TOW – Monday 25th February 2012

New Trade of the Week upload:  https://thehovistrader.wordpress.com/trade-of-the-week/

also you might be interested to know that the EURUSD daily is setting up to the long-side, but needs a Bullish DTosc reversal to trigger the trade

THT

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All that “Glitters”

Bit of an educational piece for you this week, all detail is on the chart:

gold

 

Obviously someone does not take the QE will save the world at face value!

How much lower can it go?  It could go all the way down to $0.01 if it forced to, but I suspect that we’ll find that out in the years to follow, one things for sure QE ain’t worked so the argument for QE funding Gold is out of the window – as usual we’ll no doubt see the “Gold is fund stocks” statements out now as the markets go higher.

The facts are unless there is some way of monitoring every buyer and seller and ask them for the reason of the buy/sell we will never ever know.

The overall Trend is a rather large trading range (until proved wrong) and the short-term trend is down – now watch as price explodes to the upside!!!

I’m happy to sit and watch this one for the time being until it calms down a little and becomes tradeable for me – it still owes me a few pounds that I want back!

 

Trade Card

Every time I enter a trade/position on any of my trading/Investing accounts I complete a Trade Card.

This Trade Card stays in my diary until the position is closed in full, so at any time I can review the trade card to see what stage a trade is in according to my rules – sometimes I have 10-20 positions on at the same time and it’s the only way I can be 100% sure of the exact status of the position/trade.

As soon as I enter a trade/position 90% of the trade card get’s completed, the remaining 10% gets filled in upon the trade/position closing out.

I prefer to have a paper print out so that I can log and monitor by hand, once the trade is closed then I file away.

The important aspects of the trade card are also typed direct onto the chart in my charting software to for reference – such as:  Enter trade @ 1999, £13 pt, Stop @ 1900 = £1287 risk.  Target 1 = 2098 (sell 50%, trail remaining @ 21 EMA)

Once a trade/position has been sold in full, I then update my trading spreadsheet once per week with all completed trades for my records, from all the completed Trade Cards

This Trade Card suits me, it’s probably not perfect but it works, here it is:

TRADE CARD

If the link above fails for some reason and you want a copy in Word format email me: thehovistrader at gmail.com and I’ll email you a copy for free – please feel free to copy for your own personal use only.

Hope it helps

THT

Trade of the Week – W/C Monday 18th Feb 2013

I’m taking the week off, so there’ll not be a TOW this week or much work done on the blog

Happy trading

Trade of the Week (11th Feb 2013) UPDATE

Hi All,

If you’ve been watching the Trade of the Week page you’ll notice that this week I went long the EURUSD – that resulted in the trade being stopped out for a loss.

I thought that, that would be a good trade to review for you to see what happened and why it failed and how I look at the process:

Here’s the chart up to date as of end of business Thursday 14th February 2013:

EURUSD

OK first things first this trade lost me 106 pips.  Refer to the TOW entry for full Entry/Exit details.

Why did I take the trade? – Because it was a classic DTosc reversal (bullish) at key Gann support levels

Mistakes made?  = None, the trade set-up was there, it just did not work.  The Entry and Exit were perfectly executed too.

As you can see at close of business yesterday (Midnight UK time), the DTosc was still BULLISH, this is the risk of using an indicator, but I accept it’s downfalls and factor that into my trade plan.

End result was a losing trade/position, will I take the next trade that looks identical to this one?  You bet I will.

The key message here is that even the best looking trades for a quick profit can fail, this is the nature of this business – I base my DTosc Reversals on a 65% success rate, this was obviously one of the 35% that fail.

I’m now looking for the next set-up on the EURUSD, it’s going to be interesting watching price action following the DTosc Bearish reversal that should happen, the next Bullish reversal might be very interesting!

Hope it helps

Make yourself feel good – give something back

If you take a gander at my Trade of the Week page, I’ve detailed a trade that was very fast to complete (the USDCAD trade).  It resulted in a few hundred pounds of profit.  (TOW Monday 11th February 2013)

I’ve decided to donate that profit to WaterAid – watch the video & visit their site (http://www.wateraid.org/uk/)

If everyone who watches the video gave just £5, it would be a real benefit to the children of developing countries:

Making Predictions

We all know that making predictions about the market is a fools game and I’m a big fool!

