isa's long term trading journal

PHAG.L - entry

Trade

Ticker: PHAG.L (ETFS Physical Silver)

Entry Date: 30/8/11 @ 11.57
Amount: 61 Shares
Entry Price: £24.5716 ($40.092 @ fx rate 1.6318)
Commission: £12.50

Total: £1511.37

Daily ATR(200): 0.646 (2.63%)
Weekly ATR(52): 1.597 (6.50%)

Entry Reason
Silver has formed a base in the mid 30s since it's parabolic move towards $50 earlier in the year. It gave a buy signal on the point and figure in July when it broke above $39 and I started accumulating at the beginning of August when I made 2 purchases. It's now made a bull flag on the chart and is near the lower end of the range and the cumulative volume is close to crossing it's moving average to the upside for the first time since the collapse. So I'm making my final purchase for now at just over $40.

Attached is the charts
 

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More breadth indicators

The breadth indicators really interest me and I think combined they are one of the best guides to what's really going on in the market.

The NYSE Percent of Stocks above their 200 Day Moving Average ($NYA200R) went on to a buy signal today. So all the Percent of Stocks above their Moving Average breadth indicators I use for market timing are now on buy signals and in good field positions. So I thought it would be good to look at the other internals like the New High New Lows ($NYHL) which Dr Elder values greatly and shows on a daily basis on his market commentary and the NYSE McClellan Chart ($NYSI) which I like to look at using the cumulative measure and two moving averages. The last time the cumulative value crossed over the 11 week EMA was in April 09 but it hasn't yet crossed the 22 week EMA and the main signal from this chart is a moving average crossover which last occurred in May 09. The RSI is also a very good measure on this chart and hasn't crossed below 70 since June 09 but is perilously close to doing so currently so I'm going to keep an closer eye on this chart now. NYSE New Highs New Lows has made a nice divergence versus price in the last month and has now turned positive again, but it's certainly the weakest it's been for the last 2 years.
 

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Re: More breadth indicators

The breadth indicators really interest me and I think combined they are one of the best guides to what's really going on in the market.

The NYSE Percent of Stocks above their 200 Day Moving Average ($NYA200R) went on to a buy signal today. So all the Percent of Stocks above their Moving Average breadth indicators I use for market timing are now on buy signals and in good field positions. So I thought it would be good to look at the other internals like the New High New Lows ($NYHL) which Dr Elder values greatly and shows on a daily basis on his market commentary and the NYSE McClellan Chart ($NYSI) which I like to look at using the cumulative measure and two moving averages. The last time the cumulative value crossed over the 11 week EMA was in April 09 but it hasn't yet crossed the 22 week EMA and the main signal from this chart is a moving average crossover which last occurred in May 09. The RSI is also a very good measure on this chart and hasn't crossed below 70 since June 09 but is perilously close to doing so currently so I'm going to keep an closer eye on this chart now. NYSE New Highs New Lows has made a nice divergence versus price in the last month and has now turned positive again, but it's certainly the weakest it's been for the last 2 years.

Isa,

I find it interesting that you and I use many of the same instruments and have read many of the same books and seem to look up to many of the same traders (Dr. Elder in particular). However, we seem to differ in our view of the future here. I also look at $NYHL but mine says that there has YET to be a BUY signal. In fact it gave a rather strong SELL signal back in early Aug. It (according to my charts) is now around the 0 line (+59 today) and it will fluctuate between -100 and +100. If you compare this with historical values you will notice that after a strong move up or down a correction causes this indicator to fluctuate around the 0 line + or - 100. By my charts ONLY when it has gone above +100 has it been a good BUY signal. When below -100 a good SELL signal. All the strong trends may retrace to the -100 to +100 range but will always fail at the extreme of this range unless a new trend has developed. Look at the down move in 2008 as an example. There were numerous crosses above the 0 line during the downtrend when there as a rally before a further drop below -100 and worsening downtrend.

Like you I am currently long the market and long silver but I am only expecting this market rally to be short lived and probably will turn down in the next few days (in my opinion). I would not get to married to the long side here. Obviously this could change as the charts develop.

