Stockmarket-trends and investing

trading and chess

2011-04-30T15:04:00.000-07:00

Already about a year ago, with some ETF's going up by trend
as expected, there are some more opportunities in investing
for the more adventurous, namely by active trading.

With a lot of vague theory like technical analysis and
money management, the question still is how risky
such active trading is. And the answer is ofcourse
depending on the skills of the trader.

Well in fact there are a lot of similarities
in trading, and playing chess. The trader has to
be keen on risk, try to minimize losses, head
for material advancement, stay in the lead,
watch his time, etc. Many of such skills are
also developed when improving chess playing
skills. And there is a parallel between
increasing your chess rating, and increasing
your portfolio worth.

Having found out the above in practice, in the
next messages i'm intending to provide some
concrete trading examples, whereby i'll might
make some comparisons with chess.

First of all, following the trend also in trading
is one of the safest methods. But the question
is when to enter, and when to exit the trend.
For such a strategy, we can resort to the
swingtrading method, instead of using the
common (?) wisdom of support and resistance
levels. And interesting example is Silver.

See the chart below:

The trend still is up, but when we look at
the momentum, Silver seems to get overbought,
and there is a divergence with the commodity
channel, which already is declining.

So my expectation in this case is that soon:
exit long signal, assuming you bought it,
ie profit taking.

For gold, the trend still seems to be up,
especially on a logarithmic scale. Next
time a chart, and some concrete
other examples.

So good luck with your trading.
(and your chess :)

Spring Rally ?

2010-03-18T06:15:00.000-07:00

well it appears the correction which started beginning of this year,
until about 10 February, is over.
Now that the SP500 has again set a higher value at 1165 than the low
value mid January of about 1190, we can expect to see higher values
coming months.

So the sell signal (in fact a buy for the SDS ETF, which indicates
going short for the SP500) given in previous message in the long term
was a false signal, which became apparent in the short term chart
at about 10 February, after which a possible 'long' position in
the SDS should have been ended. Also if a stoploss on the position
would have been set, something which generally is recommended, the
position would have been sold, a bit later though; ok with a small
loss, but having regarded this position in the short fund SDS as a
short term insurance against a possible large correction of the
markets (the W recession scenario) the price for such
a policy has been low.

lets look at the charts, first of all the short term chart (with
the cheap TA program Dreamtai) of SDS which indicated to end
the long position for SDS on 12 February:

when the bars on the chart started to get a red colour, the long
position in SDS as advised in our previous message should
have been ended.

Now lets check the long term chart for SDS; this now also has
indicated to end the long position, so in fact it gives a short
position again, which means we could go long on the SP500; first
the longterm chart with our program 'Trendguru' for SDS:

Now lets also have a look at the long term chart for the pure SDS500
with our program:

So indeed, a long signal has been given (note also the intermediate
sell signal which was given end January; a false signal, as
discussed, but it was a warning that risk was increasing anyway.

In our next message we try to select some ETF's which now seem
exceptionally attractive to buy, ie some funds/sectors in
which we can profit from the -most likely- upcoming (or
continuing) spring rally. Also more about stoplosses later;
for example, if the rally continues, and some funds now
are acquired, with stoplosses set just a bit
below the buy-value, then later -in case of profits- the
stoplosses can be adapted to higher positions, in order to
insure the position can never result in a loss again.

short on S&P with leverage

2010-01-30T15:04:00.000-08:00

well a few days i've given a (longterm) chart where a buy
signal was given to go short on the S&P by buying an ETF.

Now there's an ETF also going short for the S&P500 with
a leverage factor two, which now also gives a *buy* signal:

(click on image to see enlarged image)

For those who like to take some risk ..
Or simply to want to insure their basic portfolio,

best regards,
jef

PS the program on the image still is called stockguru, but
as i've taken it over, it will be renamed to Trend-guru.
*the* (best) way to make money or engage in prudent investments;
instead of losing money in highly instable economic markets
(like apparently the USA..)

careful with the Usa

2010-01-28T05:48:00.000-08:00

although many folks are talking about the booming Far East,
like China, Thailand, India, etc., my chartst indicate
it is wise to be careful with investments on US indices.

