TimerFrank's  Instablog

May 22, 2013 (by Frank Kollar)

Shares of IShares Silver Trust (NYSE: SLV) posted an interesting bullish chart pattern on Monday, May 20th.

There has been little in the way of bullish anything for SLV since back in August 2012. With the exception of a few bullish weeks, the trend has been decisively down.

The pattern we noticed yesterday is on the daily chart. It was a bullish outside reversal day. This occurs when the intra-day lows and highs were greater than the prior day's trading range and the close was at the highs.

In this case, it occurred after an extremely bearish month, and the day opened at a new trading low. The direction changed and SLV closed dramatically higher than even the prior three trading days.

Chart Courtesy of StockCharts.com

Typically such days are followed by a change in trend, at least for awhile and sometimes for a new sustained trend.

We need to see follow through to confirm a change in trend. As of Tuesday, may 21st, we do not have confirmation.

It is worth keeping an eye on SLV for a possible bullish trade.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy does not have a position in the IShares Silver Trust.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Winning market timers have learned to control their impulses. They can follow buy and sell market timing signals effortlessly. They show extreme self-control.

Rather than give into their urges, they stick with their timing strategy knowing there will be days when they are in the red, but that over time they will be profitable and also (importantly), they will never suffer a big loss.

Depending on your personality, you may have difficulty controlling your impulses. But whether you find discipline easy to control or difficult, there is much that can be done to ensure you follow your timing strategy.

Regret Comes Later

The most common way market timers act impulsively is by abandoning their timing strategy.

Once you decide to follow a specific timing strategy, it is vital to follow it. But this can be difficult to do. Even though we have years of experience here at FibTimer, that does not mean we do not have the urge to change a trade.

Those years of experience have not dulled our emotions, but they have taught us to stick with our timing strategy. Like anyone else, we learned the hard way. We exited strategies with the best of intentions and with great conviction. We also lost money almost every time.

It seems easy when you first start following a strategy, but while in the midst of a bullish or bearish position, it can be hard to stay with it.

At any given point, you may look at the market action and think, "there's no way this trade can work."

If you are an extremely seasoned timer, you have the experience and judgment to stay with the strategy. Novice market timers, in contrast, tend to abandon their plan prematurely, and regret it later when they find that had they been able to stick it out a little longer, they would have made a greater profit, or avoided a big loss.

It may be hard, but novice market timers must fight the impulse to exit a position prematurely.

The Big Picture

The first step to gaining impulse control is to identify the "reasons" you want to control your impulses... in other words, the downside of abandoning the timing strategy.

The obvious reason market timers desire to stay with a strategy is to maximize profits. The profits on winning trades must compensate for losses on losing trades.

Following a well-defined timing strategy usually insures profitability overall. You will have an easier time sticking with your plan if you frequently remind yourself that in the big picture, following the strategy is the key to profitability.

You may even want to write it down on a post-it note and stick it on your screen, so that while you are struggling to fight an impulse, you'll remember why you are doing it: The more discipline and self-control you achieve, the more profitability you'll achieve in the long run.

Fear And Greed

Many times impulses are difficult to control because of emotional states.

The emotions of fear and greed are the two most compelling urges that trick market timers into abandoning a perfectly good timing strategy. Exiting a timing strategy may give you a good feeling for a day or two, but you will have joined the "herd," of millions of investors. And overall, the herd loses money.

By self-monitoring your emotions, you can identify how they lead to impulsive decisions. By identifying how fear and frustration precede impulsive decisions, you can control these emotions and remain disciplined.

It takes time to control emotions. Don't give up. Staying with a timing strategy through a difficult period, and then realizing you have not only beaten the market, but also your own emotions, is very rewarding.

Staying with a timing strategy for several years, and looking back at the huge up and down market swings caused by the emotions of investors (the herd) and realizing that you not only avoided them, but steadily achieved a profit when most have lost money, is incredibly rewarding.

May 8, 2013 (by Frank Kollar)

Shares of IShares Russell 2000 Fund (NYSE: IWM) recently broke out above their mid-march rally high on Monday, May 6th. But the current rally is approaching strong resistance.

IWM 96.54 is the 127.2% retracement resistance level and this is only a fraction from Wednesday's likely close.

The important resistance level though that we are watching is at IWM 98.56. This is the 161.8$ retracement resistance level and the most likely to cause a reversal.

Chart Courtesy of StockCharts.com

That said, a decisive close above IWM 98.56 would be a bullish indicator for this volatile and widely traded exchange traded fund.

Watch the 98.56 level for a possible reversal.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy does have a position in the IShares Russell 2000 Fund.

Disclosure: I am long IWM.