Since you like Dr. Elder,...look at the weekly MACD and see there is NOTHING bullish about that.

Also, what is your method for entry and exits? I have looked at many of your trades and they seem a bit random. Could you clarify some of your methods?

Thanks,...and good luck.
 
Re: More breadth indicators

Isa,

I find it interesting that you and I use many of the same instruments and have read many of the same books and seem to look up to many of the same traders (Dr. Elder in particular). However, we seem to differ in our view of the future here. I also look at $NYHL but mine says that there has YET to be a BUY signal. In fact it gave a rather strong SELL signal back in early Aug. It (according to my charts) is now around the 0 line (+59 today) and it will fluctuate between -100 and +100. If you compare this with historical values you will notice that after a strong move up or down a correction causes this indicator to fluctuate around the 0 line + or - 100. By my charts ONLY when it has gone above +100 has it been a good BUY signal. When below -100 a good SELL signal. All the strong trends may retrace to the -100 to +100 range but will always fail at the extreme of this range unless a new trend has developed. Look at the down move in 2008 as an example. There were numerous crosses above the 0 line during the downtrend when there as a rally before a further drop below -100 and worsening downtrend.

Like you I am currently long the market and long silver but I am only expecting this market rally to be short lived and probably will turn down in the next few days (in my opinion). I would not get to married to the long side here. Obviously this could change as the charts develop.

Since you like Dr. Elder,...look at the weekly MACD and see there is NOTHING bullish about that.

Also, what is your method for entry and exits? I have looked at many of your trades and they seem a bit random. Could you clarify some of your methods?

Thanks,...and good luck.

Hi eegozi, thanks for the feedback. I think however, you misread my previous post a little bit. I don't think that the New Highs New Lows chart is on a buy signal, but merely that it was showing a divergence to the price action in the market as the second move down in it was much shallower compared to the S&P 500 price which got much closer to the early August low. So I view this as positive sign in the short term, but I agree with you that the New Highs New Lows chart is looking more bearish than bullish at the moment. However, I prefer to look at all the market breadth charts, not just one, and view them together to get a picture of what is happening, which as a group is currently bullish. Also, I'm working on the thesis that we are currently in later stages of a long term Elliott wave 4 that was extended because of the various news events in early August. So by that theory I want to get long into the 5th wave which if it is a similar timescale to the previous waves will last for around 9 months or more.

I've read a large amount of trading books and methods and over the years and I've experimented with lots of the standard indicators like the MACD, RSI etc. But I've found like many others I suspect that they are mostly unreliable, so I don't use them for my buying decisions anymore. So whether MACD looks bearish at the moment doesn't really matter to me as I don't give it much weight in my analysis.

The authors that I value the most for long term trades are Stan Weinstein and Tom Dorsey. Alexander Elder and Kerry Loworn's methods I find more useful for shorter term trades. Weinstein's stage analysis forms a big part of my entry and exit method now days and has simplified my trading massively as I just look at a chart and can see which stage it is in and so can make a decision whether it's is worth looking at more in-depth. Tom Dorsey's point and figure methods are the key though I think as when they are applied to the market breadth charts like the NYSE percentage of stocks that are above their 200 day moving average and NYSE Bullish Percent Index, they give you a very clear picture of what is happening in the whole market on an equal weighted basis. 1 stock, 1 vote as he says. Whereas indexes like the S&P 500 are cap weighted so some stocks have a lot more votes than others and can hold the market up when the internals are telling you differently.

So my main method now is to buy my long term positions when the market breadth indicators are below 30%, by which I mean $BPNYA, $NYA200R and $NYA50R (their symbols on stockcharts.com if you don't know them). Which if you look back through the historical data on them is almost always the best time to buy a long term position IMO. I give these breadth indicators the most weighting in my long term view and look at the various others I've mentioned before to aid my timing.

