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Where Are We?

Here are some ugly charts for your perusal.

The Dow's 358-point drop today took it to levels not seen since September 2006, and according to Eddy over at Crossing Wall Street, the Dow is now negative for the millennium.

The Dow is the most oversold of the three major indices with an RSI(2) reading of .94. Not sure I've ever seen such a low reading before, and normally I would be going long to grab a quick bounce, but not this time.

Today's market had a very weird feel to it. There was no panic, volume wasn't huge, and at times the market was moving so slowly I began to wonder if a reversal was in order. The Nasdaq TICK and TRIN disabused me of such an idea, but it just felt like a typical boring day out there except for the one-way nature of things.

Guess I thought the end of the world would be more climactic.

The S&P 500 is moving back to the January and March lows. January's low is 13 points away, which could easily be tagged during Friday's trade, while the March low is 27 points away, which also is within reach but a bit more of a stretch.

Finally, the S&P has an RSI(2) of 8.87. Again, a great candidate for a swing trade bounce play, but until the market demonstrates some sort of stability, I'll be sticking to day trades with a heavy emphasis on shorting rallies.

Then there is the Nasdaq Composite.

Clearly the strongest market index at this point, it is 119 points away from the January lows and 160 points away from the March lows. Both are within reach given a couple days of trading, but unlike the other two indices, tech doesn't seem to be in all that big a hurry to test the year's lows or set new ones.

And, with an RSI(2) reading of 16.29, it is not quite ready for a swing trade bounce play.

So, where are we and where are we going? I don't have the foggiest idea. 

The path of least resistance is clearly down and I don't see anything providing a strong enough catalyst to turn the market around. I expect a bounce sometime in the next day or two as shorts take profits, but any such rally will be an excuse to go short again.

While many companies are reporting good earnings, they also are guiding lower for the next quarter or two, so I'm not expecting great things on the bullish side of the market this summer.

The Random Portfolio: Week 4, Day 3

Things are staying positive for the portfolio so far this week, although ARTC and FIC are holding it back somewhat. On the positive side, MVL is up over seven percent.

Overall, these 10 stocks are showing a .57 percent profit over three days.

The Random Portfolio: Week 4, Day 2

I have been derelict in my duty regarding posts on the random portfolio, so I thought I better get something on the blog introducing week four of this experiment. 

These stocks were purchased at Monday's open and will be sold at next Monday's open. 

The Girl Likes To Fish

I took my oldest daughter fishing this afternoon and she caught her first fish, and then her second, third and fourth ones, too! The day's tally included one bluegill, two perch, and a largemouth bass. 

Unfortunately, none were big enough to keep, as you can see in the picture, but the smiles sure were keepers! We're going out again Tuesday afternoon, weather permitting.

More Power, Scotty, I Need More Power!

Forbes has an interesting article concerning the looming electricity shortage in the United States, including this nugget:

Right now the nation has 760 gigawatts of power plants to meet current consumption, with another 154 in reserve capacity to maintain grid reliability. But in fact only 10 gigs is truly excess capacity. The other 144 is utterly essential to keep lights on when unexpected demand arises from heat waves, outages or maintenance downtime. That reserve will begin to shrink quickly. NERC estimates that over the next decade 135 gigawatts of new capacity will be needed to meet the growth in consumption. But right now plants producing a total of 57 gigawatts are planned.

You can and should read the whole thing here.

I like to think that eventually voters will get smart and realize that a growing economy needs more, not less, energy of all kinds, including clean coal, nukes, oil, natural gas, solar and wind.

Unfortunately, I believe voters won't demand energy friendly policies until the personal financial pain, and the resulting national economic catastrophe, reach epic proportions.

We're starting to see that with oil prices and increasing demands to increase domestic oil production, but right now it is just noise, it will probably take $5 gas before the Congress critters actually start listening. However, approaching supply and demand problems with electricity are not even on the radar screens of average consumers, so it will come as a complete shock when people flip the light switch and nothing happens.

Until that shock turns into voter outrage and then into policy changes, it may be wise to do as the Forbes article suggests and buy some candles.

Senate to Debate Bank of America's Bailout Bill

Legislation that would bailout the mortgage industry and ease the way for Bank of America's purchase of Countrywide Financial is scheduled for debate in the Senate on Monday.

The Heritage Foundation has a critique of the bill here, while The Examiner notes that Bank of America essentially wrote the Senate bill, which is sponsored by Senator Chris Dodd, who received special treatment on a mortgage from Countrywide.

Also, The Corner has obtained a copy (PDF) of a Bank of America discussion document on the proposed legislation.

Moral hazard anyone?

The Random Portfolio: Week 3 Review

It was a rough week for the market but a profitable week for the random portfolio, which gained more than $500 over the last five days thanks in large part to DNR's $1,373 profit.

Six of the portfolio's positions finished in the black, while one (PTRY) hit the eight percent stop loss. The overall win rate is 33 percent and the return since inception is minus 4.2 percent vs. an S&P 500 return of minus 3.28 percent for the same three weeks.

All the gory trade-by-trade details are in the table below.

