Daily Archives: December 14, 2009

Buy, Hold, and Sell for 2010

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If there is one word I would use to describe 2008, it would be exhilarating. For 2009, I would use the word draining. I have put all my energy in analyzing and trading in 2009. On an absolute scale, I have done OK this year. On a relative scale – which is the one that really counts – I have stunk. I am disappointed in myself and have tried to learn as much as I can from my errors.

With this in mind, I offer those beliefs which I plan to "buy" for the coming year, those on which I am neutral, and those which I plan to "sell".

Buy

  • Precious Metals – I have been a doubting Thomas on this the entire time, and I was wrong. The frantic creation of fiat currency by the Fed has been a godsend for precious metals fans. I cringe at the fact I sold my bullion a year ago, buying into the EWI notion of a plunging gold market. I am planning to be a proud member of the gold bandwagon.
  • Retracement Levels – This is one of the few technical methods that has been, at best, indispensable, and, at worst, non-harmful.
  • Setting Stops – risk management and consistent use of stops has saved my neck this year. I have been extremely rigid with this habit, and with good reason.
  • Inverted Head and Shoulders – Specifically, at the top of price movements (or at least not at the bottom). I used to dismiss this pattern, but both gold and equity indexes in general have shown this pattern to be powerful and effective. I'm a believer.
  • Diversification – A large number of small positions is a style that works for me, and it has done me more good than harm this year.
  • Rampant Consumerism – It saddens me to realize this, but Americans will not shake their profligate spending. All the anecdotes you see about the new austerity are a big pile of crap. The citizens of this country will buy stuff they don't need with money they don't have until the end of time. Shame on me for thinking otherwise.

Hold

  • Elliott Wave - The jury's still out on this one for me. During the bear market, I wanted to know everything I could about EW. At this point, I'm really starting to wonder if, as many people say, it's a spiffy way to mark the past, but useless as a predictive tool. I'm willing to withhold judgment for now.
  • Options – Nothing against them specifically, but my style of trading has changed such that I've stopped trading options altogether.
  • 1937 to 1942 analog – I have been "married" to this analog pretty much all year. Perhaps I should have this in the "Long" list, since its prediction of a huge upmove has panned out, but my skepticism is on the uptick since its call for a downward turn has missed, and missed, and missed. Again, the jury is still out. Some meaningful weakness between now and year's end would strengthen the case.

Sell

  • Cycle Analysis – I was thumbing through my Trading Tome, and I saw example after example of compelling looking cycle predictions which didn't amount to jack squat. From lunar cycles to the Caralon spiral calender, this entire category has been a letdown for me.
  • Apocalyptic Viewpoints - Bearish as I've been, I've never been a jumping-up-and-down the Dow-is-heading-to-400 windbag. There are plenty of folks out there who are, and I've learned that their viewpoints have as much credibility as the Dow 36,000 crowd.
  • Overnight Trading - Trading the /ES was really profitable for me in late 2008, but between the thin-volume shenanigans and the bolt-from-the-blue spikes, I quit the /ES trading scene months ago. I don't intend to go back.
  • Doubting Manipulation's Efficacy - I was skeptical that the government could manipulate the markets, mainly because I figured if it was so easy, the collapse in 2008 wouldn't have happened in the first place. It seems that the government simply got caught with its pants down, but once they had the tools in place, they can make the market do whatever they want. Sad, but true, and important to recognize.

So that's it; I was a pretty cynical fellow a year ago, but my cynicism has probably doubled now. I'll be as cynical as I need to me in order to succeed in my trading. I want to draw as many lessons from this year as I can.

One of Each

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In the spirit of being balanced, I offer one short idea (CNW) and one long idea (LLL, which I bought last week).

1214-cnw
1214-lll   

One final thought – – – there's been a lot of chatter about how boring the market has become lately. It makes me wonder if what we're seeing today is the shape of the rest of the year………..that is, just running out the clock. The /ES has been at 1108.50 for so long, I keep wondering if my ticker feed has stopped.

Another 700 Points?

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I did a lot of soul-searching this weekend, as I considered what the balance of this year might hold and what changes 2010 might bring. I may be a bear at heart, but I've got eyes, and when my long positions are almost all in the green, and my short positions keep getting stopped out, it does occur to me that the bulls may be ending this year with a flourish.

Earlier today, I sought to balance things out with a large position in UWM (the ultra-bull on Russell 2000) and USO (crude oil). As dismissive as I've been of the inverted H&S pattern on several indices – like the Dow 30 – maybe this pattern merits attention after all. It's a sloppy pattern, yes, but if we keep this kind of strength up (take note we're at a new yearly high on the Dow today), all the resistance levels are going to fall away, and it seems an easy climb to the next 11,250 threshold.

1114-$indu
 

The past nine months have been sensational for the bulls, and it would be no surprise if they'd want to wrap up 2009 with gusto. I'd rather not get completely trampled in such a scenario, so besides the large bullish positions I mentioned at the top, last week I accumulated a smattering of smaller long positions, which I reviewed in my video a couple of days ago.

And I'm not saying this because today is some kind of blow-out on the Dow; as I'm typing this, it's only up 33 points. But a new high is a new high, and it simply makes it that much more likely that whatever resistance is in place right now will be swept aside.

Be My Guest!

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It's pretty apparent, I hope, that I redesigned the site. There are a trio of extra features I wanted to point out:

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  1. Search – this is quicker and easier than before; just type in anything you're seeking and press Enter. It will check the entire archives for any text (comments are not searched; just the posts themselves).
  2. Subscription Icons – You've always been able to subscribe, but it was practically impossible to figure out how. Now I've got one-click links to my Twitter feed, RSS feed, and auto-emailed subscription.
  3. Author Selection – Some folks have told me they just want to see what I write; if so, click my name, and you'll only see my posts from then on. Otherwise, the default is All Authors.

I like the new design, and I hope you do too. It's been a while coming!