I'm not worried about being too early as my plan was to buy some positions on the initial down move and to buy more as the breadth indicators moved onto buy signals. This down move could take months to play out yet, but even if you don't agree with my timing, I'm following my plan that's taken me almost 5 years to develop. So I'm going stick with it through all the noise as it's kept me on the right path so far this year as it got me out of stocks and into bonds starting in late April, so I made a nice 5% profit through the summer while the markets tanked 20% or so and I'm currently only down a few percent for the year due to my timing on my nickel trade being a bit early at the start of this month. :)
 
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Re: More breadth indicators

Isa,

Fair enough. Everyone has their own methods and you have to trade the way that works for you. I am more into swing and some position trading and so i focus on shorter time frames from weekly to 15 min and trade mostly 60 min and daily. I look at sentiment indicators and many of them are the same ones you look at too. However, because they lag (in my opinion) and because I am focusing on shorter time frmes I do not give them as much credibility. I differ from you in that I think MACD is the single best indicator I have ever seen and use it and MA crossovers as the core of my system.

Have you ever experimented with shorter time frames? I use to trade off of the weekly and daily charts only with end of day data and had some success. However, I have found more success with some intraday data and 60 min charts. I trade more frequently but this seems to suit my temperment as I was "over trading" on the daily charts. Once I switched to 60 min charts I can continue trading as frequently but with more success. Just curious if you have tried shorter time frames to increase your return. I ask because 5% gain is less than I would be pleased with for such a volatile market and early (April) call of bearishness on the market. Do you ever short the market or only shift to bonds for protection when you think the market will go down?

Thanks.
 
Hi eegozi, I have experimented with shorter times frames fairly extensively over the last year and through my weekly competition thread One trade a week - which you joined in it's last week by the way. I managed to create a profitable systematic method based around average true range of a product. Here's the link:

http://www.trade2win.com/boards/swing-position-trading/116688-one-trade-week.html

If you read through the whole thread you'll see a number of very good methods that the different traders used and it taught me a lot running it about short term trading.

I did also used to keep a short term journal which shows in detail my various experiments with shorter term time frames which was a bit haphazard to begin with but got more structured as I developed my short term trading methods while doing one trade a week. It's quite big as has 89 pages but I think it can be useful to others to see my various mistakes and successes. Here's the link to that one if you are interested.

http://www.trade2win.com/boards/trading-journals/112912-isas-short-term-trading-journal.html

To your question about that you wouldn't be pleased about the 5% gain I got over the summer from moving into US treasuries and emerging market bonds. I think it's a matter of perspective and person goals. This is a long term account where my aim is outperform the S&P 500, which has returned around 8% per year on average over the last 50 years, so 5% over a few months when the market was down so much is a very good move towards that goal this year.

My call of bearishness was earlier than most on 19th April (see my post 88 here: http://www.trade2win.com/boards/trading-journals/106346-isas-long-term-trading-journal-11.html#post1520018 but the S&P 500 made this years high only a week or so later, so I was very pleased with my timing as I always think it's better to be early and prepared. And as this is a long term account I need to trade infrequently or the commissions can eat up the returns, so I don't short in this account. But as you'll see if you read my other journals I frequently do in my short term trading.

Hope that helps
 
Thanks. I will check out your links.

Yes I thought you were the one running the 1 trade a week thread but did not see it appear anymore. Is your family doing better?

Have you thought of starting it again? If so it would be great if you did it based on maximum gain for the week as opposed to only one trade a week. Even though I only joined at the end I think limiting my trades to Mon to Fri is difficult as some of the best trades surface in the middle of the week.

Anyway,...glad to see you here again and that your system is working for you.
 
Thanks. I will check out your links.

Yes I thought you were the one running the 1 trade a week thread but did not see it appear anymore. Is your family doing better?

Have you thought of starting it again? If so it would be great if you did it based on maximum gain for the week as opposed to only one trade a week. Even though I only joined at the end I think limiting my trades to Mon to Fri is difficult as some of the best trades surface in the middle of the week.

Anyway,...glad to see you here again and that your system is working for you.

Thanks eegozi, yep the family's doing a little bit better but bone cancer doesn't have a cure, it can only be managed so it's not the happiest of times here still. But she is doing better now as they are managing the pain now. So my time isn't as free as it used to be, as I need to help out everyday, as she can't do much herself anymore. So I've not got any plans to start up one trade a week again for now.

