Twitter for stock market indicator updates -- as well as information on other markets such as futures and commodities.

From our Twitter: 17 Nov 11am ET: Intermediate-term (oversold) stock indicators turn bullish.

17 Nov 11am ET: Intermediate-term (oversold) stock indicators turn bullish. Long-term models remain strongly bullish. More on blog later today.

Sunday, November 14, 2010

Commodities: Prices & Volatility Increase (Capturing Profits with Managed Futures)

Below are excerpts from our SeekingAlpha article on the recent spike in commodity prices -- and sudden sharp reversal. The increased volatility presents challenges to CTAs as futures traders balance the offsetting goals of:
  • capturing additional profits, while
  • protecting existing principal.
The article discusses methods that managed futures programs use to capture -- and retain profits from the futures markets. For the complete text and some charts, please visit the link.

Recent months have seen a continued decline in the U.S. dollar and an associated rise in commodities prices. After a relatively steady climb in commodity prices since May, commodity prices spiked early in November. Gold crossed above the $1400/ounce level and crude oil challenged the $90/barrel level. Along with the rise in commodity prices, volatility has suddenly picked up this past week in the commodity futures markets.

Some additional recent futures market activity, reflected by the Liquid Commodities Index (LCI):
  • Since hitting a recent low at May 31, 2010, commodities have rallied strongly, with the LCI rallying more than 20%.


The investable, "Liquid Commodities Index" (LCI), was designed so that Adamah Capital could more easily track the price movements of the commodity futures markets. The LCI has a very high correlation (about 0.98) to other commodities indices, has slightly better risk/return characteristics, and is a good low-fee alternative for investors seeking the diversification benefits of the major commodities markets.
Managed Futures
In addition to a passive approach to investing in commodities, some investors seek a more actively-managed approach to futures, namely "managed futures." These products can capture both up and down movements within the futures markets. The Liquid Commodities Index showed the "buy and hold" performance of the commodities markets over the past several months.
... The Adamah Diversified Program captured profits in the futures markets over the past few months -- and protected profits during the sharp reversal of the week ending November 12, 2010, maintaining about 75% of the month's gains.
Many managed futures programs are systematic and aim to capture moves within the futures markets. While no program will be successful all of the time, a good trading strategy will attempt to capture the profit opportunities within the markets -- maintain these profits -- and minimize risk and whipsaw losses during more difficult trading environments.
Quantitative trading programs often manage and monitor risk on both a "trading system" level as well as on a "portfolio level." Trading strategies are often based on historical simulations, as well as statistical and systematic research. They are also tested in a multitude of ways to increase the comfort level of robustness and improve the "forward information" of the strategies. These methods include blind-testing, bootstrapping, Monte Carlo, and other methods to maximize the effective use of data.

Finally, CTAs monitor and manage risk within their portfolios using a number of metrics and models. In addition to capturing the opportunities the futures markets offer, it is essential to protect these profits. In today's economic environment -- with commodity price volatility increasing -- risk management and "protecting profits" are particularly important.

Carlton Chin, CFA, is the portfolio manager for ADAMAH Capital, which specializes in Computer Aided Research & Advanced Technology (CARAT). He founded Adamah with his long-time friend and associate, George Parr. Carlton has been quoted and featured in the Wall St. Journal, NY Times, MARhedge, Futures Magazine, and Financial Trader. He holds both undergraduate and graduate degrees from MIT.

Monday, October 25, 2010

Managed Futures: Performance & Diversification

Some of our readers know that our specialty is "alternative investments." We believe that alternative investments such as commodities, managed futures, and other diversifying strategies offer good diversification benefits to a traditional portfolio of stocks and bonds.

CARAT Capital was originally started to combine concepts of Modern Portfolio Theory, downside measures of risk, and robust trading systems. CARAT is an acronym for Computer Aided Research & Advanced Technology. Today, all money management activities are handled byAdamah Capital, a firm founded by Carlton Chin, CFA and his long-time friend and associate, George Parr.

Managed Futures have had a nice run over the past several months. Please check out the performance of our Diversified Program, tracked by a third-party firm. Carlton Chin, has a solid longer-term track record. Over time, managed futures have proven to earn returns from opportunities in the futures markets -- that are non-correlated to traditional assets such as stocks and bonds.

