This Economy is Stressful
John Lee, September 3rd, 2010 at 10:32 am, Comments: 0

I don’t talk politics or anything, but DAMN.

Re: Hair

Not tradeable info. Sorry.

$SPY Analysis 9/3
John Lee, September 3rd, 2010 at 9:00 am, Comments: 0

Very nice move here. We have two resistance areas marked from the 8/11 gap and at the 100-day MA (potentially the 200-day MA, if needed). We also have a gap at 8/19 that may be resolved. It’s a good time to sell some longs into this strength. I know I will.

Markets are closed on Monday, September 6th.

A Look at REITs (27 Charts)
John Lee, September 3rd, 2010 at 7:59 am, Comments: 0

The $IYR is up over 15% YTD vs. the $SPY which is down almost -2%. With that fact alone, it’s worth taking a serious look at REITs. Home builders are still struggling, but many REITs are near, approaching, or broke to new highs. If you have a personal bias against real estate, then this may be a bad time to harbor such opinions. It’s not about what you think, but rather what the charts tell you. Simply put, the REIT industry is doing extremely well given the overall market environment.

Below are an assortment of REITs that popped up on my screen. I trust that you’ll find a few good ones.

A Month Later…International Markets Are Still Outperforming Us!
John Lee, September 2nd, 2010 at 11:31 pm, Comments: 0

On August 8th, I wrote this post.

Almost a month later, this same group is STILL outperforming us. This group consists of the German DAX, Korea KOSPI, India Sensex, Singapore Straits, Indonesia, Sweden 30 Titans, and Malaysia are all outperforming us.

$SPY Analysis 9/2
John Lee, September 2nd, 2010 at 8:33 am, Comments: 0

Levels for today:

Looking at the AAII Bullish, Neutral & Bearish Readings from 2009-Present
John Lee, September 2nd, 2010 at 12:30 am, Comments: 0

The AAII does weekly sentiment surveys. You can find them here: http://www.aaii.com/sentimentsurvey. I’ve taken the extreme readings and plotted them onto the $SPY starting from January 2009-present.

The first chart consists of the lowest bullish readings and I chose all readings below 25%. Usually, when the reading hits the low 20′s, there is some sort of bottom coming or already in. The March 2009 reading was the lowest reading at 18.9%. We hit 20.7% last week, which was the lowest reading since the March 2009 bottom.

The next chart plots the highest neutral readings. I chose all readings above 30% because there aren’t any 40% readings. In 2009, there was only one reading at 30% or more. So far in 2010, we had 11 readings.

Finally, I plotted the highest bearish readings. Typically, these readings are synonymous with the lowest bullish readings, but not always. I chose all readings over 50%. Typically, they also marked some sort of bottom as well. We had the lowest bullish reading since the March 2009 low (the bearish reading was 70.2%), but the current bearish reading is ‘only’ 49.47%.

Finally, here is the data:

$SPY Analysis 9/1
John Lee, September 1st, 2010 at 7:55 am, Comments: 0

The most important thing today is if we first gap out of the descending wedge and if it holds. As of 7:53AM, we will be gapping above the upper segment. Like I said previously, there is potential sup/res at each point, and ~106 appears to be the closest support with ~107 being the closest resistance. If we can’t gap above, then the odds of a gap continuation significantly decrease.

For the Month Ending August 31, 2010
John Lee, September 1st, 2010 at 3:30 am, Comments: 0

How Long Do We Stay Neutral?
John Lee, August 31st, 2010 at 1:58 pm, Comments: 0

ETF Breakdown by Assets from 2009-Present
John Lee, August 31st, 2010 at 9:22 am, Comments: 0

Using data from ICI, I made some simple graphs to visual where ETF assets are located.

The following areas were considered: total, total market, large cap, mid cap, small cap, commodities, consumer sector, financial sector, health sector, natural resources sector, real estate sector, tech sector, utilities sector, global, emerging markets, government bonds, municipal bonds, corporate bonds, and international bonds.

All figures are in millions.

$SPY Analysis 8/31
John Lee, August 31st, 2010 at 7:16 am, Comments: 0

It’s the last day of the month and the market continues moving in an erratic fashion. The large neutral multi-month range as well as the smaller time-framed ranges are likely pushing people to a limit. Both primary trends and secondary reactions prove to be difficult to trade and anticipate. The market is down around -4.5% for the month so chances of a full recovery in monthly losses are almost nonexistent.

It looks like we’re forming  a flag, short-term range, and/or a simple holding pattern. The volume continues to dry up as the consolidation continues forward. The market went, up, then down, then up, then down, and that’s pretty much in-line with a 50/50 coin flip. These are not favorable odds. After fighting 106 support, the market failed and will likely require the 105 support level. The August 27th lows are a last resort support level until a full-fledged failure is declared. Honestly, anything can happen from this point and attempting to predict market direction is a bit futile.

We can see the established range here on the 10-day. We’re looking for some kind of major resolution:

On the 60-min chart, we’re still fighting a descending channel and lower highs and lower lows. We’ll need to break through this descending channel or risk another short-term leg lower. Although not 100% accurate, every point on the SPY from 104 to 107 will provide support or resistance.