I know and understand that the market can and does do just about anything it wants and we have no way of knowing for sure what it will do, however, that does not stop me from trying to predict both TIME & PRICE levels for the market to hit/meet.

Hell man, I’ve even put my cards on the table and started to publish Time Cycles on my “W.D. Gann – Medium Term Market Predictions” page – this is for MAJOR turning points in the market and I’ve more to add to that page too in time.

Anyway here’s a chart that captures a lot of detail and information:

S&P500

It solely depends upon your thoughts and beliefs about the markets – if you think (as I do) that most price swings are linked somehow then these projections can work for you, especially when you have a fairly accurate momentum indicator that helps back up the case.

Let’s have a look at the time aspect – using the exact same parameters for Price, but on the Time axis – I’m not as convinced on Time Cycles from previous swings – but they can be useful:

S&P500

Trailing a stop up during this time would not have hurt.

Now for something that I’ve just spotted and remembered:

S&P500 1

The chart above shows you how using Robert Miners Fibonacci Time Ratio’s (mentioned in his book) the BOTTOM on the correction in Nov 2012 could have been projected and anticipated 2 months in advance!!! – from the high in Sept 2012.

Add in the DTosc Bullish reversal and you have a pretty sound reason to trade to the long side, even though the minor trend is down.  What other aspect would of helped?

Fibonacci or Gann levels [not displayed/shown].  I can tell you that the Nov 2012 LOW sat bang on the 62.5% Gann Retracement level – for Fib users price came close to the 61.8% Fib level!

How much more confirmation do you need that a potential turning point was at hand?

This is an EASY one, markets aren’t usually this clear-cut, but occasionally they are, as above.

To any new readers/subscribers  who read Miners book or have read it, NO I don’t use Elliott Waves or EW counts – I’m very aware of EW but I don’t use it, the experts at Elliott Wave have since 1986 been calling for the top of the market, if they can’t do it with high degree accuracy I sure can’t – I personally think that the next 3 years are do or die for Elliott Wave as a concept, their counts must see the 2009 lows taken out by a massive amount, if that fails to occur then the overall structure their counts are suggesting goes on the scrap heap.  It’s got to the stage now where EW is right or wrong.

Hope it helps

The Hovis Trader

Market Cycles and Points of Force

Watch this space, well specifically my medium term predictions page for new and updated material.

Most of this work is from my recommended Gann course provider – I have simply carried on the work/research documented in the course and projecting forward.

I will not post whether a turning point is associated with a high or low as the purpose of these posts and the medium term predictions page is for you to see just how accurate the authors work is.

Do market cycles work?  I think they do, if you have a fairly good idea of what the market should do and roughly when you can position yourself accordingly – Obviously this goes without saying that you have to have a fairly reliable trading set-up if playing/trading the cycles.

The one aspect of making money from the markets is that no-one can with any degree of confidence tell you WHEN in TIME a market turning point should be likely.  I remember hearing one very high profile trader say back in October 2010 that a series of cycles where converging and to expect a major turn!  The market continued upwards!  The experts at Elliot Wave International where calling a TOP in 1986!  (I was only 11 then, so I had not even got involved with the markets at age).  I like to use cycles as roadmaps, to have an idea of potential turning points in the markets and have a trading plan to trade them if and only if the cycle looks to have worked – I will be elaborating on this in further posts in the future as to how to trade with the cycles.

W.D. Gann and a few others are the only ones to have put their name on the hat of Timing the markets, Gann’s financial timetable is still fairly accurate to this day, although it has got out of sync a little – search this site for it as I’ve a link for it.

I like to see a cycle repeat with a high degree of accuracy at least 3 times, ideally more to give me confidence in that cycle, if you can trace back a Time Cycle over many decades it becomes even more useable.

There is also a heck of a lot more detail than I will disclose that is involved in cycle analysis of which I will not reveal as it’s in the courses.