Please visit our websites and contact us for more information.

Intermediate-Term Stock Indicators Slightly Bullish 10/25/10 720am

As of the close Friday, our intermediate-term stock indicators turned slightly bullish from their recent cautious stance. They join the long-term models on the bullish side.

A look ahead at the indicators shows that with a pop upwards, the intermediate-term indicators may retreat back to neutral to slightly bearish. The stock market has certainly had a strong run over the past several months and the models reflect this fact. However, they do not want to "fight the tape" too long.

Saturday, October 16, 2010

Stock Model Indicators Remain the Same

Our stock market models remain the same:
  • Our long-term models remain bullish, with a full buy signal.
  • Our intermediate models remain slightly cautious, with a neutral to very-slightly-bearish signal.
As a result, our stock positions lean to the bullish side, depending on the short-term models. As usual, we will post any changes in long-term or intermediate-term stock market indicators to our blog.

Note that we are increasingly using SeekingAlpha to publish trading articles and investment information since they named Carlton Chin, CFA (Adamah Capital & CARAT) a "contributor."

Thursday, October 7, 2010

MLB Playoff Analysis for NY Times

In case you missed it, here's some analysis we did for the 2010 baseball playoffs based on quantitative analysis of concepts of sports psychology.

Long-Term Stock Models Go Long 10/7/10 350pm

Near the close today, our long-term stock market model has gone fully long, from it's medium-long position.

In addition, our intermediate-term models are just very slightly short, from a moderately short position. Net-net, we now have a moderate to medium-long stock market position and outlook. You can't fight the tape...

Friday, September 24, 2010

Battle of the Stock Market Indicators 9/24 330pm

With the stock market's continued rise, our long-term indicators are turning to a "medium long" position from its neutral signal of a week ago.

Meanwhile, our intermediate-term models remain bearish -- with a moderate to medium bearish signal. We sometimes see indicators disagreeing, but we rarely see "medium-level" signals in the opposite direction.

The markets will dictate how this situation resolves itself, and our systematic models will keep us disciplined.

If you like these posts, please follow my blog at

Monday, September 20, 2010

Article on Commodities Indices, Managed Futures & Diversification

As gold has continued to rally to all-time highs, there has been increased interest in gold, commodities, and managed futures as “diversification plays.” Indeed, these “assets” have been receiving increasing attention as true “asset classes” that offer good risk/returns and diversification benefits – for a traditional portfolio of stocks and bonds.
A “buy and hold” commodities approach has proven to be a solid diversifier over the years. However, just like “buy and hold” stock strategies have come under fire, the 2008 decline in commodities has led some investors towards actively “managed futures” as a good alternative investment.
During the 2008 financial crisis, many managed futures programs were able to profit from the extreme moves, with the Barclays CTA Index posting a +14.1% return.
For the complete article, please visit:

Friday, September 17, 2010

Long-Term Stock Indicators turn Neutral 9/17/10 730am ET

With the sustained rally, our long-term stock indicators went from a "moderately bearish" stance to a neutral position, at the close on Thursday, September 16th.

Our intermediate-term indicators remain cautious and slightly bearish. No indicator will be correct all of the time, and the long-term indicator certainly "took it on the chin" this time. However, like all good investment strategies, the system will will "cut its losses" at some point -- in order to preserve capital -- and look for another opportunity in the future.

With gold's continuing rally to all-time highs, there has been increased interest in commodities. Stay tuned for some research on the commodities markets and the diversification opportunities they offer to traditional portfolios that hold equities.

Sunday, September 12, 2010

US Open -- Men's Final

Some of our readers asked us to mention when we have interesting sports information on our sports book blog. Please click on the link below for the entire blog post.

Below is an EXCERPT

Tennis Big Point Performance (BPP)

What does our Tennis "Big Point Performance" (BPP) say about today's finalists? Our book's tennis measure focuses on performance during big points (break points for and against). BPP has been a good predictor of the latter matches in major tennis tournaments and predicted Federer's loss in last year's final.