‘Blocking’ is a way to simply visualize the measured moves up or down in any trend.  So far, there is no indication that there is a true reversal on the daily.

The other index ETFs are not faring well either:

Tread carefully, friends.

Separating the Pros from the Amateurs
John Lee, August 31st, 2010 at 6:39 am, Comments: 0

I think I stressed the importance of cash and/or hedging this entire month. It is no mistake. This is the longest overnight cash streak I’ve been in almost 3 years. Intuitive trading is partly about attempting to position one’s self for anticipated market conditions. This erratic market continues to be traded by those who remain stubborn.

The market is currently weeding out the most frustrated traders and it is quickly and obviously separating the professionals from the amateurs. The question is, which camp do you belong in?

The last 5 days says it all:

Congratulations Contest Winners!
John Lee, August 30th, 2010 at 12:24 pm, Comments: 0

Bella and I would like to thank everyone that entered the contest and taking your time to write out your best trades and sharing lessons that you learned with the rest of us: Jarsch, Randy Redman, Gary C, Jeff Wilson, Cal, Daniel Speer, Derald Muniz, Wynmill, Nomoreuquotes, Michael Hasson, Pc, Omar Worthy, SAL, Brian C, Trading in Zen, Greg Harmon, Johnleonidas, Shane Blackmon, Mannysanchez, Heinrich Dulay, and jjblacksheep.

To make things fair, Bella chose two winners and I chose one (in case anyone was wondering if I was going to pick my ‘three most favorite people’). I was looking for all of the conditions to be met but more importantly, the lessons that were shared. We all hear about how we should ‘learn from losers’ but executing those lessons and creating winners takes greater skill. After all, you’ll never know if you actually learned from a loser until you ‘make it happen’.

The winners chosen were Gary C, Cal, and Pc. Congrats folks!

Here are some lessons these guys shared with us:

1) Gary C

Lessons Learned:

1. Continuously learn and evolve: Regardless of your career, we must adapt to the changing environments. Without an open mind to accept changes in technology, views, tools, etc., you will become irrelevant and fail. Within trading, we must continuously learn to trade using new technology and tools while adapting to trade new markets and trade against new opponents.

2. Begin with small positions and focus on development: When trading a new style, product, or industry you are testing, use small positions and regardless of the outcome focus on the learning experience. Initially I was ready to trade DNDN with a normal size position and would have been stopped out immediately. If so, I may have given up on technical analysis and trading Bio-Techs altogether. However I traded a small position with a wider stop-loss than normal and allowed myself to focus on learning from the experience, even if the trade turned into a loss. The education of the trade would out weight the cost.

3. Trade the Plan with Discipline: Do not allow emotions to alter your trade plans. Although the trade may not be turning out, do not panic if the trade has not reached your stop loss. You set the stop loss for the sole reason the trade may reach near this level before approaching your target profit level. Do not anguish over each tick as this will not help with your stress level and development.

2) Cal

Lessons learned:
1. If you see a high probability pattern with a good risk/reward: Take it! Even if it’s not moving with the general market. There are stocks that go down in bull markets, and stocks that go up in bear markets.
2. I checked for earnings on this stock before I held overnight because I don’t hold into earnings. The catalyst for the gap down ended up being an announcement made in an earnings conference. So the lesson here is to simply trade in the direction of the primary trend, and the reaction to whatever news that comes out will tend to be in your favor.
3. Don’t take all your profits until there is a reason to. In this case, the profit was so large, I had to take a little bit off to stay calm. This allowed me to ride my remaining shares down another 12% from the open. Over the long run this will lead to more profits. Let your winners run and stay calm.
4. Do your homework every night. I found this setup by scanning through hundreds of charts.
5. Use multiple timeframes, and most importantly, keep your charts clean and simple.

3) Pc

I learned a couple of important lessons – first of all, when public perception is OVERWHELMINGLY in one direction, there is a good chance that a reversal looms near. Secondly, if a chart really catches your eye specifically because of very appealing risk-reward for a swing/positional trade, even if initial entry is missed, it is worth monitoring until the entry point presents itself. I was convinced USO was overbought, and my beliefs were strengthened by the obsession with crude oil prices that was the prevailing public sentiment of the day. I waited patiently until the correct opportunity presented itself, stuck to my rules, followed the technical cues, and it ended up being the best trade of my life.

It’s important to note that everyone traded something different and had their own way of making money. There isn’t one right way to trade. The important thing is that you trade what best fits for you. Feel free to go back to the contest post and take a look at how everyone traded to achieve their best trades ever. We can all certainly learn something from everyone that posted. All of you folks had ‘One Good Trade‘ and we are thankful that you guys shared your experiences with us.

For the three winners, please send Bella an e-mail (mbellafiore@smbcap.com) with your name, address, e-mail, and phone number. The book is sold out on Amazon, but you guys are going to get your copies directly from the author!

$SPY Analysis for 8/30
John Lee, August 30th, 2010 at 9:01 am, Comments: 0

Today might be a day where we digest Friday’s move. There is some resistance up here and 107 is a key level to watch. There is major short-term support at 106 and everything in-between.