This industry is full of sharks and rip-off merchants, I will answer generic questions but I will not give specifics.  If you want specifics you’ll need the courses in their original format, so that you can learn for yourself the techniques and cycles.

The Hovis Trader

Repost of Van Tharp email

I would urge you to sign up for the FREE email from Van Tharp, his emails contain invaluable information that most people just don’t have the time to obtain and compile themselves.  Links to his site are littered through-out the post.

Enjoy

 

Market  Update for Period Ending February 1, 2013,

Market Condition: Bull Quiet

by Van K. Tharp, Ph.D.

View              On-line

I  always say that people do not trade the markets; they trade their beliefs about  the markets. Consequently, I’d like to point out that these updates reflect my beliefs.  I find the market update information useful for my trading, so I do the work  each month and am happy to share that information with my readers.

If,  however, your beliefs are not similar to mine, then this information may not be  useful to you. If you are inclined to perform some sort of intellectual  exercise to prove one of my beliefs wrong, simply remember that everyone can  usually find lots of evidence to support their beliefs and refute others. Know  that I acknowledge that these are my beliefs and that your beliefs may be  different.

These  updates are in the first issue of Tharp’s Thoughts each month. This allows us  to get the closing month’s data. These updates cover 1) the market type (first  mentioned in the April 30, 2008 edition of Tharp’s Thoughts and readable on our  web site), 2) the five-week status on each of the major U.S. stock market  indices, 3) our four star inflation-deflation model plus John Williams’  statistics, and 4) the movement of the dollar. I now report on the strongest  and weakest areas of the overall market in a separate SQN® Report. I may  come out with that report twice a month if there are significant market changes.—Van K. Tharp

Part I:  Commentary—The Big Picture

I  am writing this on February 4th of the New Year.   The fiscal cliff has been postponed and the  real decisions are a few months away, so there have been no real changes.   The markets, however, seemed to like the  postponement, as they went up significantly in January.   We moved from neutral to bull and the  shorter term SQNs are actually strong bull.

According  to the U.S. National Debt clock (www.usdebtclock.org), our National  Debt stands at $16.35 trillion — that’s up $180 billion in the last month.   That’s equivalent to the United States increasing  its debt by $600 per person in one month — that’s an annual rate of $7,200.   So how would you like your taxes to go up by  $7,200 per person in your household this year?    If you are a family of four, that means an extra $28,800 per year in  taxes are necessary this year just to cover how mismanaged our government  is.   It really doesn’t matter who  the President is — it’s a horrible situation for anyone and most Americans really don’t have a clue how  bad the situation is.

Federal  tax revenue for the year is currently at $2.49 trillion, while spending is at  $3.54 trillion – that’s basically 50% deficit overspending.  The U.S. trade deficit for the year stands at  $740.9 billion.  The total debt in the US  per family is $732,610, while the average family has less than $5,800 in  savings.  In addition, U.S. unfunded liabilities  now total $122.6 trillion – or over one million dollars per taxpayer.    Do you see any way to overcome these  problems that doesn’t hurt?   Do you  understand what I mean by terrible fundamentals?

The  debt clock also shows this month’s population for the US at 315 million.  We have a work force of 143.3 million (down  200K from last month) supporting 62.3 million retirees or social security  recipients.  48.3 million food stamp  recipients are included in that population.   Additionally, there have been 1.3 million bankruptcies and 743,480 foreclosures  so far this year.

Here’s  my update for you from the debt clock web site with figures so you can watch the  changes over time.

chart1

Some  of the numbers fluctuate and do not make sense to me, but I’m just reporting  the monthly figures as I see them on the debt clock.  As reported, the bankruptcies and  foreclosures figures don’t make sense to me unless they are rolling 12 month  windows.   Watching the debt per family  grow from July’s $684,405 to $732,611 in six months has been quite interesting.  Someone has to pay for that eventually and  the bottom line points to each of us.

Part II: The Current  Stock Market Type Is Bull Quiet

Each  month, I look at the market SQN® score for the daily percent changes in the  S&P 500 Index over 200, 100, 50 and 25 days. For our purposes, the S&P  500 Index defines the market. The market SQN helps me understand the market’s  trend.