For example, the S&P500 index *short* ETF (symbol SH) now gives
a *buy* signal on my (usually quite reliable) longterm chart:

click on the picture above for a larger image.

NB fundamental causes i don't know, but things don't look good,
maybe there's still a lot of risk in the US economy,
but going short ? like above chart indicates, well that
takes some guts ofcourse (and i dont give any guarantees)

we'll see later,
best regards
jef

PS so probably house in Thailand is a better (at least
less risky) investment, see my previous message !

happy -and prosperous- 2010 !

2010-01-26T08:11:00.000-08:00

best wishes for the new year !

haven't been writing here for a while, many etf's
like Thailand indeed have gone up, although with
sometimes some fluctuations.
its my intention soon to do a new screening about the
best etf's and recommend them here; with the long
term charts of course.

but.. now for something slightly different,
another sort of investment, a vacation house (from a friend
who has to leave on short notice) and i think a good investment
as well, in fact i'm contemplating to buy it myself, if i
could get a good mortgage.

here's more info, ie. the flyer (click on the picture for a full screen view):

any serious reactions are welcome, i can give you more info,
call my friend in Thailand, and when you're serious enough,
can give you his telephone nr as well.

best regards,
and until soon,
jef

End of short-term correction ?

2009-08-22T09:32:00.000-07:00

Well apparently the recent correction on the markets ,
beginning last week, was a mild one. Most likely caused
by an earlier correction on the Chinese markets (Shanghai
index), most of our ETF's gave 'exit long' signals.

But now there are buying opportunities again.
Should we jump in the same ETF's which i've sold last week?
Well not necessarily, in fact there now is an excellent
opportunity to do some careful selecting again, and choose
one or more funds with excellent prospects.

Here's one, the Turkish stockmarket, ETF symbol TUR.
On the chart is is obvious that its a clear uptrend:

And this time i intend to keep the funds i've bought for
a longer term, as long as they are in the long term uptrend;
with Dreamtai often 'exit long signals' are given, but
following such signals gives much more trading costs.

So only when i get a 'sell' signal on Dreamtai *and* on my own
program -in the longterm chart- then i will sell; probably
Dreamtai will sooner give such a sell signal, but for
large indices like TUR, in clear uptrend, such short sell signals
can in fact be buy signals according to swing trading methods
(so called stock kisses; see for some examples:
http://dreamtai.blogspot.com/2007/02/stock-kissing-in-action-feb-5-2007.html)

As for the longer term sell signals for most indices, i don't
expect they will appear soon on the charts; in the
meantime, besides EWA (Australia) which still is in the
portfolio, i'll keep looking for other buying opportunities;
one for example is symbol EWO, a specialized Austrialian
fund which you might like to check out yourself.

Until next time, when i intend to do some backtesting
with my proposed ETF (buy and/or sell) strategies,

jef

exit USA

2009-08-19T05:45:00.000-07:00

well for most USA ETF's i've got 'exit long' signals with
my short term trading tool Dreamtai, so i've sold
the financials, except one, to keep on monitoring these
funds. But i'll keep the Australian fund EWA (the ETF
fund EWO still even looks like a buy).

So it looks indeed there will come a short term correction,
but there's no reason to go short, which would be
against the main trend. On the contrary, after a mild
correction, most likely there will come some
excellent opportunities to go long again. An
interesting ETF which i will monitor for such
purposes is PDP, a top 20 technical stocks exchange
traded fund, with a higher expected growth figure
than the average indices.

until later
jef

Corrective actions

2009-08-17T07:38:00.000-07:00

today (monday 17th August) we see some corrections
on the stockmarkets, so the question is what to
do with our ETF portfolio ?