BPP gives a very slight edge to Djokovic in this year's US Open final. As you can see in the chart below, the semifinal match gives a tiny edge to Nadal, but using both the quarterfinals and semifinals gives the overall edge to Djokovic. Djokovic has been playing the big points consistently well.

Big Point Performance - Men's Finalists

Djokovic = + 7% and +1 in his five-set match over Federer in the Semi-Finals
Djokovic = +24% and +5 in QF match

Nadal = +13% and +2 in his semi-final match over Youzhny
Nadal = -56% and -2 in QF match

Friday, September 3, 2010

Stock Indicators: Moderately Bearish (9/3/10; 12:30pm ET)

With the market rally, our indicators have changed to an overall slightly bearish position. Our long-term models have changed from a medium bearish signal to a moderately short position.

Our intermediate-term models have flipped from a moderate/medium long position to a moderately bearish signal.

Both signals are bearish -- but note that both are just "moderate." As a result, traders should look to the shorter-term trend for additional direction.

Investors should be cautious.

Friday, August 27, 2010

Stock indicators: Neutral Stance 8/27/10 (near the close)

At current stock market levels, our long-term indicators are slipping to a "medium level" bearish stance.

Our intermediate-term indicators still believe that the market is oversold, but with today's rally, they have slipped to a moderate to -medium level bullish level.

Thus, the indicators have a neutral stance. Long-term investors should be cautious, as our long-term indicators have not been this bearish in a while. Traders should keep an eye on short-term trends to dictate stock positions. I will update changes in intermediate and long-term indicators on this blog.

Thursday, August 12, 2010

Stock Market Oversold 8/12/10

At current levels, our intermediate-term overbought/oversold stock market indicators feel that some of the air has been let out of the market -- and are going long. We have a full long-signal based on these intermediate-term models.

Note that due to the sharp sell-off from recent peaks, our long-term model is just very slightly bullish, down from its medium long signal.

Net-net, we will have a bullish stock market stance, with the market's short-term trend helping us with our overall equity exposure.

8/12/10 3:25pm ET

Friday, August 6, 2010

Stock Market Indicators

As of our last stock market update on July 20, 2010, both our long-term and intermediate-term models were moderately bullish:

As the market rallied from around the 1080 level to recent highs at 1125 on the S&P 500, the models maintained this bullish stance. Now, however, the intermediate-term overbought indicators are turning moderately bearish. Interestingly, the long-term model remains just moderately bullish, even with the relatively strong rally.

A "look-ahead" at probable intermediate-term signals shows that (depending on market action), the intermediate overbought-oversold indicators will be bearish for about a week or so. Long-term stock investors may not want to take action on a short-term change in model indicators but shorter-term traders may want to take profits.

Please visit our blog for stock market model updates.

Tuesday, July 20, 2010

Risk Management, Kurtosis, Skewness & Extreme Value Theory

My article at was published as a full-fledged article - and I am now an official "Contributor" at their website. Someone asked a few good questions that I answered on the website. I also copied it below, since I thought it was good information.

More realistic estimate of probabilities: I like semi-deviation as an easy-to-explain measure (volatility and risk to the downside). Additional measures that help describe return distributions -- would involve calculating additional "moments" such as skewness and kurtosis (the fat-tailed distributions that many investment strategists strive for = minimize losses, fattening profits).

More on Semi-Correlation: Semi-correlation is somewhat similar to correlation, except it studies periods where certain assets decline. This can give a "true" measure of diversification during financial crises.

There is also a branch of statistics that studies the probability of big dislocations such as crashes in markets (Extreme Value Theory) - which is very interesting...

Stock Market Outlook

With the sharp decline, and bounce, our stock market models are turning bullish. The long-term model remains moderately bullish. The overbought/oversold indicators have turned from moderately short to moderately long.

In addition, barring wild market action, a look-ahead at the model's signals shows that they will turn from moderately bullish to a medium long signal. Perhaps the summer rally is getting set to start in earnest.

Monday, July 19, 2010

My Article at SeekingAlpha - Portfolio Optimization and Rising Correlations

Here's a link to my article at

In particular, it talks about "true" diversification amidst rising correlations and the evolving world -- and some implications for portfolio optimization. I show a tool I developed that I call semi-correlation. This statistic can show which asset classes offer more "true diversification" when many assets start moving together in a financial crisis.

