A Tale of Two Backups

Of course, we all know how important it is to back up critical data on your computer. (You do perform regular data backups, don't you?) A disk drive can fail at any time and with no warning. The time to start thinking about backups is while your system is running normally, not 10 seconds after it goes south.

Now I've been doing daily backups of my critical trading data to a local file server for quite some time now, and weekly backups of everything else. But I thought in the event of a disk crash, it would be a lot easier if I had an image file of the entire disk. That way, I wouldn't have to reinstall the operating system and all of my programs individually. That could easily take several days. So I decided to run the Backup program that comes with Windows XP. (There's a great article from Microsoft about how to get and use this program, here http://www.microsoft.com/windowsxp/using/setup/learnmore/bott_03july14.mspx. Well, it ran about 20% of the way to completion and then stopped reporting some vague message about "read error".

So I decided to try a different program. I downloaded a copy of Macrium Reflect (http://www.macrium.com/ReflectFree.asp.) I tried doing a disk image but it too failed to complete, this time with a "CRC read error" message. That was the clue. CRC means a bad block on the disk somewhere. I checked the system log and sure enough, there were a pile of bad block errors in there. Note that all this time, the system was apparently functioning normally. I then ran chkdisk, with the options to repair any bad sectors. It found a bunch of them too.

I rebooted and tried the backup again. Failed the same way. I then ran Western Digital's Data Lifeguard utility and it reported an error on that drive that chkdisk was apparently unable to fix. Now note that this drive was only 18 months old. I ended up replacing the drive. Since it was under warranty, my friendly local computer shop did the job in one day, and apparently their utilities are more powerful than mine, because they were able to successfully image the bad drive. I lost just a couple of unimportant files, which I was able to recover from an earlier individual file backup on my file server.

So the moral is not just to back up your data, but do it two different ways. One place I used to work at did regular backups (this is back in the days of open reel magnetic tapes). One day, the big crash happened and they went to recover their data. They discovered to their horror that every single backup was unreadable - the program wasn't working. It was a disaster.

Also, I strongly recommend having at least one off-site backup. It could be at your parents' house, a safe deposit box or wherever, but it doesn't matter how great your backup is if the drive is sitting right next to your computer and your house burns down, or a tree lands on it, or the pipes burst and flood your computer room.

And by the way, with the new drive, both XP Backup and Macrium work fine. They're both free, and I can recommend either one. (There's also a paid verison of Macrium with more features).

Today is Saturday, the markets are closed. Take a few minutes to get your data in order and you will save yourself a massive headache later on. Maybe not tomorrow or next week, but one day that drive will fail. Trading is serious business and it depends on data. That data has to be treated seriously.

Waiting for Godot

No chart today - no need to. Today's action was just like yesterday's, and the day before, and the day before that. In fact, we now have five straight days of nothing going on here. What does it take to get this market off of top dead center? I went back in the daily Dow charts for 10 years looking for other instances of such trend paralysis. I found a half dozen or so. The interesting point is that none lasted more than six days. Tomorrow will make day six of the current gridlock.

In the meantime, I was wrong two days ago about yesterday, and I was wrong yesterday about today, if you can call a 2 point loss against a call for positive action to be wrong. So I give up. I now officially cry "Uncle" and step to the sidelines where I will await our fearless leader and his Keystone Kops Kongress to make up their minds about income taxes so the rest of us can get on with our lives.

I have absolutely no idea which hat to put on tomorrow. The only bet I'm willing to make right now is that I give it one more day (that will make the magic number of six) to resolve this statsis one way or the other.

Trades

Today, I welcome Himax, HIMX to the Low Price/High Yield portfolio. I paid 2.10 for it and it's yielding 12.1%. We'll see what develops.

Stuck in Neutral

Last night, it sure looked to me like we'd be going lower today, and for a while this morning indeed we did. But in the end I was wrong and the Dow finished the day with a 13 point gain, the fifth day in a row of tiny ranges in the market. Part of the problem for me is the huge run-up we had last week. I keep looking at that and waiting for the inevitable retracement - only it doesn't seem to want to happen. The longer we spend stuck at the 11,300 level, the less likely a near-term 200 point plunge becomes.

The indicators are still all showing overbought, but after a while at these levels they become "broken" and lose their predictive power. If yesterday's action demonstrated the bulls' inability to drive the market higher, today's demonstrated the bears' inability to knock it lower. So the tug-o-war continues. Right now, there is no trend in this market either up or down, so the "X" symbol remains in place. It's difficult for a swing trader to make any money when the market only moves a few points a day. Today for instance, I made all of $7 in the market. While that's definitely better than losing 7, it's not going to pay the rent. Even intraday, there was really nothing going on. I'm sure the daytraders aren't too happy either right now. In fact at this point, I'm seriously considering taking the rest of the year off.