The  two short term SQN® scores for 25 and 50 days are both strong bull.  The 100 and 200-day SQNs are both bull.  These scores are much stronger than last month and  shows the short term run up.   Personally,  I like to have some short positions in IITM’s retirement account and currently,  I only have one good short.  I do have  several good long positions though.

This  is the chart tracking the 100 day Market SQN for the last year.  You can see how we have moved up from neutral  to bull in the last month.

chart2

Here’s  a weekly candlestick chart of the S&P 500.    Notice the nice run up over the last two months.  It’s no wonder the short term market types  are strong bull.

chart3

The  next graph shows that the volatility is still quiet.   Although that can change quickly, you are  generally pretty safe to say that the market is in no immediate danger of  falling strongly when the volatility is this quiet.

chart8

The  next chart shows the activity of the three major U.S. indices at the closing  Friday for each week last  month and at the end of the last few years as well.  In 2012, both the S&P 500 and the  NASDAQ 100 were up over 10% in 2012.

chart4

The  first month of 2013 was almost as good as the entire year of 2012.  In fact, the Dow 30 did better in January (up  8.27%) than it did in all of 2012 (up 5.64%).    So perhaps the end of the world  meant the end of bad markets.   I doubt  that, but it would be nice.

Overall,  2012 was positive, in fact, probably a little better than inflation with both  the S&P 500 and the NASDAQ 100 being in double digits.  Lastly, Jason Goepfert’s Daily Sentiment  Report for February 1st shows that smart money is 38% confident in a rally, but  down from 42% — so they probably missed the January rally, while dumb money is  63% confident (up from 50%).  That’s a  slightly risky picture.

Part III: Our  Four Star Inflation-Deflation Model

In  the simplest terms, inflation means that stuff gets more expensive, and  deflation means that stuff gets cheaper. There’s a correlation between the  inflation rate and market levels, so the inflation rate can help traders  understand big-picture processes.  Here  is my four star inflation-deflation model for the last few years and the last six months of 2012:

chart5

Looking  back over the most recent two-month and six-month periods provides the current  month’s score, given in the table below.

chart6

So,  now the model has shown a slight inflationary tendency for three straight  months.   Four of the last five months in  2012 showed an inflationary tendency.

www.Shadowstats.com  still shows that the real inflation rate is  about 10% based upon the way the CPI was calculated in 1980, and about 5.5%  based upon the way it was calculated in 1990.   Based upon how the government currently constructs its lie sheet, the  CPI is officially about 2%.  Right now,  at www.shadowstats.com, you’ll find  that the rate of GDP growth (subtracting real inflation) is at -2%.  Based upon those statistics, the GDP has  shown negative growth since 2000 (meaning recession) in all but one quarter of  2003.

Part IV:  Tracking the Dollar

Look  what has happened to the US dollar since August.   We’ve suffered a huge decline from 84 to  below 79.  Shortly after, we have had a  slight up movement, but now it looks like we are going to test the lows  again.  I’m going to Australia this  month, so I’d expect to see the Tharp Effect to cause the US dollar to drop  against the Aussie dollar.  The Tharp  Effect has been a long running joke but it seems to happen every time I travel  internationally.

chart7

General Comments

Money  is definitely flowing into the market.    We still don’t know what Congress will do with the fiscal considerations  they just postponed but remember that everything they do is short term and in  the direction of getting elected – always.   They do not think about the long term consequences of what they are  doing.   Also, remember earlier in this  article, I said they’d need to raise taxes by $28,800 per family this year in  order just to balance the budget.  Better  yet, they could cut spending by $28,800 per family.  Meanwhile, they argue about whether the rich  should handle the burden?

These monthly  market updates are not intended for predictive purposes; rather, they’re  intended to help traders decide which of their trading systems should work best  in the current market conditions. In bear markets—which are almost always  volatile by nature—shorter-term strategies, and those that allow going short,  tend to work better than long-only or intermediate/longer-term systems.