Friday, July 16, 2010

Quick Twit: have you signed up for our Twitter?

16 July 345pm - With today's drop, our indicators remain neutral. The overbought / sold indicators will remain bearish for a few more days.

Our twitter is: z_trader (underscore).

If signals don't change, we may only do a Quick Twitter. If models flash a change in signals, we will normally make a blog post.

Have a good weekend.

Tuesday, July 13, 2010

Long-Term Systems Flip to Moderately Bullish

With today's rally, our long-term stock models are flipping to moderately bullish at the close today (from their moderately bearish stance). Our overbought (intermediate) stock market indicators remain moderately bearish.

The short-term trend upwards today kept us flat to slightly long overall. Remember to keep all three time-frames in mind if you are a trader.

Monday, July 12, 2010

Stock Systems Wary

Our long-term stock market indicators are moderately bearish. The market has bounced, but not very strongly. The indicator will hold on to it's bearish stance for a few more days, based on market action.

Interestingly, our intermediate indicators are also moderately bearish right now. The intermediate and long-term indicators have been countering each other a bit recently, but both are now moderately bearish due to the market bounce. They are calling it a dead-cat bounce -- at least for a few more days.

We'll keep you posted with any changed in the stock market indicators.

Wednesday, July 7, 2010

My Article at SeekingAlpha - Semi-Deviation & Semi-Correlation

The popular mean-variance approaches are well-documented methods of improving a portfolio’s risk-reward characteristics. The fact that Markowitz’s contributions to Modern Portfolio Theory have stood the test of time – more than fifty years later – shows the power of these methods. Over the years, additional models have been developed, that, for example, help investors establish reasonable assumptions and optimizer inputs such as expected returns, volatility (standard deviation), and correlations amongst asset classes.


It is important to study and measure true downside risk and the inter-relationships amongst various asset classes. More specifically, determine which particular asset classes may help when certain assets are declining in value. Semi-correlation as well as semi-deviation have proven to provide a more accurate picture – when applying portfolio diversification models.

In addition to improved risk measures and correlation studies, a variety of tools (such as Monte Carlo analysis) form a strong foundation for enhanced portfolio optimization and Post-MPT. On top of a “risk-management portfolio optimization engine,” robust alternative investment strategies add meaningful diversification and greatly improve expected risk/return characteristics to a portfolio.

Carlton Chin, CFA, is a specialist in strategic asset allocation, quantitative investment strategies, and alternative assets. Carlton has worked with institutional investors on asset allocation and is a fund manager. He holds both undergraduate and graduate degrees from MIT.

Wednesday, June 30, 2010

Mixed Signals (Stock Market)

Interestingly, we have mixed signals from our intermediate-term and long-term stock market indicators. Our long-term model moved to flat from a long position for the first time since last July, based in today's decline. Upcoming market action will determine if the model goes short on the stock market.

Our intermediate overbought / oversold models feel the market is well oversold and moved from a flat position to a fully long position. In total, this leaves us still slightly bullish, but we will be watching the long-term model closely, as a 'look-ahead" indicates that unless we see some strength within a week or so, the long-term model will go short.

Enjoy the July 4th weekend.

Thursday, June 17, 2010

Intermediate Indicators go flat; LT bullish

Our intermediate oversold/overbought indicators are now flat to slightly bearish. However, our long-term systems remain bullish. The LT systems, in particular, "liked" the bounce off of recent support / market lows to current readings of 1110 on the S&P.

Perhaps we'll now continue to climb the "wall of worry" -- but be wary, because we are currently overbought a bit.

Tuesday, June 8, 2010

Stock System Update - Intermediate and Long-Term

Our intermediate signals remain moderately long. This set of signals has suffered through the volatility of the stock market -- but believe the market is oversold.

Our long-term systems remain fully long. Note, however, that if the market doesn't show some life, these systems will downgrade to a moderately long signal. Our long-term model has been fully engaged in the market for about nine months (since last summer!). Stay tuned...

