Mr. Market likes Ben, Friday to close higher

Hey Mikey, he likes it!

Mikey Market

That was about my reaction to the market's reaction to Ben Bernanke's eagerly awaited speech from Jackson Hole this morning. Never before have I seen the can so artfully and expertly kicked down the road, one month until the next Fed meeting, to be precise. In any case, the market definitely seemed to like it for some unfathomable reason.  My best guess is that since Bernanke didn't say anything awful, it was presumed to be good.

So much for my theory last night that Mr. Market was going to hate it because "he hates everything". Bzzzt - wrong.  In any event, you can't argue with the Dow up 135 points at 1 PM EDT. And since this rally took us above today's daily pivot at 11,221, it looks like we should end the day (and the week) on a positive note after all.

The Swing Trend

An alert reader took me to task over my putting up the "who knows" swing trend icon yesterday and I've got to admit he has a valid point.  So this seemed like a good time to review how I decide what the trend is.

First off, "swing trend" isn't precisely defined.  I think of a swing trade as something longer than a day trade but shorter than an investment - usually on the order of a few days to a few weeks.  Nonetheless I try to be analytical about it.  The "swing trend", as I define it, is based on the regression trend channel fitted to the daily Dow chart from the most recent high or low.

Dow daily

So for example, there was a rising RTC from 8/10 to 8/16.  I put up the green arrow after two days, on the theory that any move shorter than that can't really be considered a "trend".  Once the candles leave the RTC, the "X" trend-end icon goes up.  Then usually a new trend begins but sometimes I just get confused, and that's when the question-mark curly track icon goes up.

So for example. here's the most recent dozen daily Dow candles.  There's the 8/10 RTC I mentioned (the low in the center of the chart), the one we're in now, and the end of a descending weekly one providing something of a cross-current.  After last night, even though we were still inside the current RTC, it looked to me like the trend wasn't developing the way it should, so I took the liberty of changing the arrow.  In retrospect, I should probably stick to the objective system and will do so from now on.

Now, there's one more icon I use, the "channeling" zig-zag, and I may bring that one up if Monday's action remains inside the range of the last three days.  But for now, we're going back to the up-arrow, because, as you can see, we're still inside the rising RTC.

The Hoot

The same alert reader pointed out that having the "Bottom Line" up on top was kind of odd, and suggested I rename it to something more catchy, like "The Hoot".  Well, the Night Owl has to agree and gives that idea four hoots up.  Thanks Daniel and a tip of the Hatlo hat.  Starting next week, my actionable market call or the next day will still appear right up front but will be called "The Hoot".

New Comment Policy

When I first started this blog, I elected to enable comment moderation out of concern for spam.  However, that has not really turned out to be a problem.  Therefore, in an attempt to encourage more interaction I am now allowing comments to appear immediately without waiting for my review.  I believe this is also in line with what Dr. Brett Steenbarger was pushing for towards the end of his great Traderfeed blog (although I recall he did have comment moderation enabled).

As always, I encourage comments (both positive and negative) on anything I post.  I've gotten some really great ideas that way.  We'll see how this works out.  Enjoy!

Preparing for Disaster

Dr. Steenbarger recently wrote about recovering from a disk crash. If you use computers for anything as important as trading, it is vital to have a rock-solid backup plan and stick to it. There's two main parts to this: data protection and connection protection.

Data protection

Here's what I do: I keep all my important data on the primary disk in my PC. This is all replicated on a file server on my local network. Whenever I change an important file, I copy it to the file server. Weekly, I copy the data to a separate laptop PC and make another copy on a removable hard drive. Whenever I visit my summer home, I take that with me and copy it onto the PC there. I have one more copy on a USB stick that resides in my safe deposit box. The key is multiple backups in multiple locations. Having two copies of your data sitting in the same room does you no good if you're struck by a fire, flood, or theft.

Connection protection

Just as bad is if you're about to sell some big position because the market is turning over and your PC crashes. That is very not so good. Here's what I do: I have my trading platform open on two different PC's during the trading day. Both are plugged into a battery backup UPS. I keep a lnadline and have a modem so I can resort to dialup if my cable connection fails. And I have my broker on speed dial so I can phone in an order if all else fails.

Of course none of this will help if Martians land on Wall St. and everyone in America is trying to exit their positions at the same time. But if you're trading for a living it's still important to do as much as you reasonably can to avoid that horrible "uh oh" sinking feeling when the screen goes blue.