Thursday, November 4, 2010

SPX above April's high!

SPX managed something unthinkable two month ago, it managed to climb above the April's high. Dow and Nasdaq were already there and consolidated their position today. I also noticed a spike in the volume today and yesterday the volume was not bad either. Of course a correction is always possible but I won't bet on that right now. I hope I am going to convince you, in time, that the best way to make money in stock market is to buy when your timing indicator gives you the signal then WAIT as much as necessary until the trend changes. You will always miss the bottoms and the tops with this method but is much better than trying to guess a top, go short and see the market moving further up or guessing the bottom, going long when you think the correction is over just to see the market plunging further down. Believe me, I did this mistake many times, I eventually managed to buy at a bottom or to sell at a top here and there but overall I lost money. When I see people on different boards bragging about buying exactly at a bottom and selling exactly at the top I know I am either dealing with liars or newbies that were lucky but who are going to lose their shirt on long term. Nobody knows when the market is going to top or to bottom, except Bernake of course and his inner circle but for the rest of us is practically impossible to anticipate this events.

But enough gossip, let's see what the market is telling us. Well... everything looks bullish, isn't it? The daily and weekly DMI, the moving averages on 60 minutes chart, the rising SMA50 and SMA200, the "golden cross", you name it. If the market decides to go south from here, so be it. I can afford to give up a few points after re-entering the market at 1080. But what if it continues to go up?

Dollar on the other hand plunged to a new low and consequently gold and silver rallied today. That's one of the reasons I don't trade neither dollar or dollar related ETFs, commodities, they depend too much on Bernake's printing machine. Not that the rest of the market doesn't depend on Bernake's action but there isn't a perfect correlation between the dollar and the market. They may go up at the same time or they can plunge at the same time, there is no rule here.

We do have some new friends from Cobra's blog. Since they are new to my blog I want to spent a few minutes on explaining my timing indicators that did a wonderful job this year. Last year was not bad either but there I had more whip-saws compare to this year when I had only two minor whip-saws. So, my goal is to ride every major wave up or down. I am focusing on what I call "intermediate time frame". This may be different from what you normally know as intermediate time frame. Mine doesn't have a precise length. It could be days, weeks or even months. My major timing indicator is EMa25 crossing EMA50 on 60 minutes chart. As soon as EMA25 climbs above EMA50 I am buying, as soon as EMA25 goes bellow EMA50 I sell and go short. I am also using SMA120, 120 hours, which represent 5 days. EMAs crossing and SMA5 give the buy and sell signals almost at the same time but sometimes you will see a difference, especially when a sharp move down is followed by a sharp move up (or the other way around). Why I chose these EMAs and 5 days SMA? I just played with many moving averages over time and I found that these are the best.

The system is making money when market is trending, it doesn't matter if is rallying or plunging big time. It's losing money when market is trading in a very tight range. For example market did trade in range from May to September but the waves up and down were long enough to make me some profit. On the other hand November-December last year was a time when my system did lose money but overall last year I managed to make good money since there were few big waves up and a couple of decent waves down.

Another indicator I am paying attention is DMI. This is a momentum indicator that doesn't depend on the price, as the moving averages do. I am using daily DMI as a confirmation of major uptrend or downtrend and weekly DMI for even longer uptrends or downtrends. 

If you have questions please let me know.

All the best!


P.S. Once again many thanks to those of you who clicked on the adds displayed on this page.


  1. We arrived at 1217.1217-1230 area is the Stalingrad of S&P.The index is widely overbought.Hindenburg Omen ON and awful fondamentals.I suggested gold and € stocks that widely outperformed Us stocks.Too euphoric people without sense..and weak cot of the market since the start.
    The 2nd part of november we'll start for new absolute lows.I'm clear.

  2. Your mistake is that you consider only Us is totally changed and weakness odf $ show this.Very dangerous point of view yours.Anyway thank you.

  3. why is dangerous? Last time I re-enter the market was at 1080 on SPX. I am staying comfortable on 140 points gain. If market turns south from here I may give away 30 points. Still 110 points gain, then I am going to make money on the short side.


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