Thursday, May 27, 2010

Nice write-up by 3rd party on RMBS

One of the "flyers" we have mentioned has been in the news recently. Here is a good write-up from a 3rd party:

Legal Delays Hit Rambus

Shares of memory chip maker Rambus (Nasdaq: RMBS) are off -8% today on word that the International Trade Commission (ITC) will delay a decision on whether Nvidia (Nasdaq: NVDA) and others violated Rambus’ patents. Rambus, along with Qualcomm (Nasdaq: QCOM), has made its name as a collector of royalties for the massive base of intellectual property it has developed. Before the delay, shares of Rambus had been near a multi-year high on expectations of an imminent positive resolution to the matter. Yet this is more of a delay then a real setback, as the ITC simply wants all parties to weigh in on how a royalty deal between Samsung and Rambus will affect the rest of the industry.

Rambus has always been a difficult stock to value. Much of its profits come from royalties, and the timing of agreements creates very lumpy revenue and profit results. The company was especially active in securing new agreements in the middle of the last decade, which pushed shares above $40 in 2006. Royalty revenue slumped in more recent years, and shares now trade closer to $25.

Action to Take --> Over the near-term, shares should rebound and push past the $30 mark, perhaps closer to $35. That’s because the company is expected to imminently win a patent case over memory makers Hynix and Micron Semiconductor (NYSE: MU), which could net the company close to $500 million in an upfront license, and then more revenue from ongoing royalties. After that, perhaps by the end of July, the company is still expected to prevail in the case that was just delayed by the ITC. That could net the company a similar windfall.

Wednesday, May 26, 2010

Stock System Update

During the recent stock market volatility, our long-term stock systems have remained long. Our intermediate overbought/oversold have been slightly "long" through the turbulence -- and they are now moving to a medium to strong long position.

Volatility and scary drops have returned for now -- but the computer systems are giving a green light. We moved back down to the area of the "Flash Crash" and there looks like there is solid support in the 1050-1060 area on the S&P.

Stocks in the Long Run

Franklin Templeton and Stocks in the Long Run -- this is a nice look at long-term stock performance including poor ten-year periods like we have seen recently.

Monday, May 17, 2010

Comparing Greece to US: OK, but need to tighten belts

" different, really, is the United States?

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.

We, the people, are..."


Check out this article for more info.


Monday, May 10, 2010

Using Z-Trader Blog: Difference between Traders & Investors

Several readers and friends have asked about our trading systems and how to best read our Blog -- and use the trading signals. Last week's crazy free-fall was a prime example.

There is a difference between traders and investors. Investors typically look for positive results over a longer-term time horizon. Traders, on the other hand, attempt to add excess returns by trading in and out of positions over the short to intermediate-term.

During last week's sharp declines, traders had to reduce positions and manage risk. On the other hand, long-term investors were looking to add to positions. I act as both an investor and a trader for various portions of my portfolio.

Note that we always blog or Twitter whenever we have a change in our long-term or intermediate-term (overbought/oversold) stock indicators. We also periodically discuss the futures markets.

Wednesday, May 5, 2010

Intermediate Indicators Go Long (Fear)

We just Twitted about our intermediate-term/oversold signals going long this morning. There is a lot of fear in the market right now. Stocks may be volatile, but at least historically, this kind of fear creates short-term and intermediate-term opportunity.

We are stepping back into the market (and increasing our stock allocation) cautiously.

Thursday, April 29, 2010

Flyer RMBS ready to Fly??

One of the stocks we mention as a "flyer" (high potential return, high risk) has been making thenews. Here is a recent mention in "Smart Money" / "Barrons."

If the court finds in its favor, the damages would be tripled to roughly $13 billion. Bulls deduct taxes from that result, divide it by Rambus' 117.5 million shares outstanding to determine that the company will enjoy a $66-per-share windfall.

Wednesday, April 28, 2010

Hope our Tweet helped investors avoid Tuesday's drop

On Monday, near the close, we tweeted about our Intermediate-term models turning neutral to slightly bearish. We are still long, but "took our foot off of the gas." Note that our intermediate models look like they may turn bullish again in a few days (depending on market action, of course).

If you want to follow our Twitter, note that we are "z_trader"

26Apr 340pm: Intermed-term stock signals turn neutral to slightly bearish; overall stock position is moderately bullish due to LT signal.