Which of your  trading systems fit this current market type? Of course, this question implies  that you have multiple trading systems and that you know how they perform under  various market conditions. If you haven’t heard of this concept or the other concepts  mentioned above, read my book, Super Trader,  which covers these areas and more, so that you can make money in any kind of  market conditions.

Crisis  always implies opportunity. Those with good trading skills can make money in  this market—a lot of money. There were lots of good opportunities in 2012, and  many more to come in 2013. Did you make money? If not, then do you understand  why not? The refinement of good trading skills doesn’t just happen by opening  an account and adding money. You probably spent years learning how to perform  your current job at a high skill level. Do you expect to perform at the same  high level in your trading without similar preparation? Financial market  trading is an arena filled with world-class competition. Additionally, and most  importantly, trading requires massive self-work to produce consistent, large profits  under multiple market conditions. Prepare yourself to succeed with a deep  desire, strong commitment and the right training.

About the Author:  Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.vantharp.com. His new book, Trading Beyond The Matrix, is expected for publication February 2013.

 

Trading Tip

January 2013 SQN®  Report

by Van K. Tharp, Ph.D.

View              On-line

There are numerous ETFs that now track everything from countries, commodities, currencies and stock market indices to individual market sectors.  ETFs provide a wonderfully easy way to discover what’s happening in the world markets.  Consequently, I now use the System Quality Number® (SQN®) score for 100 days to measure the relative performance of numerous markets in a world model.

The SQN 100 score uses the daily percent change for a 100-day period. Typically, an SQN score over 1.45 is strongly bullish and a score below -0.7 is very weak. We use the following color codes to help communicate the strengths and weaknesses of the ETFs:

• Green: ETFs with very strong SQN scores (0.75 to 1.5). • Yellow: ETFs with slightly positive SQN scores (0 to 0.75). • Brown:  ETFs with slightly negative SQN scores (0 to -0.7). • Red: Very weak ETFs that earn negative SQN scores (< -0.7).

  The world market model spreadsheet report below contains most currently available ETFs; including inverse funds, but excluding leveraged funds.  In short, it covers the geographic world, the major asset classes, the equity market segments, the industrial sectors and the major currencies.

World Market Summary

I’m amazed at how much green I’m seeing in the world summary.   We track 486 ETFs in the World Market Summary.  The Table below shows the make-up of the market. So right now, 57.1% of the world model is bullish and 8.6% is strongly bullish.

chart9

Let’s see what the markets look like as shown in our first figure.

The SQN world market summary is still green and there are no red areas except for the Japanese Yen and the VXX; the same as last month.  Most of the US stock market is light green, aside from the small cap growth stocks and the QQQ (which is slightly negative because of AAPL).  Europe is totally green except for Russia and Spain.   Asia is green except for China, Malaysia, S. Korea and Taiwan.  The only brown on the chart is the British Pound, the Canadian Dollar, the US Dollar, and the technology sector.

chart10

The next chart shows real estate, debt instruments, commodities and the top and bottom ETFs for the past 100 days.

Since most bonds are now either yellow or brown, people are moving out of that sector; only the junk bonds are green.   Among the commodities, gold, silver and oil are all brown, while agriculture has turned red.

Timber, however, appears to be a shining star, as it is now dark green.

chart11

We have six ETFs with SQN scores over two.   They include: Thailand, Japan Dividend, Gaming, Global Currencies (probably as basket), Timber and International Small Cap stock.   The weakest area, by far, is the Japanese Yen with a -3SQN (perhaps that’s more a function of the ETF than the Yen);   many of the weak funds are also short funds.

What’s Going On?

Last month, I talked about the strength of municipal bonds.   Today, they’ve disappeared off the list.   As I have said before, wait two months and the whole picture will be different.

Fundamentally, the U.S. is in the worst shape it’s been in a long, long time.  Our debt looks asymptotic and the dollar could soon be dismissed as the world’s reserve currency.  Given all of that, the markets look relative strong, at least for a while.

Next month, I’ll be in Sydney presenting three  Peak Performance workshops and RJ Hixson will be doing the update; so until next time, this is Van Tharp.