I agree that limiting one trade a week between Monday and Friday made it harder, but the point of it for me was to help with mine and the other participants trading education, to see other peoples analysis of the week ahead, setups they were considering and why, and to develop a trading method that could work across multiple markets consistently. I think it achieved this really well as the average true range position sizing and rating scale I developed worked perfectly across stocks, commodities and Forex. The other purpose was to study other people's trading methods in real time as the traders all had to trade live and update their stops and targets on the thread. This turned out to be very educational, as I got to see around 8 or more different people trade live every week for six months. For example one of the traders was an excellent Forex trader and had a very simple trading method which he used consistently. So even though I don't trade fx, I now know how to, to a certain extent, and know how it moves on a day basis now, which is very different to stocks and commodities generally.

I'm almost fully invested again for this long term account for now, so if time permits I'll probably start a new short term trading journal soon and see if I can trade my methods consistently and methodically and remove the impulsive trades which have always damaged my short term account in the past.
 
I've exited my silver trades this morning as the price closed back below the Kijun line after making a lower high the week before. Momentum is weak and the short term daily channel has been breached to the down side, so I've taken my small profits, which have mainly come from the move in the GBP/USD and stepped aside for a bit as I think there's a chance of a move back to the cloud support and possibly lower in the short term.

The monthly chart is interesting, as even though Silver had a fairly big down move in May, the 30 month weighted moving average is still far away below $30, and looking through the historical parabolic moves I can see that this was always approached before a move higher began again.

Below are my various charts
 

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Breadth indicators turning negative

The breadth indicators I follow have turned negative again after their short term bounce from the end of August, which I think is the final wave of this panic correction.

I'm mostly in cash, so I'll be looking for the breadth indicators to give buy signals again before I look to get back in, which is normally the end of October on the S&P 500 from my historical analysis of the last 50 years.
 

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I've signed up for CNBCs million dollar portfolio challenge which starts next week. I don't think I've got any chance of winning anything, but it could be good experience and help me focus over the next 3 months or so.

I've got some ideas of what I'll do with the $900,000 equity account part of it, but I've got no idea what to do with the $100,000 forex portion of it at the moment, as I don't trade currencies normally. I don't want to day trade them as it's too time consuming and I'm not a day trader, so I'll probably just swing trade using the daily and weekly charts and see how I get on.
 
Some breadth indicators turning positive again

A few of the breadth indicators moved back to buy signals again today. The market is whipsawing about on the daily charts so I'm not willing to get back in yet, but it a was a positive sign that the downtrend line was breached. However, it's a steep downtrend line so I think there's a good chance of more back and forth to go before the possible base building is done.

1130 was my roughly measured move using the swing rule from the head and shoulders pattern breakdown, and that has been reached. So, I'm hopeful that a new stage 1 consolidation is forming here although the 30 week moving average is still up at 1258.65 so we could have some time to go yet before the beginning of a new stage 2 uptrend.
 

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I'm quite pleased as my bear portfolio in CNBCs million dollar portfolio challenge has made 13% so far, which has got me to my highest position so far of 4215th out of the 600,000 or so players. So am in the top 1% which is nice. I doubt it will last, but is nice to have made a good start to it and would be good to make the UK leader board of which 20th place is only a 5% away from me at the moment. But I'll probably tank from here now.
 

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Am so close to getting on the leader board for the UK with my bear portfolio. Am now 2524th overall :D
 

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Nickel - entry

Trade

Ticker: LNIK.L (ETFS Leveraged Nickel)

Entry Date: 27/10/11 @ 08:01
Amount: 248 Shares
Entry Price: £3.9761 ($6.3934 @ fx rate 1.6075)
Commission: £12.50

Total: £998.57

Entry Reason
Nickel is at the lower end of it's long term range and looks to have based like the other markets over the last month. The CCI (Continuous Commodity Index), which is the basket of all the major commodities, gave a buy signal on Thursday and Nickel broke above it's short term range this week and has held above it.

The fundamentals also look stronger as inventories of Nickel have been continuously drawn down this year so there's much less supply in the market place.

Below are the charts:
 

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