Stan Weinstein's Stage Analysis

This is a discussion on Stan Weinstein's Stage Analysis within the Technical Analysis forums, part of the Methods category; Originally Posted by lplate . . .as the investor approach would not be very profitable over the several months as ...

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Old Dec 31, 2011, 11:42am   #185
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Re: Sectors

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Originally Posted by lplate View Post
. . .as the investor approach would not be very profitable over the several months as the market trend changes from up to down. I notice you are finding winning buys in a difficult market, so congratulations.
Isa, may I recap what is going on then, as I am getting confused by the daily and intraday.
On 10 Dec 11 page 18 you have a weekly SPX chart showing a falling 30 week MA, which turned some months ago.
Normally this would have been associated with a difficult time for trend traders.
You are then saying No you can combat this by choosing the best sectors, e.g. Tobac, Utils, Cons Staples, Healthcare. (What jumps out about these sectors are that they are dividend stocks, by the way, so this reflects a macro problem with growth stocks, which are the motor to a rising stockmarket.)
Another interpretation is that these sectors and stocks are just the star players in a meandering stockmarket, and you may not find they motor much.
To me, the stockmarket looks like mid 2008 pre Lehmans.
SPY Fund Charts - (NAR) SPDR S&P 500 ETF Trust Fund Charts
You have the long stage two rally, the topping process like started in late 2007, the turn down in the 30 week MA and the lower high. In early/mid 2008 there was a rally into the Lehmans news. There was lots of housing and banking worrying news at the time.
We have a good idea what the Lehmans equivalent news will be not so far away in 2012. In this scenario, aren't we, on a weekly "investor" basis, better sitting it out?
Alan Saunders at the time identified all these turns very early and very accurately, but, as you would expect, this did mean very few strong opportunities and difficult performance, as I remember it. ShareHunter Unfortunately his blog goes back only to 2009, but I have looked back in my diary and he assessed around May 2008 as a bear market rally and one for sitting on hands. That is a feature of Weinstein, that you can have multi-month periods of difficulty and sitting on hands. Stop losses, by their nature in weekly trend following, have to be a good distance away, so you can't afford to get the big picture wrong.
For me, though, the big worry is the prospect of massive state intervention to prevent the consequences of EUR collapse, and this could send the stockmarket (and silver!) rocketing, against all the technical signs.
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Old Dec 31, 2011, 12:36pm   #186
 
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Re: Stan Weinstein's Stage Analysis

isatrader started this thread As I've said before, my aim is to forward test the method as accurately as is possible from the little information we have. i.e the book, global trend alert newsletter sample, various interviews and articles by other people that say they use the method. Weinstein has been asked to update the book from what I've read, but has stated that it doesn't need to be as everything you need is in it already. Although we know from the Global Trend Alert Newsletter that he's made an addition of the A and B sub stages, but otherwise we are told that everything is the same.

From my interpretation I agree that currently from the investor point you should be sitting out, as we are only in Stage 1A on the S&P 500, so that is not a time to be sitting in long term positions as you shouldn't start accumulating Stage 2 breakouts until the market has stabilised in Stage 1. However, if you are following the more active trader method then I think you should be hedging any plays you make by buying stocks in the strongest sectors and shorting stocks in the weakest sectors. I've taken it a bit further by including the forex market and commodities to further diversify and reduce correlation. But of my 13 trades during this quarter, 6 have effectively been shorts, and 7 have been long. However, some of the shorts have underperformed and 2 have been stopped out, and one was closed near break even. So from my hedged stance I have currently 11 winners and 2 losers.

With regards to the sector rotation. This is a feature of other excellent methods that I mentioned before from companies like Dorsey Wright, that have done studies that show it to be an effective model. I believe this partly due to the fact that there are long only funds that have to be invested in the market. So when there's panic everything drops initially in tandem, however, sector rotation then begins quickly and money moves into defensive sectors while the rest of market continues on down. If the market becomes a bear market then all sectors will likely fall. But the strongest sectors will be the last to roll over and will likely outperform the market as a whole.

I've been thinking about how the market works recently and the fact that it is trying to price the future. So for example for the last six months the Market has been pricing in Armageddon in Europe, with Greece leaving and the Euro collapsing. Whereas the technical's have slowly been improving, with the market moving into early Stage 1, and the short and long term breadth indicators have been giving early buy signals very recently. So following the method I believe I need to ignore the news headlines as it is a technical method and is suggesting that the path of least resistance is currently neutral to slightly positive imo.
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Old Dec 31, 2011, 2:01pm   #187
 
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Thanks

isatrader started this thread I just wanted to say a big thank you to everyone that's joined in the discussion this year. It's really helped me to talk about it with others while trying to learn the method. And it's really helped me to focus and has kept me from going off track. So thanks everyone and I hope you've found it useful as well.

As well as carrying on with this thread in the new year I intend to add a forum section to my Stage Analysis blog Stage Analysis that I recently set up, so that I can have threads for individual stocks, sectors, commodities etc, so that it's easier to find and discuss specific stocks or commodities stages. I doubt it will have many users as it's so specific and not many people trade this way, but hopefully it will help us all to learn and be a useful resource. I've not added it yet to the site as I need to plan it and get the vBulletin software, but it should be live in the next month or so.
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Old Dec 31, 2011, 3:56pm   #188
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Re: Stan Weinstein's Stage Analysis

re your last sentance in post 186. before i had read your post i was thinking the same while out walking this morning. i was thinking that everyone is sooooo bearish it is having a negative influence on me. i must block out outside influences of news etc and just follow the charts. the charts to me at the mo are neutral so i must just be light in both longs and shorts. next year the market could go up down or sideways. at this particular moment no one knows, in fact no one will until it has started either way..its been drummed into me that europe bust, usa bust etc etc that mkt must go down, but that not necessarily the case. time will tell..
happy new year to all
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Old Jan 1, 2012, 9:52am   #189
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Re: Stan Weinstein's Stage Analysis

