The purpose of this site is to share results of a trading system that I use for identifying both long-term and short-term trading opportunities. I take the time to do this because of my passion for investing and helping others succeed. The system helped me avoid the "Crash of 2007/2008" and every major correction since then. The cornerstone of my trading system are analyses of market liquidity to gauge longer-term market sentiment and equity and index options (put/call ratios) to identify short-term entry and exits.

This site is for information purposes only. Past performance of the trading system is not a guarantee of its future success. Please consider consulting a qualified investment adviser before making investment decisions.



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Friday, December 19, 2014

No trades on Friday

The money flow indicators came close to penetrating the downward sloping trendline but failed. Even if they had broken to the upside, the market is again near resistance and the weekly RSI is tracing a divergence. Both these conditions are in my opinion, poor setups for a long trade. As an update to a prior post, my macro indicator resumed its downtrend after meandering for a few weeks. Technically, it's still not at a low enough level for me to call an August 2015 top. Therefore, well just have to continue watching it's progress week by week.

Thursday, December 18, 2014

Game plan for Friday 12/19

In reviewing money flow indicators this evening, I confirmed that inflows were not enough to take out the downward-pointing trendline since mid-November. However, it's possible that this could occur tomorrow. Specifically, I'll be looking for the Chaikin money flow indicator to continue it's advance as confirmation. Assuming that this occurs while the S&P is above 2044, I'll be deploying 100% of idle cash.

Patience

So the market rebound is obviously impressive and key levels are being penetrated that would normally cause me to jump back in. Most notably, the trailing ATR3 stop at 2044 broke today on an intra-day basis. I'll assess the technicals and ensure that money flow indicators confirm the health of the upward move before jumping back in.

Friday, December 12, 2014

Weekly recap

I executed two major trades by selling a total of 75% of core positions at two key levels 2040 and 2027. As usual, I could have done even better if I had sold earlier (i.e., not waiting until both of my longer-term indicators were showing negative divergences). Even if this correction is short-lived, it feels good to have taken some profits off the table. It's not clear what the re-entry point will be. There is some support in the 2000 region, but if the market doesn't hold here, I would be looking for support in two areas -- either 1945 or 1905-1920. The macro indicators are still pointing to a positive 2015 until at least August.

Tuesday, December 9, 2014

Took some profits

My short-term indicator flashed a sell signal last Friday but even though other short-term indicators I track (e.g., money flow) were confirming that a correction was possible, I didn't take any action. I didn't because, the longer-term (weekly) indicators such as RSI were not yet tracing any divergences. My objective for this week was to watch out for any divergences (i.e., a close below 2072) and to possibly take profits on 50% of core positions. Given the nature of weekly indicators, I would normally wait until Friday to draw any conclusions. However, given the apparent shift in momentum, I took sold 50% of my core positions this morning at S&P 2040. The next key level is 2027 which represents the ATR4 trailing stop. A break of this level will lead me to sell 75% of remaining open core positions.

Tuesday, October 21, 2014

All in !!

As planned, I bought the market (with 100% of idle cash) when it broke above the trailing ATR3 stop at 1910. Unfortunately, the market gapped up so the best I could do was to enter the market at 1920.

Friday, October 17, 2014

Update on my macro indicator and a possible market top near August of 2015

Just a quick note: My macro indicator has declined for a second consecutive week. The indicator value at it's peak was 171 and it now stands at 104. It would need to fall below a certain negative level before I can make the call of a possible market peak sometime near August of 2015.

The virtues of discipline

Well I'm back from a backpacking trip and I learned the hard way about the value of discipline and the pain of not following my trading rules. As I indicated in a prior post, I used some of my idle cash to buy into the market on pullbacks because I wasn't going to have access to a computer and there was a chance that my short-term indicator would generate a buy signal. Unfortunately, it didn't happen and I was left with a greater than ideal exposure to the market. I took the opportunity today to sell (for a small loss), the trades I had made before my backpacking trip. So as it stands now, my equity exposure is 25% of what it would be normally if I were fully invested. For the IRA however, this equates to a 49% equity position comprised of 9% core, 2.5% alpha, 7.3% sector, and 30% dividend/low volatility stocks -- My asset allocation for the IRA emphasizes dividend and low volatility stocks during times of "reduced" equity exposure and de-emphasizes "core" and "alpha". Now, I don't foresee a short-term signal until sometime between October 24 and October 31. According to my rules, the only other events that would trigger buying are (1) a positive weekly RSI divergence, or (2) a penetration of a trailing ATR3 stop. In regard to no. 1, a divergence can be formed next week if the market trades near this week's low of 1820 or lower and closes above 1886.76. With no. 2, the stop now stands at 1910.37. With all three scenarios, I would also like to see a break of the downward trending money flow indicators. That's all for now.