Well first of all the long term trend is still up,
and some small corrections in such a strong uptrend
will not change the main trend. Nevertheless
traders might think portfolio adjustments might be
needed, and indeed short term technical analysis
(TA) programs give 'exit long' signals for many
ETF funds. As i don't believe much in the added
value of many highly sophisticated (and very expensive)
TA programs, I just use a rather simple and
cheap tool, namely Dreamtai-5-beta (or occasionally
a free tool 'Webotron, with many indicators):

http://www.dreamtai.com/index2.htm

And according to the Dreamtai software, the US
financial sector (eg XLF) still looks like a 'buy'. So
first thing i've done today is sell a hightech stock
(RFMD); and instead now bought some extra ETF for
the US financial sector (IYF); not at a lower price
than i bought it first, this would be 'averaging down'
(a wellknown trading mistake) but just slightly above
the value for which I bought it some weeks ago,
when starting this blog. Now it's a matter of wait
and see, if the market will bounce up again. Here is
a 3months chart, made on yahoo for two financial
ETF's (XLF and IYF), compared with the Dow, until last
Friday (click on the image for a large scale view):

Now today there is a further correction of about 2 %,
but the uptrend for the financials clearly remains;
so this correction could be just some 'Monday' effect,
and later this week we might see a continuation
of the uptrend; well at least for those ETF funds i've
identified to have strong uptrends; just to be sure, i
will keep the stoploss at the original value and will
exit my positions if they are not higher, in a few
days, or later of this week.

As for the position in IYR (real estate), it already
went through the stoploss so it's sold, as a matter of
trading discipline. Looks like a pity, as it's been up
for almost 8% since buying, but no big deal, i like to
catch large&long upswings, and a little loss doesnt hurt
(in this case due to the trading/broker costs, often
overlooked/ not accounted for by most TA programs,
and/or short term traders..). So in line with common
advise, i like to cut my losses short, and let my profits
run, hopefully the US financials (like XLF). Until next
time, and good luck with your own investments,

jef

another buy

2009-08-13T05:09:00.001-07:00

our previous ETF buying recommendations, EWA (Australia) and
IYR (US real estate) are doing well, still rising. As written
before the US financial sector also is recovering; in
particular one ETF fund namely XLF (ishares SPDR financial
sector) seems a strong buy, both for the short as the
longer term; here's the longterm (weekly) chart:

Next time i'll show the results of our example portfolio,
and intend to show it on a regular basis; with our strategy
of not only selling, but also going short during downtime
cycles, like 2008, we are confident to be able to beat
the results of most big portfolio's managed by professional
investors like eg. pension funds, etc.

until next time,
jef

PS also next time advise on how to add stoplosses, i'm
going to add stoplosses for EWA and IYR slightly above
the value i've bought them, then at least for these funds
i will never have a loss; and during next months, these
stoploss levels will be gradually being raised, in
accordance with the charts of course; so for XLF you can
add a stoploss at about 12,5 or so, the estimated value
at which we could get a 'sell' signal (not likely we'll get
there, i think, but you never know; as the more professional
investors know, its always wise to have a stoploss, never
risk more for one position than about 2 % of your total sum,
and on the basis of that you can estimate the max amount
you can buy XLF; without any guarantee from my side ofcourse,
just as a legal note)

new buy recommendations

2009-08-02T08:45:00.001-07:00

As i wrote in the previous post, these big indices like the
Nasdaq, HangSeng, etc currently seem to be a bit overbought
so instead of buying these trackers, i found two other other
trackers (ETF's) for which i give buy recommendations:
(August, 02, 2009)

1) EWA Australian stockmarket index
2) IYR American real estate index

Now you don't need to have a Noble Prize in economics,
or be someone like Soros to understand why these funds
are trending up: the economy is recovering in the Pacific
region, and in the USA real estate seems to be in a
turnaround, after the recent crisis.