Saturday, April 24, 2010

Snippets from Barrons article on RMBS

Thanks to InvestorVillage posters, here are some snippets from today's article in Barrons on RMBS:

"So far, results have been mixed, even when Rambus (ticker: RMBS) ostensibly wins. A major settlement with Samsung Electronics (SSNGY) came in far below expectations. Yet Rambus boasts a $2.9 billion stock-market value, based largely on bulls' bet that its $12 billion lawsuit against Micron Technology (MU) and Hynix Semiconductor will succeed, producing a rich reward." (snip)
"Optimistic analysts say a victory could help propel the stock, recently around 25, up to 50." (snip)
(Reflecting the Micron/Hynix case) "If the court finds in its favor, the damages would be tripled to roughly $13 billion. Bulls deduct taxes from that result, divide it by Rambus' 117.5 million shares outstanding to determine that the company will enjoy a $66-per-share windfall." (snip)
(Reflecting on Samsung's settlement for $900 million), "If Hynix, based in Korea, and Micron, based in Boise, Idaho, settle for $900 million each, that would lead to a total of $1.8 billion, which after taxes shrinks to $1.1 billion, or $9 a share."

Friday, April 23, 2010

Bring Your Child to Work Day

Thought I would mark this day because it was a fun and interesting trading day, combined with "Bring Your Child to Work Day." We talked to our child about: saving and earning interest -- and then bonds, stocks (pieces of a company), and then trading (gold, oil, commodities).

I use computerized trading systems, with the main drivers being long-term indicators and intermediate "overbought-oversold" systems. We also have short-term systems for the S&P 500 futures -- which help to manage risk during the day.

The stock market opened scarily lower yesterday (Thursday) -- but the indicators remained strongly long, so we took an additional long position at 9:48 AM eastern time, with the S&P around 1192. This market continues to defy the odds -- and seems to continually climb. As we have blogged before, there are a lot of naysayers -- which may allow us to continue to climb the contrarian "wall of worry."

Chart forS&P 500 INDEX,RTH (^GSPC)

This "Bring Your Child to Work Day" trade did well, with the market closing at around 1208 (so bought at 1192, sold at 1208). We were saying that it's not always "this easy..." But at least it covers allowance for the foreseeable future...

Tuesday, April 20, 2010

Stepping on the Gas...

At current market prices, our intermediate-term stock systems are going long at the close today. These intermediate-term indicators have flip-flopped around a neutral position -- keeping us in a somewhat cautious stance the past few months. Note that based on a look-ahead -- and depending on market action -- this system's signal may be relatively short-term.

Our long-term indicators have been long for a while, so net-net -- we will go from a medium-sized long position to a full-sized long position.

Friday, April 16, 2010

Intermediate Stock Signals Remain Neutral but...

look like they will turn positive in a few days depending on market action. This information includes today's (Friday's) move lower as of 3:25 pm on April 16th. Note that we always update our blog with new stock signals.

Long-term indicators remain bullish.

Monday, April 12, 2010

Sports Investing Book # 1

I was asked to help edit a book on "Sports Investing" -- which applies concepts of contrarian investing to the sports marketplace. The book has been holding the # 1 spot in Amazon's "Sports>Gambling" category.

The academic viewpoint will interest everyone from the casual sports bettor trying to improve results - to the professional sports gambler looking for additional angles - to the Wall Street trader researching additional markets to trade.

Public sentiment and betting activity cause the sports marketplace to act irrationally, in a way which can be measured and exploited. The massive flow of public wagers force betting lines to fluctuate like an inefficient market. Point spreads, betting line movement, public betting percentages, money management, statistical analysis, and other important topics are studied. The implementation of contrarian investing – and theories such as "Betting against the Public" and "Smart Money" are developed.

Thursday, April 8, 2010

Market's Continued Strength & Reason for Systems

The stock market has continued to march higher, with many analysts becoming increasingly worried. I have also worried a bit, as the market has moved relentlessly higher. On one hand, I chalked up the rally to the "wall of worry" that we sometimes discuss -- as a contrarian indicator. On the other hand, friends and associates have pointed out how the market rallied for X days in a row; or something like 95% of the last Y days.