So where next? I think the fact that last night the market looked for all the world like it should go lower today but finally didn't suggests that it may be poised instead to go higher. The VIX, which did in fact bottom yesterday as I had thought, was unable to gain any meaningful traction today and actually ended the day with a red candle. And right now (8 PM EST), all three futures are up meaningfully, with the ES up 0.35%. I'll update this later tonight, but right now the bias seems to marginally favor the bulls for tomorrow.

1 AM Update

Right now, all three futures (ES, NQ, and YM) are up even more, over half a percent now. Indeed, ES at 1236 is now convincingly above its November highs. This does nothing to change my opinion that we may be having another go at the Dow 11,400 level soon.

Trades

I dumped my stake in GMR today at 3.64, taking a small loss. Meanwhile, DRYS, which I sold last Friday, continued lower today, as I expected. I continue to watch this one because it may be worth getting back into when it bottoms.

Looking for lower

Yesterday, I wrote

"My general feeling is that we may be in for several days of consolidation"

and that's just what we got today, ending barely down just a couple of points in the Dow. Unfortunately, the candle it produced was a gravestone doji which is a bearish indicator. It also marks a failed attempt to breach the 11,440 resistance level. The market is going to need a few more days to regroup for another attempt.

In addition, today's action fell entirely outside the lower RTC line, and given yesterday's bearish setup, this has to be considered a bearish trigger. Therefore, I am reluctantly removing the green arrow since this uptrend is over. But I can't replace it with a red arrow since there's no evidence to suggest we're going to be trending lower just yet.

However, I do think we'll be lower tomorrow, so I'm reaching back into the closet for my short hat. The indicators are still all overbought and today's declining volume was higher than yesterday's. And the VIX, which was looking like it was getting ready to bottom yesterday, I think has now done so. Its daily stochastic is executing a bullish crossover, which is bearish for stocks.

We've now seen four consecutive days of tiny ranges and that can't last forever. Although I still think December as a whole will be higher, I can't say the same for tomorrow. I'm not looking for a huge drop, but I also don't think we're in for any gains just yet.

No trades today. I sold my entire position in DRYS last Friday, only to watch it rise further yesterday. Today however, it came back down and formed a dark cloud cover which is a very bearish candle. I guess I was just a day too early.

Pearl Harbor Day

Today is December 7th, the "date which will live in infamy" as we mark Pearl Harbor Day, the 69th anniversary of the Japanese sneak attack on Hawaii that plunged the US into World War II.

Let us pause for a moment today to reflect upon the courage of those those who made the ultimate sacrifice that day and those who fought bravely against seemingly impossible odds to repel and finally put an end to the tyranny of the Japanese Empire in the Pacific and protect the freedoms we enjoy today.

To all these brave Americans, we salute you, and we remember you.

Stalled

Hmmm, let's see. Last Friday I was hopeful for some more upside from this market but by last night I wrote

I'm getting a feeling that we might be in for a bit of a pullback tomorrow.

and that's exactly what we got, with a 20 point loss in the Dow. I ended up not taking any short positions though. In fact, I made no trades today, and judging by the low volume, a lot of other folks stayed home too. So where next?

Today's action brought us right the the lower edge of the rising RTC channel and that is a bearish setup, but not a trigger. If we are lower again tomorrow, I will reverse the swing trend arrow. But for now, it remains green. The indicators are all looking toppy right about now and the daily VIX did hit a support level of 18 from which its rallied every time back to October, but it has not reached its lower Bollinger band. And as of this writing (1:15 AM EST), all three futures are up, with the ES up 0.23%. These sorts of mixed messages are consistent with a directionless market.

My general feeling is that we may be in for several days of consolidation before making another run at the 11,440 resistance level. I'd be surprised to see any major moves in either direction tomorrow. The market this year has shown an ability going back to September to spend anywhere from 3 to 6 days just doing nothing before resuming its previous trend. And historically, though December as a whole is a strong month, it has a weak spot in the middle.

So I'm temporarily putting both my long hat and short hat in the closet until I see some clear evidence of which fashion is in style.

Perhaps a pause

Looking at the action in the futures this evening (it is now 12:45 AM), I'm getting a feeling that we might be in for a bit of a pullback tomorrow. It would only make sense after the spectacular three day run last week. In particular, with the ES down 0.16% right now and its stochastic about to make a bearish crossover, I'm not quite as optimistic as I was last Friday. Also, Friday's candle in the Dow looks like a hanging man and that could also portend a turn around.

So right now, I'm leaving the green swing trend arrow in place but looking to buy some short-term insurance for tomorrow. It is admittedly not a real clear signal either way.