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Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Wednesday, October 5, 2011 - Short Term Update 10 comments
    Oct 5, 2011 4:47 PM | about stocks: SPY, DIA, QQQ, FXE, UUP, VXX, TLT
    Tuesday Recap: 
    "It's pretty simple. Technicals are bullish + cycles are bottoming + sentiment is terrible = Buy. Long the SPY, risk adjusted stop is an hourly close below the 108 - 109 area"

    Wednesday:
    Risk appears to be back on. All the major indexes participated as well as the Euro vs the dollar. The TLT dropped and the VIX plunged. All in all, this is what we wanted to see as temporary bulls. Trading indicators have moved up from oversold to the low-neutral range. Swing indicators, namely the $NYMOT never got as low as I would have liked but I surmised it might be part of a bullish divergence. So far it looks like it may turn out that way.


    $SPX / $NYMOT: bullish divergence?

    Notes: The 5 day moving average (red line) never got as oversold as I would have like. That said, we had several lows in the $SPX, with higher lows in the $NYMOT, producing a possible bullish divergence, which often occurs at swings.

    Investor's Intelligence latest survey was released this morning, showing percent bears continued to rise, and bulls disappeared. Which is what we want to see (at least while we are bullish). A friend asked me where the money was going to come from that could propel this market higher. A good question, had it been asked 4-5 months ago. This latest survey shows us that question to really ask, now that bears are in the majority is: Where are the short sellers going to come from that can continue to push this market lower? This doesn't guarantee success of course, but as temporary bulls, it's nice to have sentiment as a tailwind.


    Notes: Bears (red line) take over.


    Summary:
    Traders:
    Stay long SPY, move stop up to 110. With an entry between 111 and 112, we are now only risking a 1-2 point loss.

    For now, there isn't much to do except to continually raise our stops in an effort to continue to reduce risk, and preserve our capital, should the market reverse and fall. Once the first trading indicator gets overbought, profits should be taken on a portion of the trade. The rest can be left on should the market continue to run to even higher extremes, while again, raising our stops to protect any gains we may have accrued.

    Investors:
    The rally looks like it should continue higher. Once the first indicators start looking "overbought" I would recommend bailing out of remaining long equity positions.


    Themes: "Investor's Intelligence" Stocks: SPY, DIA, QQQ, FXE, UUP, VXX, TLT
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Comments (9)
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  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Great stuff as usual, thanks!
    5 Oct 2011, 06:38 PM Reply Like
  • jong82
    , contributor
    Comments (7) | Send Message
     
    thanks!
    6 Oct 2011, 04:49 AM Reply Like
  • Bill L.
    , contributor
    Comments (682) | Send Message
     
    Author’s reply » Thursday morning, 11:30am...

     

    Moving my stop. Half will be stopped out at with a quarter hour close below 113. Moving the stop up from 110 to 111 on the other half. This way, at worst I will make about two points on half and break even on the other half if the market falls apart.

     

    -Bill L.
    6 Oct 2011, 11:28 AM Reply Like
  • Bill L.
    , contributor
    Comments (682) | Send Message
     
    Author’s reply » Thursday afternoon, 1:30pm

     

    Moving my stop up again.
    Half out if there is a quarter hour close below 114 SPY.
    Remaining half stopped out if there is an hourly close below 112 SPY.

     

    I can no longer lose money in this trade.

     

    -Bill L.
    6 Oct 2011, 01:33 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    SELL SELL SELL sit on your hands until after the # tomorrow.
    6 Oct 2011, 02:46 PM Reply Like
  • Bill L.
    , contributor
    Comments (682) | Send Message
     
    Author’s reply » I tend to agree... with +700 Dow points strait up off the low and the trading indicators getting rich, the market looks like it is set up to fail on the non-farm number.
    6 Oct 2011, 02:59 PM Reply Like
  • Bill L.
    , contributor
    Comments (682) | Send Message
     
    Author’s reply » Before the close:

     

    I may sell half with a trailing stop of about 113.50 SPY (or perhaps the whole position today before the close). I can tell, even before things settle out that the short term trading indicators will have been pushed from oversold to overbought in just three days. I'm not really interested in shorting the market, but with all the short term indicators moving to the overbought range, I'm not terribly interested in holding a large long position either.

     

    -Bill L.
    6 Oct 2011, 02:46 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Smart, Bill, I enjoy reading your stuff, it helps me alot.
    6 Oct 2011, 02:49 PM Reply Like
  • Bill L.
    , contributor
    Comments (682) | Send Message
     
    Author’s reply » Position closed at 115.50.
    6 Oct 2011, 03:23 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Better safe than sorry! I tell you what though, if that # is good tomorrow, it's going to be a 3% - 4% day, and I want in on it.
    6 Oct 2011, 04:07 PM Reply Like
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