Finally, the portfolio will be repopulated with 10 new stocks at Monday's open, and I will post charts of those stocks over the weekend.

The Random Portfolio: Week 3, Day 5

Back from vacation and trying to catch up, so here is a quick update on the random portfolio. I'll have a full update on the random approach this weekend.

The nine stocks in the portfolio -- one was stopped out this week -- will be sold at Friday's open and replaced with 10 new stocks at Monday's open. Again, full details this weekend.

Heading to the Lake

We're heading up the the family cottage in Grand Haven, Mich., and won't be back until Wednesday night. I plan to spend more time flying a kite on the beach than trading or blogging, so updates will be sparse, except for the occasional photo blog post.

Here are a few pics from our last trip north in May.

My seven-year old flying her kite

My soon to be four-year old with a snack

The water temp was only 48 degrees, so the girls
had to chase the waves rather than go for a swim.

The Random Portfolio: Week 3, Day 1

A nice little bounce for the portfolio but it would have been better had BRP behaved.

The Random Portfolio: Week 3 Introductions

Welcome to widows and orphans week at the Swing Trading Randomness Experiment! 

The following 10 stocks are either shattered and crushed remnants of their former selves, or are working hard at testing support levels that could easily give way in a moderate market breeze. One or two might actually be legitimate trading candidates for chart chompers, but overall this is a sad and depressed looking group in need of a self-esteem boost. 

This week's random candidates are: DNR, MCK, AMP, ARW, BRP, PTRY, BCSI, DST, TTI, and CNQR. The market orders have been placed in my paper trading account at Investopedia and will be filled at Friday's open. Each position is allocated $9,526 of our make believe capital.

The Random Portfolio: Week 2 Review

The nine stocks remaining in the random portfolio were sold at the open Thursday, leaving the portfolio with a balance of $95,265, or a 4.7 percent loss after two weeks. In comparison, the S&P 500 is down 3.8 percent over the same time period.

Since inception, two stocks (BCS & FMBI) have hit the eight percent stop loss while four trades were closed with a profit, which gives the random approach a win rate of 20 percent.

Not much to write home about, but then this little experiment was initiated at the market highs for the year! At least we'll get a feel for what type of drawdown can be expected from a random entry system!

I'll have a post up first thing Friday morning with the charts of the next 10 stocks for the random portfolio. 

QLD & SSO Oversold, DDM Not So

QLD and SSO, the double long ETFs for the Nasdaq 100 and S&P 500 are both showing oversold conditions with RSI(2) readings of 4.79 and 8.81, respectively. Meanwhile, the Dow 30 via DDM is not quite in oversold territory with an RSI(2) of 11.61.

While I believe the market is due for a bounce, I am hesitant to jump in here due to the technical damage that has been done. Each of these ETFs have now closed below their MA 50, the last line of major support that doesn't rely on round numbers or previous lows 

SSO and DDM have been trading below the MA 50 for several days, but today marked the QLD's first trip below that line since late March-early April. It flirted with support in mid-April, but it hasn't been close since.

Since QLD is the most oversold and closest to the MA 50, I may dip my toes into the tech waters ever so gingerly sometime tomorrow, but then I might not. With LEH crashing lower every day in spite of its $6 billion capital campaign, it is beginning to feel a lot like January and March when financial panic was bubbling to the surface.

Whatever you do, be careful out there. Any hiccups in the LEH deal and we'll see minus 500 on the Dow in a heart beat.

The Random Portfolio: Week 2, Day 5

Bears are inflicting extreme technical damage on the indexes and the random portfolio this week. 

Today, FMBI was stopped out for an eight percent loss, while the remaining nine stocks in the portfolio slid further into the red. Overall, the random approach has lost about 4.7 percent since inception.

All stocks will be sold at tomorrow's open and then the next 10 stocks on the random list will be purchased at Friday's open. An updated trading journal will be posted tomorrow night, along with charts of the next 10 candidates.

The Random Portfolio: Week 2, Day 4

A slow grind lower.

The Random Portfolio: Week 2, Day 3

Today was a no harm no foul market day with a sell off in the morning followed by a 3:30 p.m. rally. The random portfolio finished the day slightly better than it started, but not by much.

There are three stocks inching their way deeper into the red, so I threw stop loss orders on DRH, FMBI and PFG to limit the downside risk of each trade to eight percent. FMBI is down nearly six percent from the entry price, so I wouldn't be surprised if it gets stopped out, although financials have to bounce at some point, at least for a day.

MA 50 Cross Over Update

Triple MA Cross Over Update

A Guy Like Him Should Just Shut His Face

Photograph: Nicolas Guerin/Corbis

I've always liked Clint Eastwood. The Guardian has a great interview with him here. Enjoy.

Trend Following System Pick: DISH

The Random Portfolio: Week 2, Day 2

Friday's selloff wiped out Thursday's $2,300 gain in the random portfolio and drove it into the red to the tune of $787. Total value of the portfolio is now $98,038, or a two percent loss since inception.

REO Speedwagon: 157 Riverside Avenue

Triple MA Swing Trade: CY

The Triple MA Cross Over filter issued eight buy signals after Thursday's close and CY was at the top of the list. The stock appears ready to launch, at least back to $32 and change. 

