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Watch list for week of 6-19-06 at 2006-07-09 19:42:47
I'm convinced that the long-term market trend is down and that we're experiencing the first bear rally. The naz gained almost 3% on Thursday. That's the kind of stuff you see in bear markets. I'm out of almost all long positions, and will be closing the rest out over the next two to four weeks. I'll be shorting opportunistically, but not aggressively yet. Before I show my computer generated watch list, let me point out the two scariest charts and the two best charts I've seen all week:
By the way, if you are a daytrader or an "investor", don't even bother to email me. Also, if you have some pay_for_stock_tips service, don't email me.
Somebody might ask, so I feel like I should explain why I'm not going to hawk daytraders' websites. There are two reasons. Daytraders fight the tide if they are going long, which can be seen on this very simple trading system that buys the QQQQ at the open and sells out at the close:
The starting balance was $100,000, and ending balance is $18,914. Where did all our daytrader's money go? Simple. It went to the traders who bought and sold to the daytraders, ie. the ones who took overnight risk and avoided intra-day movement. It might occur that the daytrader should be shorting and cover at the close, but that is also less than optimal due to the inability of a short position to compound as it moves in your favor.
Anybody who wants to reproduce the spreadsheet above can download the price data into excel from this link at yahoo finance, sort the price data in ascending order by date, and use this formula in column J: =J1*(E2/B2) . Put the starting balance in the header row of column J, and you're set.
I can't wail on the daytraders without wailing on the investors. So how did they do over the same period? By buying and holding over the entire period, the $100,000 account is worth $76,192.37. A lot better than the daytrader, but a sharp stick in the eye for seven years worth of "investing". The investor figures his money would have doubled in seven years. Every seven it doubles, right? It never works out that way.
The point is that you have to have an edge, and if you aren't looking for one then don't come here. If I haven't pissed you off yet, then I probably don't mind if you email me.
To tell the truth, I'm thinking of taking a break from this blog. There are so many reasons why, but to name a few:
1) The market has turned long-term bearish. 2) I got ZERO responses to my writing contest. 3) I keep getting more and more annoying emails from people starting investing or daytrading websites and less email from legitimate traders. 4) There's no point in trying to help people make good strategic choices. The public cannot ever "solve" the market. As I get closer and closer to it, I find I have less and less to say to the public about it. 5) It is tiring to keep up with an exponentially growing community when the quality will never get any better than it was. 6) Almost all the blogs I used to love reading are either posting 12 times a day instead of maybe once or twice, switched to daytrading, moved to a pay site, or they don't post anymore. Maybe I'm the one who's crazy, but either way I just don't feel like there's much left here for me. 7) The "evil scientist hibernation" instinct is starting to become overpowering. I have more clarity now than I've had in about three years. When I'm working on my software, the only conscious thoughts that interrupt my concentration is that none of my other work matters. I've got to start cutting out other things, and this blog is one of them.
I like formulating my discretionary trading plan on here each week, it keeps me organized and disciplined. I haven't missed a weekly strategy plan posted to the blog in well over a year and I think I'm at the point where I don't need the blog anymore to maintain it, sort of like when you're a kid and you're ready to take the training wheels off the bike. I might discontinue the "weekly watch list" postings because it will give me more time to focus on improving my strategy and computer programs, and doing some real writing about trading instead of just snippets to the blog.