Here's a graph for the IYR fund:

As written in the previous post, these are not buy-and-hold
recommendations, although these trackers might be most
profitable for only a few months or so; it are buy
recommendations for the medium term; but for more quiet
investors, they might also be profitable on the longer
term, with some 'neutral' periods in between. Like
indicated in my first post about investment strategies,
i'll continue to monitor them, and after a while i might
give a sell, or neutral signal. And if you're are sceptical
about the above two specific recommendations, well you
might investigate for yourself a selection of some other
trackers, wich also really look uptrending, namely:

IWM (small caps), EEM (emerging markets), XLF (financial),
GMF (emerging Asia), IYF(US financial markets), EWZ
(Brazil) and VEA (pacific region); also, after a
possible correction the semi-conductor market, i.e.
SMH might become attractive again. So until next
time, and good luck with your investments,

jef

PS yes i'm contemplating to buy the above two trackers
myself as well, only for a moderate financial amount,
and in the meantime i'll look for some trackers for
which you could try to go short, if possible.

solid and profitable investment strateges

2009-07-31T11:28:00.000-07:00

Lots of books exist about trading, and many programs are
advised to use for socalled 'technical analysis' (chart
reading), and assist the trader in investment decisions.
All such methods are aimed at short term gains, and are
quite risky in the longer term; it is known for example that
about 90% of stock traders in the end are losing their money,
a risky business indeed; offical economic science even
strongly doubts that 'technical analysis' can work due to
the 'efficient market hypothesis'(where the future
expectations are discounted in the present stock prices).

So on the other hand, some -often better educated- people
try to find undervalued stocks (eg the Wareen Buffet strategy)
and use a buy and hold strategy; while this could work, it
is not easy, and also risky nowadays with the highly
fluctuating economy. Also quite common is use of the modern
portfolio theory, with a mix of stocks, bonds, and real
estate and/or mutual funds. All these strategies don't use
the concept of trend following, especially not when the trend
is *down* (like during 2008).

So, instead of gambling with options, swingtrading with
pennystocks and technical analysis or the opposite, namely a
buy and hold strategy, here is our 'best' investment
strategy, which we will discuss later more in detail on
this blog, or on our new website about trend-investing:
www.stockmarket-trends.com
(in development)

Basically the strategy will use two methods, trend following
(with a proprietary computer program, with a very robust
long term indicator), and index funds. Leveraging will
be possible if people choose to use futures, sprinters,
turbo's or whatever, but in general we won't recommend it.
And for value investing, people can look at sector
funds, which we might advise in due course,
after sufficient (trend-)analysis.

current advise(31 July 2009):
Hangseng index (TraHK): upward trend , advise = 'buy'
Nasdaq index(QQQQ): upward trend, advise = buy
S&P 500 index (SPY): upward trend, advise = buy
TraHK, QQQQ, SPY are the symbols of the respective index tracker
funds; more info about such funds, and our trading method soon.
Note: a small correction coming weeks seems likely, after that,
eg. mid August many indices, also Aex, Dax, etc. could get a 'buy'
recommendation.

NB this is not a buy and hold strategy, as for certain funds
or in certain times we can advise to go neutral, and even
-instead of holding cash- can advise to go 'short', which
would mean profiting from a downtrend; such a strategy not
only makes optimal use of the socalled business cycles, but
also avoids risks as result of socalled investment 'bubbles'
(like the internet bubble in 1999, or the credit/subprime
bubble in 2007). Example: famous American investor Jesse
Livermoore made about 100 million by going short during the
crash of 1929; and Goldman Sachs, the investment bank,
continued to make profits during the credit crash of 2008,
probably by going short with a large number of assets.

Disclaimer: investing is a risky business:
advise given on this blog is for own risk,
we are not responsible for any investment
decisions the reader may have taken as
result of the advise given on this blog.