blackmamba and isatrader, you don't really know what the market is pricing in; it prices in only what it feels at the time, and who knows what that is.
The technical case for saying it is too bearish or is pricing Armageddon is that the TLT is at the same level as Christmas 2008, i.e. AFTER Lehmans, not before. SPY vs TLT (20yr Treas)
Technically all you had in late 2007 to early 2008 was a peak in late Sept 2007, a lower high, a turn down in the 30 week MA, a move below the 30 week MA, and another lower high.
Likewise in 2011 you have a peak in late April, and so on. We are now faltering at that second lower high. (Treas and USD also look like they may go higher.)
Anyway, thanks for explaining isa about your use of "trading" daily and currencies and commodities. Yes, there is nothing to prevent you trading in other ways until the stage 3 (or continuation 1) has finished.
(Commods should measure against the CRB index, I suppose, and currencies against the DXY or Gold.)
It does go to show the differences in interpretation, though, don't you think, and as Dawson says there is no strict blueprint for how you use the Weinstein book?

Last edited by lplate; Jan 1, 2012 at 9:57am.
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Old Jan 1, 2012, 10:42am   #190
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Re: Stan Weinstein's Stage Analysis

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Originally Posted by lplate View Post
blackmamba and isatrader, you don't really know what the market is pricing in; it prices in only what it feels at the time, and who knows what that is.
The technical case for saying it is too bearish or is pricing Armageddon is that the TLT is at the same level as Christmas 2008, i.e. AFTER Lehmans, not before. SPY vs TLT (20yr Treas)
Technically all you had in late 2007 to early 2008 was a peak in late Sept 2007, a lower high, a turn down in the 30 week MA, a move below the 30 week MA, and another lower high.
Likewise in 2011 you have a peak in late April, and so on. We are now faltering at that second lower high. (Treas and USD also look like they may go higher.)
Anyway, thanks for explaining isa about your use of "trading" daily and currencies and commodities. Yes, there is nothing to prevent you trading in other ways until the stage 3 (or continuation 1) has finished.
(Commods should measure against the CRB index, I suppose, and currencies against the DXY or Gold.)
It does go to show the differences in interpretation, though, don't you think, and as Dawson says there is no strict blueprint for how you use the Weinstein book?
There is no strict blueprint for anything to do with trading. Weinstein's, no doubt, excellent book is full of good ideas on the subject, I'm sure. The detail must be in one's own head and, as you say, the differences in interpretation are wide. I have not read the book but it has been drawn to my attention, not by the article, but by Isatrader's excellent thread which I am following with great interest. Who know's? Perhaps one day I will have something useful to add to it.

Prosperous trading in 2012 to you all.
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Old Jan 1, 2012, 11:24am   #191
 
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Re: Stan Weinstein's Stage Analysis

isatrader started this thread
Quote:
Originally Posted by lplate View Post
blackmamba and isatrader, you don't really know what the market is pricing in; it prices in only what it feels at the time, and who knows what that is.
The technical case for saying it is too bearish or is pricing Armageddon is that the TLT is at the same level as Christmas 2008, i.e. AFTER Lehmans, not before. SPY vs TLT (20yr Treas)
Technically all you had in late 2007 to early 2008 was a peak in late Sept 2007, a lower high, a turn down in the 30 week MA, a move below the 30 week MA, and another lower high.
Likewise in 2011 you have a peak in late April, and so on. We are now faltering at that second lower high. (Treas and USD also look like they may go higher.)
I agree we don't know what's priced in, and I'm sure if Europe did collapse that it would drop the market further very quickly. But at the same time I think because it's been trying to price it in for 6 months that the actual event could be the final flush out of the weak hands and would clear the decks for a possible new bull run. Or it could be the beginning of new longer term bear market move. I think however what Weinstein's method has taught me is that it doesn't matter what I think personally, I just need to follow the price action that occurs and make plays based on it. So currently we are in Stage 1A on the S&P 500 and above a flat 30 week weighted moving average, which is neutral territory still.
Quote:
Anyway, thanks for explaining isa about your use of "trading" daily and currencies and commodities. Yes, there is nothing to prevent you trading in other ways until the stage 3 (or continuation 1) has finished.
(Commods should measure against the CRB index, I suppose, and currencies against the DXY or Gold.)
It does go to show the differences in interpretation, though, don't you think, and as Dawson says there is no strict blueprint for how you use the Weinstein book?
Agreed, there are many ways to use it and people will interpret it differently, they always do with any method. But there are also lots of things in there that aren't open for interpretation really, like the long term entry points and how to manage your stop loss etc. My personal plan is develop a deeper understanding of stages as I think correct identification of them is the key as getting into a move at the right point, which is critical to long term success imo.

Happy New Year
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Old Jan 2, 2012, 1:29am   #192
 
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US 30 Year Treasuries

isatrader started this thread US 30 Year Treasuries have continued to consolidate near the highs. The weekly chart is currently in Stage 2B still. It made a weekly closing high three weeks ago, but failed to make a new high overall but is still near the highs, so it could breakout higher. However, momentum on the 30 week MA is slowing and a Stage 3 top looks to be developing, but it is still rising at the moment and price has yet to break it. So I consider it Stage 2B until the stop below 139.5 is breached.

Price broke below the short term trend line and is trying to break back above it again and relative performance versus the S&P 500 is flattening out.

So watch for a Stage 2 continuation move above the high or Stage 3A breakdown below the 30 week weighted moving average and stop position below 139.5
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