Friday, October 10, 2014

2015 Top??

As I've been saying for quite some time, I see a generally positive bias for the market well into 2015. Sure, we may be experiencing a correction now, but my macro indicator is still bullish. The question, however, is how long this positive bias will last. Well, I may have an answer. My macro indicator has finally shown some signs that we may see a market top near August of 2015. The indicator will have to continue to weaken for me to make a more definitive call. It may take a few more weeks or months for me to make that call, however. If in fact I make this call, the next question will be whether the top will be a start of a prolonged bear market. The way I will gauge this is as follows: As August 2015 approaches, my macro indicator will provide a 12 month look-ahead into market liquidity. If the indicator points to a weak period lasting more that about 6-9 months (beyond August 2015), I will be recommending whether to reduce equity exposure significantly, including shorting the market for hedging or profit-making opportunities. Data for my macro indicator is based on weekly figures so I will be publishing updates accordingly.

Thursday, October 9, 2014

Time to get my feet wet

My short-term indicator is still pointing to the possibility of a buy signal next week. Since I won't be in front of a computer next week, I made some early moves by taking 50% of my sidelined cash and buying at the close @ S&P 1929. Unless I see a significant move down (or up) tomorrow, I doubt that I will be deploying any more cash. The only case for buying on the up draft would be if the S&P closed above either 1967 (to create a weekly positive RSI divergence) or if it broke the downward trailing ATR3 stop at 1983. If the market makes a significant move downward to 1900, I might be tempted to buy in with another 25% of my cash...we'll see. With the 200 day moving average at 1904 and with my macro indicators still positive for the next 12 months, it might be a good long-term play.

Thursday, October 2, 2014

Coulda, Shoulda, Woulda -- What's Next

So the reduction in my equity position two days ago was based the breaking of the ATR4 level at S&P 1963 along with weekly RSI divergences. In retrospect, my short-term indicator which flashed a sell signal on September 4 (@ S&P 2000) was right on. However, I refrained from taking this "short-term" trade since, in my opinion, we are in a good macro environment. With that said....Although I'm happy to have pulled the trigger at 1963, it would have been nice to take profits earlier. Going forward, I will be highlighting and taking action on short-term signals if the "stars align." As far as next steps, I'm watching my short-term indicator for entry points and the trailing ATR3 stop which will serve as a fallback to trigger a re-entry into the market. Even though it's too early to gauge when my short-term indicator will fire, the sweet spots appear to be 10/10, 10/14, or 10/28. The current trailing stop is 1983. More later as warranted.

Wednesday, October 1, 2014

Had to Trim Equity Holdings

With a intra-day break of the ATR4 stop I sold 75% of core positions at S&P 1963. For the IRA (non-cash) account, I remain 50% invested in equities. More later on this development.

Thursday, August 14, 2014

Deployed Cash Today

With improved money flow as measured by Chaikin and the formation of a positive RSI divergence at last Friday's close, I deployed all sidelined cash into the market earlier today.

Monday, August 11, 2014

Positive Divergence Formed, BUT NOT SO FAST!

The rally on Friday was enough to create a weekly positive RSI divergence. However, in looking at money flow (as measured by the Chaikin Oscillator), it didn't offer any confirmation to support a fully bullish stance at this point. My short-term options-based indicator is still projecting a buy signal on the 18th or 19th. Based on the parameters discussed, I will likely invest 50% of sidelined cash on the 18th or 19th; however, if or when the Chaikin Oscillator breaks the downward trendline as depicted in the chart below, I will invest 100% (given that a positive divergence has already been formed). Any breakdown below the prior week's low will change the aforementioned "entry" plan.

Thursday, August 7, 2014

Re-entry Strategy

I just wanted to share my approach for investing the cash that was recently sidelined. My plan is to deploy 50% of sidelined cash into the market when I get a signal from my short-term indicator. Based on projections from my model today, it appears that a bottom might occur on our about August 19 -- when this date becomes firm, I will post another update. If on the other hand, a positive (weekly) RSI divergence is formed OR the S&P breaks its trailing ATR3 stop which now sits at 1963, I will buy 100% of sidelined cash. I expect that this trailing stop will continue lower over the next 1-2 weeks. It's conceivable that the short-term indicator might "fire" first, so I might be re-entering the market in two stages. Although I'm not targeting any specific level, my Fibonacci analysis indicates strong support at 1860 and 1820.

Thursday, July 31, 2014

Took some profits today

Despite the positive long-term view, the market broke its ATR3 trailing stop today. Thus, my trading rules lead me to reduce my equity position on my cash account to 50%. For the IRA, I trimmed my equity position from 73% to 55%. More later on the re-entry strategy.

Monday, May 5, 2014

Holding Steady

With the negative open today, I refrained from opening any new trades today. My short-term model is pointing to potentially better entry points around the third week in May. So rather than going in all at once, I'm looking for opportunities to scale in with the objective of being fully invested in a few weeks.

Sunday, May 4, 2014

The Elusive Correction -- Time to Buy!!