Crises always offer opportunities, but to capture those opportunities you MUST know what you are doing.  If you want to trade these markets, you need to approach them as a trader, not a long-term investor.  We’d like to help you learn how to trade professionally; trying to navigate these markets without an education is hazardous to your wealth.

All the beliefs given in this update are my own. Though I find them useful, you may not.  You can only trade your beliefs about the markets.

Social Mood Impels Feelings of Certainty and Uncertainty

Social Mood Impels Feelings of Certainty and Uncertainty

By Alan Hall, originally published in the August 2012 Socionomist

Today, your boss could hand you a raise—or a pink slip. Tomorrow, you might narrowly avoid a car crash—or get T-boned.

The future is equally uncertain at all times—in both bull and bear markets. Yet many investors and the media perceive the world to be far more uncertain during negative mood phases. Consider this excerpt from Chapter 18 of The Wave Principle of Human Social Behavior (1999):

[People] equate uptrends with predictability and downtrends with unpredictability. The Harper’s Weekly quote from 1857 includes the phrase, “never has the future seemed so incalculable as at this time.” Translation: “The market has been falling for several years.” The media constantly characterize market setbacks as injecting “uncertainty” into a picture of the future that presumably was previously as clear as crystal. I am not exaggerating when I say that this foible is timeless.1

The distinction is more than academic. It illustrates that humans use events to justify their collective mood. The reason? Social mood itself is unconscious—and therefore, by definition, unperceived. Yet it produces powerful feelings. One of those feelings is uncertainty. When we observe widespread expressions of certainty or uncertainty, we can use them as indicators of public mood—and plan accordingly.

Quantifying Uncertainty Over the years, researchers have developed hard evidence that allows us to link changes in the volume of expressions of uncertainty with bull and bear markets. Let’s begin by looking at several uncertainty indexes.

1. Measuring Economic Policy Uncertainty Economists Scott R. Baker, Nicholas Bloom and Steven J. Davis developed their Index of Economic Policy Uncertainty in their February 2012 paper, “Measuring Economic Policy Uncertainty.”2 The authors used three measures to construct their index: (1) newspaper coverage of economic policy, (2) the number of federal tax code provisions set to expire, and (3) what they refer to as “disagreement among economic forecasters.”

Figure 1

Figure 1 plots the monthly Inflation-Adjusted Dow (the Dow Jones Industrial Average divided by the Producer Price Index) against the authors’ index. The Dow/PPI reveals the true extent of the 13-year bear market that has been largely disguised by repricing stocks in depreciating dollars. This index has also reflected fear and uncertainty in the past, as its largest declines prior to 2000-2012 occurred in the bear markets of 1929-1932 and 1966-1980.

Note that social mood creates a major division on this chart at the Dow/PPI peak in January 2000. Now observe that just a few months prior, the uncertainty index reached its second-lowest level in nearly three decades. Note also that most of the significant peaks in the uncertainty data correspond to significant lows in the Dow/PPI. And finally, note that the overall negative social mood trend since 1999 has accompanied increasing expressions of uncertainty.

Figure 2

Figure 2 shows the authors’ Index of Economic Policy Uncertainty as published in their paper. The authors labeled each significant peak in their index with an accompanying event and wrote, “The index spikes near consequential presidential elections and after major events such as the Gulf wars and the 9/11 attack.” At first glimpse, one might think these events—most of which are “negative” in nature—caused the spikes in uncertainty. But socionomics asks this critical question: “What generated the negative events?”

Figure 3

To answer that question, Figure 3 plots the nominal Dow against the same Index of Economic Policy Uncertainty. We shaded significant positive-mood trends (rising stock prices) blue and negative-mood trends (falling stock prices) brown. As you can see, uncertainty increases during negative social mood trends.

But here’s the shocker: In every major uncertainty spike except 1986, multi-month downturns in the Dow and upturns in uncertainty preceded the events listed in Figure 2. Given this chronology, it appears that negative social mood motivated both the scary events and the uncertainty.

A final observation: Baker, Bloom and Davis rightly connect uncertainty and fear…

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