Friday, March 09, 2007


My system has moved higher and the buy signal is on. We are now at -625 in my system. Keep in mind that this recovery for the bulls is still very fragile especially since we didn't get to the
-1000 level. If we assume this was the bottom week then 2340 was the low and any break of the high of 2404 gives more credence to the bottom-is-in theory. My personal feeling is that the system's uptick should be respected but the fact we only hit -700 places an added layer of risk into the equation. Basically, if stocks don't perform bullishly from this technical signal then they should be dumped like a hot potato. As mentioned yesterday, I will be away for a few days and will post either next Thursday or Friday. Have a great weekend!


Blogger pursuitist said...

As your system is of very little use from a ST or IT trading perspective, and since you have always--as far as I know--given your system's signals precedence over index numericals, i.e. 2404--why now is that number more important than -1000 in your system? You've often treaded a fine line of having it both ways (if you select card a. than it's card a; if you select card b than that leaves card a.) but you've now published a post that leaves no room for you to be wrong. That's not TA, it's bad child's birthday party magicianship.

7:27 PM  
Blogger jason said...

pursuitist, you're actually confusing two different things here. The -1000 level is the technical analysis and the actual trading off of that signal is risk management. To rely 100% on technical signals is foolish as there is not one signal that is 100% accurate. That is why risk management comes into play. When you trade off of these signals you should always have a way of getting into the trade and most importantly, getting out of the trade if the market goes against your trade for the least amount of loss. In my opinion, the skilled traders are the ones that can minimize their losses the most from their losing trades. Since my system generates intermediate term signals at the +1000 and -1000 levels I have found through experience that the best way to manage risk is to make the assumption that when my system turns that a top or bottom has been made on the weekly chart. If I have assumed that the bottom is 2340 then the market should not trade below that after breaking the bottom week's high of 2404. The market will likely drift into that range of 2340-2404 again after breaking the high, sometimes 3 or 4 weeks later, and everything should be bought inside that range that you can get your hands on. But if 2340 doesn't hold, all of it should be dumped to minimize your loss as the signal failed and cash should be raised for the next signal. Keep in mind that the above example is actually for a
-700 bottom which I don't have as much confidence in and makes this particular trade much riskier than if we had breached -1000. There are other subjective nuances in my system like divergences that can affect my confidence in a particular signal as well. I urge you to go back to past bottoms in my blog over the past 2 years. My system works fairly well but is not perfect, nothing is. And if you're looking for the Grail you'll never find it let alone on a free financial blog. I have often encouraged my readers to use me as a contrarian signal as well as long as it helps them make money because then if I'm wrong you'll make money too. I'll leave you with a phrase that has helped save me from many costly errors over the years, "A trader that doesn't change his mind will soon have no change to mind". Thanks for reading!

8:19 PM  
Blogger Ghosta Da Reaper said...

Looks like my take last week about tumblin Earl wassa off....but it is still valid. Basically Earl as tracked by USO did nuthin this past week.I am very happy to see Earl separatin fom da mawkets though. We went for a loooong period of time where Earl and equities (even airlines!) traveled in lockstep. I think that is going to change short term as traders equate fallin Earl prices as a reason fo Bernanke to lower rates if da indicies ainna makin new highs. I think the high was put in on da Naz and I seriouly doubt da naz gets above 2500. In fact, it is questionable if it will even fill the gapdown from "china Tuesday" LOL We see da VIX backin off nicely and I am stickin wit my take that it'll break balow 9.75 bafo the end is near....but since fokes is gamin the VIX options and John Nejarian on da Fast Muny flunkies may have em all excited enuff to get their a$$es handed to em I guess that's EXACTLY what will happen. Can I get the naz to get it all dunn by Fri since my promus dat da coming mawket calamity will be a Fri/Mon event like 1987? Stay tuned sports fans. *-)

8:05 AM  
Blogger pursuitist said...

Jason, Here's a link to a humorous if insightful bit of goofy TA by my friend, Curt.

The last five IT corrections in the Nasdaq have all followed five wave correction patterns. He goes to some artistic lengths to show that we're due for an upleg now or very soon.

Your post yesterday says that if ANY break of 2404 gives credence to the the "bottom is in" theory. It would also give a lot of credence to the theory that if you actually look at historical charts you might learn something from past pullbacks. Yesterday we reversed at the nasdaq pivot of 2404 (43.3 QQQQ) There is a confluence of resistance (attractants)at 43.75 (2440) If we go there it won't be any different from the previous 5 IT tops that zigged up. Stick to you -1000. Let me worry about risk.

I've watched enough of what you do to know not to fade one of your (1000)tops or bottoms, and also enough to know that more precise timing models are required to truely use the imformation well.

By hedging your system, and your statements, with a poorly thought out risk analysis your watering down what you do well--you're taiking away from your system not adding gto it.. --Bob

1:43 PM  
Blogger pursuitist said...

3:06 PM  

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