What a disappointment -- the much desired correction didn't come. That's what I get for wanting something so badly. So what to do now? As I mentioned in earlier posts, my macro indicator is very positive from 5/14 onwards. Within the last couple of weeks, my short-term indicator flashed a buy (4/21) and the S&P a day later on the 22nd, broke a trailing ATR3 stop to the upside @ S&P 1878, thus signaling a positive trend. I didn't act on these two signals because we were still in the "Red" phase according to my macro indicator. However, given the impending macro "Green" phase (on 5/14), I've had to give those two signals more credence. As a result, I've decided to go all in and restore my equity positions to their fully invested level. For those of you trying to understand my approach, I score and weigh my signals and when the score hits certain levels, I act. The scoring components are: (1) a phase change in the macro indicator [1 point], (2) a weekly positive RSI divergence [1 point], (3) a break of a ATR3 trailing stop [1 point], and (4) a signal from my short-term indicator [0.5 point]. During a "Green" macro phase, I buy on 2 points. During a "Red" macro phase, I buy on 2.5 points. Right now, given that 5/14 is just around the corner, I consider that we're in the green -- the indicator is termed "macro" for a reason. Thus, the "2 point" rule has been satisfied. I don't see any significant risks for the next 12 months, so let's cross our fingers. Although, I reduced my equity position and sacrificed some gains in the last 3 months, this has been a lesson in risk management. After all, it's the gains you realize (keep) that count. Happy Investing!!

Thursday, March 6, 2014

March 13 Top?

I'm more confident now that a reversal will begin around March 13 -- suggesting a top at that time.  It's fair to say that I'm wishing for this to happen since the run up to the 1880 region has been somewhat of a surprise. I would then be looking for an entry point no later than May 1.  The exact entry point will likely be based on my Fibonacci analysis which now points to support levels at 1800, 1770, and 1730 -- these levels are based on a possible high at 1900.  The appropriate buy point will be based on the market's "behavior" if the correction does happen.

Sunday, March 2, 2014

Buy on the dip soon

The run up from the 1740 level has been strong, but I anticipate one last pullback before seeing a rally that will take us to new highs.  The market has been "acting" ahead of my long-term macro indicator and it, combined with my short-term options model, is signaling a corrective top sometime between March 6 and March 13.  I'll be highlighting some potential entry points in upcoming posts.

Friday, January 24, 2014

Done deal....See you in about 3 months

With the options market showing signs of fear (as is the VIX) and the low likelihood of a recovery today above 1814.75, I pulled the trigger at 1803 to reduce my equity position to 30% (actually 26.9 by the time I finished executing all my trades) with a 1:4 ratio of alpha to low vol/dividend stocks.

I was really hoping to catch a higher peak for this "final" selling but oh well.  I would rate my trading "performance" a B+ -- sold 50% at 1825 and then another 20% or so at 1803.  If the market tanks, then I'll give myself a higher grade :)

As I mentioned in my posts over the last few months, this weakness should persist for the next three months or so.  Therefore, I'm going to sit back and wait for a buying opportunity.


Secondary fallback

I wanted to alert my readers that if the S&P appears like it won't close above 1814.74 today, I will be executing my plan to sell my equity position down to the 30% level.  This 1814.74 level represents a ATR3 trailing stop reversal and is my fallback if all else fails to trigger a signal.

Thursday, January 23, 2014

Not quite yet

Despite the pullback today, with a half hour left in the trading day, options activity doesn't support a sell signal today.  More later.

Wednesday, January 22, 2014

Signal Tomorrow?

My options model could generate the signal that I'm expecting tomorrow.  For those of you that monitor the total equity put/call ratio, I'll be looking a value of 0.82 or anything above .90.  As I indicated in my prior post, I will be reducing my equity position to 30% (I may have said 33% earlier) if a signal is generated.  I'll post an update tomorrow.

Monday, January 13, 2014

Preparing for more downside

Since going to a 50% equity position on January 6, I continue to see weakness that corresponds with the macro indicators I follow (e.g., commitment of traders, weekly RSI).  I wouldn't be surprised, however, to see a rally to what I believe will be a intermediate peak sometime between January 16 and 28.  I will be using my options model to assess when I pull the next trigger which will be a reduction of my equity position to 33% that's comprised of a mix of 11% alpha/core and 22% dividend paying/low volatility ETFs -- a "defensive" 33% mix.  Please note that this 33% equity position is the lowest level that I plan to go to for my long-term portfolio during the anticipated weak period from February to May.  I've already taken profits on my cash (trading) account.

More later on the timing of the next move.

Monday, January 6, 2014

Time for some action

As I indicated last year, the market will likely show signs of weakness during the February to May time-frame.  With this in mind, I began looking for a weekly RSI divergence on the S&P.  Well last week, this negative divergence "carved" itself onto the charts.  If it were closer to February, my inclination would be to sell 100% of my core equity position as my strategy would dictate.  However, I couldn't totally ignore the fact that February is just around the corner and a negative divergence is in place.  Thus, I assessed my short-term options model and learned that a sell signal would likely "fire" today.  With these factors in mind, I decided to sell 50% of my equity holdings and take a nice profit from last year's run up.

As we get closer to February, I'll be looking for confirmation of a top and if necessary, identify other selling opportunities.  Please note that because I do not foresee a protracted decline, I will not be going short anytime soon.  I'll be updating the sidebar for the blog to reflect my 2014 predictions.