The stochastics are pointing up; the MACD is ready to cross; the RSI(2) is pointing north into oversold territory; there is substantial support at the MA 50 and 200; and volume is respectable but not spectacular.

I will be going long at the open, unless the world falls apart pre-market thanks to the employment report.

Trend Following System Pick: DISCA

DISCA will be added to the long-term trend following portfolio tomorrow.

The Random Portfolio: Week 2, Day 1

Nothing to say but wow. Trend days are nice!

The random portfolio is back in the black after outperforming all three major indexes today with a 2.38 percent gain. The Nasdaq rose 1.87 percent, the Dow 1.73 percent, and the S&P 1.95 percent.

The Random Portfolio: Week 2

Here are the selections and position sizes for week two of the trading randomness experiment. These trades take effect at the open.

I am making one change in the methodology of the experiment. Instead of creating a new randomized list of stock symbols each week, I will simply by the next 10 stocks on the first random list I generated last week. The purpose of the change is to save time.

Since the portfolio lost money in week one, the capital committed to each position has been reduced from $10,000 to $9,866. An eight percent stop loss will be put in place after the buy orders are executed.

Now on to the charts:

One Step Closer to a New Oil Refinery

There has not been a new oil refinery built in the United States in 32 years, but voters in Elk Point, South Dakota, Tuesday night took the first step in expanding the country's domestic refining capacity by approving the rezoning of 3,292 acres.

When completed, the Hyperion Energy refinery will process 400,000 barrels per day of Canadian tar sands crude.

Let's hope the project gets past the enviros, who are pledging to delay the project as long as possible.

Full story is here.

RSI(2) Buy Signals

There are four RSI(2) buy signals, they are USO, DDM, XLF, and SSO. Here are their charts, starting with the lowest RSI reading. For a good discussion of USO, I recommend stopping over at Woodshedder's place.

As for XLF, it issued a buy signal on May 20 and the trade is still in play because the RSI(2) has yet to hit 80 on a closing basis. In any event, trade financials carefully because I don't know if that sector has anything remotely resembling a bottom.

The Random Portfolio: Week 1 Review

The nine remaining stocks in the random portfolio were sold at the open, unfortunately, because the morning rally might have improved results a bit.

After week one, the random portfolio lost $1,334.80 or 1.33 percent, by comparison the S&P 500 index lost .74 percent over the same time period. The biggest loser in the portfolio was Barclays, which hit the eight percent stop loss Tuesday morning, and the largest winner was DBRN, which made $775.10 or 7.7 percent.

Below is a trading journal with all the gory details. For the record, I stole the journal format from Trader Jedi's Google Doc, which began life as an Excel spreadsheet from Trader Mike.

The next step for the random portfolio is to purchase 10 new stocks at Thursday's open. I'll have a post on the new portfolio after Thursday's close.

The Random Portfolio: Day 5

Smoked.

That is the only way to describe the last couple day's impact on the random portfolio. Financials and brokers have been knee-capped and that hasn't helped the Barclay's or NDAQ positions.

NDAQ is now in the hole and Barclay's was stopped out this morning for a $787 loss. The remaining nine stocks will be sold at tomorrow's open, and then replacements will be purchased Thursday morning.

The account equity now stands at $99,330, so it appears the first week of randomness will end with a loss of $670, give or take a few after slippage and commissions

Triple MA Swing Trades: THO & CXW

I opened small positions in THO and CXW this morning, these are Triple MA Cross Over picks. THO and CXW will be held for five days or sold if an eight percent stop loss is hit, which ever comes first. 

RSI(2) Swing Trade: DDM

DDM, the double long ETF for the Dow 30, finished the day oversold with an RSI(2) of 6.03.

Given the afternoon rallies yesterday and today, I was beginning to wonder if we would get an RSI(2) pick this week or not. I'll probably open a position in DDM sometime tomorrow, especially if we get a substantial sell off sometime during the day.

Hacking Roomba

The Roomba busily cleaning my kitchen floor as I type isn't nearly as cool as this one.



Personally, I think the guy has way too much time on his hands, and if you do too, then you might be interested in Hacking Roomba.

The Random Portfolio: Day 4

Smack down! Barclay's and NDAQ didn't help the random approach today, which dropped an impressive $1,800 from Friday's close. Those two stocks alone were responsible for about half of the drop.

Tomorrow is the last day for these 10 stocks, then they will be sold at Wednesday's open and replaced Thursday morning with 10 new ones. Let's see if Tuesday can bring a modest recovery.

Bo Diddley dies at age 79

Swing Trade: QID

I closed my QID trade when it went parabolic on the 12:30 bar. Got out too early at $38.69, but still managed a 3.7 percent gain from my entry at $37.31 on Friday.

MA 50 Cross Over Update

Here are the year-to-date results of the MA 50 cross over system.

Trend Following System Pick: FLIR

My trend following system issued a buy signal for FLIR after Friday's close. The stock has had a nice run since late April and looks primed for a pullback, but ya just never know. At this point, I plan to buy at Monday's open.