This is one of the main reasons why traders like to use trading systems: discipline.

Our long-term indicators remain strongly bullish. Our overbought/oversold indicators have flipped between slightly bearish to slightly bullish and are currently neutral. As a result we have been Long -- and remain Long -- in this market.

Friday, March 19, 2010

New Stock Signal; Recap of Markets

As mentioned in our Twitter earlier today at 3:30 pm, our intermediate stock signal is turning mildly bullish from a mildly bearish stance. Our overall long-term (LT) signal remains bullish, so that we have been net long during this rally.

It's been a few weeks since our last blog post because our stock signals have remained the same since that time. We'll see how the stock market reacts now that it's reached recent highs...

In other markets, the futures markets have been fairly choppy. The currencies, US dollar, and precious metals can't seem to make up their mind if the dollar will weaken further. Some futures positions:
  • Long Gold
  • Long Energy
  • Long Aussie / Canadian $

Wednesday, February 17, 2010

Cost of Olympic Gold Medal

Fun article on the actual Olympic Gold Medal.

Gold Medal Trivia Question: Which of the following is/are made out of solid gold?

a) Olympic Gold Medal

b) Nobel Prize Gold Medal

c) Congressional Gold Medal

(The answer is at the end of this post.)

What is the value of Olympic gold?

(Click on the link)

Tuesday, February 16, 2010

Intermediate Stock Signals Turning

Our intermediate stock signals are turning neutral and will be slightly bearish by tomorrow. The long-term trend remains bullish.

Thus, long-term investors should remain bullish, but "traders" may want to take some gains off of the table (net-net neutral positions for traders, perhaps following short-term trends).

Snow Days and Human Nature

My daughter was very sad today because she had to go to school -- even though it was supposed to be the fourth day of a four-day weekend. We couldn't cheer her up even though she had two snow days OFF FROM school last week.

Last week, when we were getting pummeled by almost four feet of snow within four days (!!), we enjoyed some fun and happy family time on those extra two days off from school. BUT -- if you could measure the fun, it would go something like a "normal happiness level of a 7" up to, say, a "9." (So a decent jump in happiness; we all remember snow days, right?).

However, if we consider that today was supposed to be a day OFF from school, we can see why kids will be sort of bummed. Our daughter's happiness went from the "normal 7" all the way down to about a 2. A BIG disappointment. So -- even with two snow days last week, and today's make-up day, the net is a slight disappointment. People HATE losing something they thought they had!

There is a whole field of behavioral finance, but this morning's "off-to-school routine" made me think of some of the factors that help drive markets. In particular, we can try to use patterns of human nature to obtain an edge:
  • Most people are risk-averse
  • People often "compartmentalize" gains and losses
  • Contrarian methods
  • Fear versus greed
  • Climb wall of fear
We use systematic methods to invest and trade the markets to keep us disciplined -- the human element. We perform tons of research, but then use computerized and automated trading approaches.

Saturday, February 6, 2010

Stock Market Update

Earlier in the week, we thought that our intermediate term indicators might go neutral on the stock market by the end of the week. Because of the decline at the end of the week, more "air was let out of the balloon" -- so our indicators are staying long.

Recent market action has been scary, but that gives more fuel for the argument that we can continue to "climb the wall of worry."

Tuesday, February 2, 2010

Trading Signals and Current Outlook

Our stock market models remain long right now. Depending on market action, our intermediate models may go neutral at the end of the week. The long-term models will remain bullish so that the net position will remain at least slightly bullish. In addition, there still appears to be enough bearishness out there so that contrarian investors can see a continued rise in the equities.

Futures Markets

Many of the futures sectors saw a vicious reversal from the middle of January until the end of the month. This caused losses for trend-followers. Our models had to manage risk and reduce positions a bit, but we generally remained long commodities and rode the recovery over the past two days. The long-term trends have not broken down, so our technical models look for some sustained moves. A look at some markets:
  • Metals (precious metals and copper) - long
  • Energy - long
  • Grains - long
  • Meats - short
  • Softs - generally long (especially sugar, coffee, cotton)
  • Currencies - transitional, so generally flat