Battle of the Stock Market Indicators 11/23/11

We haven't posted about our stock market indicators since October 13, 2011, because our indicators have stayed relatively constant.  On October 13th, the S&P stood at 1195 (when both our long-term and intermediate-term models were slightly bearish).  Currently, the S&P stands at 1167.  Here is an update on our stock market indicators:

• Our long-term model is currently bearish (more bearish than the slightly bearish stance on 10/13).  
• Our intermediate-term indicators are moderately bullish (from the slightly bearish stance on 10/13).  

Our key models have offsetting signals, so that stock positions will be dictated by the short-term movements in the stock market.  Long-term investors should be watching key levels of stock market technical support -- and/or adding to positions on market weakness.  Traders should be wary of the short-term trends in the markets.  

Happy Thanksgiving!

Market Update; Trader Thoughts (9/23 - 7am)

The stock market has dropped swiftly and viciously the past few days.  This has impacted most other markets -- including crude oil, precious metals, commodities, currencies and fixed income.  A few quick thoughts from the blog's contributors who are traders and investors:

• Don't try and catch a falling knife.  We had a blog post recently about this...
• Trade down to the level that lets you "sleep at night."
• Stick to your trading plan and/or system.  Systematic approaches maintain discipline and reduce the impact of emotion and psychology.

We are writing an article for Seeking Alpha on some of these topics.  And in case you were wondering:

• Our stock market indicators are currently "overall" bearish.
• Our short-term indicators have dictated our stock market positions because the other indicators (long-term and intermediate-term) were neutral.  
• As our readers know, our intermediate-term and long-term indicators went to neutral on our last post on stock market indicators -- when the S&P was at 1216.  
• Currently, however, our long-term model flipped to bearish (depending on market action, this may change; we will keep you posted).  In addition the intermediate-term indicators are moderately bearish (but a look-ahead shows that the oversold indicator may flip to bullish in the near-term). 
• The S&P closed Thursday at 1130. 

Stock System Model update (8/23 after the close)

At current levels, our stock model indicators are as shown below.  Note that at our last stock model update, the S&P was at 1296.  The S&P closed today at 1162.  Not to state the obvious, but the market has been extremely volatile and has been difficult to trade with relatively large whipsaws.

• Our positions have been dominated by the short-term movement of the markets.  Over the long haul, the combination of time-frames is typically helpful, but this market environment was extremely difficult -- creating whipsaw reversals.  
• At current levels, our long-term model is very slightly bearish.  This is the first time the model has dipped to the bearish side in quite some time.  
• Our intermediate-term oversold/overbought models are moderately bullish.  

Thus, we have a mixed bag of indicators -- where positions will remain driven by the short-term systems we employ.  Traders should be cautious -- but look for tradable moves.  Long-term investors should be cautious but may think about adding to positions on dips.  

   

Quick reminder: "falling knife"

Just a quick blog post about the old saying, "Don't try to catch a falling knife."  Most good trading systems will use this kind of approach -- because you can never tell how far emotions will carry a big market move.

Although our intermediate and long-term stock market indicators are long, our short-term model has us on the sideline (although not before taking some losses -- less than the general market's decline.).

We will continue to follow our trading models -- and depending on how the signals are -- will trade accordingly. Long-term investors may look to add to their positions at some point -- and traders should be cautious due to the high volatility.

Stock Indicators Update 2/14/11

Our stock market indicators remain the same as our last blog post.  Our long-term model remains strongly bullish (as it has been for a while).

With the stock market's continued rise, our intermediate models have remained mostly neutral.  They have had slight shifts from slightly bearish to neutral -- but with no notable or material change.  A few weeks ago, we said that our intermediate models looked like they would turn bullish -- but the market's slow rise has kept that in check.  We'll keep our readers posted on material changes to our long-term or intermediate-term indicators.

Our short-term models, along with the long-term models, have kept us on the right side of the stock market's rise, so that our Short-Term System has had a good run in February.   

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.

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.

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

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."

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...

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).

Current Stock Market Indicators (Bullish)

Currently:

• Longer-term models -- moderately bullish
• Short-term models -- currently bullish, especially with market calling higher
• Overbought/Oversold indicators -- bullish; these models don't currently "believe" in the "bearish themes" out in the marketplace.

As always, let the market action and "tape" dictate your investing and trading positions.

Preview of Friday's Mkt Action & How We Trade Mkts

In AH (after-hours) on Thursday evening, MSFT missed their quarterly earnings and revenue estimates. The market is currently calling down a little more than -1%. What does that mean for our trading in Asia overnight -- and as we enter Friday? As computerized and systematic traders, we'll follow our systems -- which are currently positioned fairly neutral in the equities -- and are poised to take their cue from overnight and early market action on Friday.

Recently, the "futures" portion (namely, currencies and commodities) of our portfolio has been the leader, helping our diversified portfolio to near recent highs. We'll talk more about the futures sectors in another blog post.

Trading Approaches

In our posts and Twitter, we talk about various time-frames -- such as Long-term (LT), Intermediate-term (IT), and Short-Term (ST). We trade many liquid markets around the globe using multiple time-frames and various approaches. These systems are all profitable and robust as stand-alone systems -- and are meshed together to produce excess returns with an eye on risk and robustness. We will often refer to our models' views across various time frames. Our Members have access to our positions -- as well as database (if they want to research their own trading systems).

Markets

We trade everything from equities, futures, options, fixed income, currencies, and commodities. Our focus is on the futures markets where we trade all major sectors including global stock index futures, interest rates, currencies, and commodities (metals, energy, agriculture, meat, softs).

Other Diversifying Methods

In addition to this core of trading systems across diversified markets, we are able to capture positive returns that are great diversifiers for the rest of our portfolio -- and are particularly useful for more traditional stock (and bond) portfolios. We'll discuss this investment approach in a different post when we get a chance to publish some actual performance that we -- and our Members have earned.

Stocks Open Down; Look to go Short after Gap Fade

After the stock market's recent run-up, the market opened lower today by about -0.7%. Our Long-Term and Intermediate-Term equity models are both neutral to short.

We'll use the typical "gap fade" (market often moves to close an opening gap) to PROBABLY enter short positions. That is, unless the "gap fade" is so strong that the market is looking stronger. With the longer-term models neutral to slightly biased to the short side, the Shorter-Term indicators will dicate our stock "trading" position.