More downside coming

The markets were lower today and I'm sure glad I had my short hat on. This was an interesting week technically and I plan on doing a review and look ahead to next week tomorrow when I have more time. Executive summary: I see more downside ahead.

Uptrend broken

Today's Dow action both opened and closed decisively below the lower RTC line of the uptrend going all the way back to the end of August for a 74 point loss. Accordingly, I have to call the uptrend over. I am now removing my long hat and putting on my short hat. It took three days of declines to call it, but that is the nature of the RTC. The lower line accounts for 95% of the price variance in the trend. Below that, it becomes fairly suggestive that any prices in that area are not part of the trend.

Interestingly, traditional candlestick theory would have called this top earlier, with a hanging man on the 5th and a red candle on Monday. A stochastic crossover also occured on Monday. By that technique, we could have turned around to a short position on Tuesday. In that sense, the RTC is slower to respond, but I think at this point we're in for a few more days of declines. Will November live up to its historical reputation as a good month on the Dow? We'll see. Obama's blundering around in Korea certainly isn't helping matters.

Trades

I may live to regret it, but I bought 100 shares of TIE just before the close at 18.85. The big runup in DRYS today helped me out and led to an above average return on the day for me, despite the overall decline in the market. My YTD return right now is 26.03%, on track for a 37.6% annual return.

Veteran's Day

Today, November 11th, is Veteran's Day. I urge everyone to stop for a moment today and reflect on the ultimate sacrifice made by many many thousands of brave men and women defending our great country from those who would destroy us.

To all those in uniform at home and far away, we salute you and thank you for your service. You are heroes and true patriots.

Close but no cigar

Today's confused and confusing action briefly saw us dip below the lower RTC line in the Dow but then close back inside for a meager 10 point gain. Take a look - what do you think? If you believe that today's candle was a hammer and that the finish inside the RTC averted a bearish setup, then the uptrend remains intact despite the losses of the past few days. And today's volume was slightly higher than yesterday. Finally, although the NYSE TICK took a number of deeply negative stabs throughout the day, the mean pretty much just wobbled around zero and actually improved as the day went on.

Personally, I think the recent action is being motivated primarily by the uncertainty surrounding the upcoming G20 meeting, or as one wag on CNBC called it, "G19 versus the US". But from a purely technical standpoint, I'm going to have to leave the green arrow in place and not call a turnaround just yet. Tomorrow may tell a different story. It won't take much of a dip from here to create the bearish setup ... but that candle today sure looks like a hammer, and the current RTC is quite strong with a Pearson's R of 0.959. We'll see.

No trades today. I went through my entire watch list and couldn't find anything with a sufficiently attractive risk/reward ratio to warrant jumping in.

The market takes a pause

Today was the third disappointing day in a row in the Dow, losing another 60 points. I've zoomed in on the recent daily action so we can take a close look at it. From a classical candlestick point of view, this chart looks bad (see the last three candles): a doji, followed by a hanging man, and then a confirming red candle. Along with an overbought stochastic and RSI, both of which have peaked, this makes for a bearish call.

However, note that despite the recent losses, we remain inside the RTC channel. It would take three more days at the current level (11,347) or one more day of declines like today's, to bring us into a bearish setup. Note also that although selling volume was higher today than yesterday, both days were below the levels on the previous two up days indicating a certain lack of enthusiasm for selling. Also, the sentiment on finviz.com is 58% bearish which, if we adopt a contrarian stance, is bullish. Also, today's close brings us pretty much to the 50% Fibonacci retracement level of last Thursday's big gain, implying a natural stopping point.

So all in all, I'm going to have to stick to my system and say that the uptrend remains intact, although I'm not expecting a major rally tomorrow.

Storm clouds on the horizon
Although I usually try to stick to purely technical analysis, the following news item that just came out caught my eye, courtesy of marketwatch.com:

SYDNEY (MarketWatch) — China’s credit-rating agency on Tuesday downgraded its rating for U.S. sovereign debt and warned of further cuts, in a pointed move ahead of this week’s Group of 20 major economies meeting.

You can read the whole article here. I don't know about you, but I find this more than a little worrisome for the future. In the meantime, since I can't set US monetary policy, I continue to watch the charts and try to make some money.

Trades

No trades today. I spent some time going over my watch lists but was unable to find anything that looked like a compelling buy, despite today's down market. And, although I was down a bit today, I also couldn't find any compelling reasons to sell anything either. Not just yet anyway. Again, I must remind myself to exercise patience. Let the market come to you, never the other way around. In the meantime, I was pleased to see that LOW was down another 44 cents after I dumped it yesterday.

Continuing consolidation

Today's slight 37 point decline in the Dow is pretty much what I expected when I suggested that a period of consolidation might follow last Thursday's big gain. At this rate, it would take six more days of similar action to reach the lower edge of the rising regression trend channel and suggest a possible bearish setup. Or, it would take a 174 point loss tomorrow to achieve the same thing. I just don't see either one of these happening this week.

Note how the current uptrend has proceeded in stepwise fashion - big one day gains followed by around a week of sideways or even slightly declining action. With today's loss still keeping us in the center of the RTC, it looks like we're in for more meandering for a bit.

Of course, this all assumes we don't get any alarming news out of Europe. Since Greece has apparently been removed from the PIGS, we're now left with an even more unfortunate acronym for the Club Med countries, which CNBC neatly sidestepped today by coming up with an anagram of IPS, promoting Ireland to the front of the class.

Trades

Today I gave up on my Lowe's trade, taking a 1/4 point profit and selling at 21.98. LOW fell out of its recent rising RTC today and put in an unusual green candle that was still a 20 cent loss, due to having gapped down on the open. This, coupled with a doji last Friday and an ugly looking stochastic plus oversold RSI, makes me think that it's time to bail. The trade was a bit disappointing, but I'll take a 25 cent gain over a 10 cent loss any day.

My low price/high yield basket continues to perform well. CIM recovered from its bad news last week and DHY closed at 3.01. Though I only got in at 2.95, this one is such a low beta that I consider a 6 cent gain to be quite nice. And AMD, which I mentioned as a breakout candidate at 7.29 closed at 8.14 today. I may actually finally turn a profit on this one.

Note

With today's post, I'm adding a new feature to the blog. In the right hand pane up top, I'll be including either a green or red arrow indicating the general trend I'm expecting in the Dow, and by extension the market in general insomuch as it tracks the Dow. This direction is based on regression trend analysis from the last top or bottom. It is not necessarily an indication of where I think the Dow will close tomorrow. It is a trend in a swing time frame.

Weekly review

Before this week, a lot of people were saying that the election results were already "baked into" the market. A look at the weekly Dow chart below shows pretty convincingly that if the results were baked in then someone forgot to turn on the oven.
Last week was the best in what is now a ten week rally. The climb to a weekly close of 11,444.08 brings us right to the upper RTC line. This in itself is bullish. Even more importantly, look at the volume. The great Dr. Brett Steenbarger always made a big point of paying attention to volume to determine the significance of any given move. We see that last week's volume was not only higher that the previous week, but in fact the highest since the start of the rally on August 31st.

Compare this to the April rally, which ended on a large green candle, but with diminished volume compare to the preceding week. Although the indicators such as RSI and stochastic are looking overbought right now, I don't think we've seen the end of this rally. Also note how in April, the rally ran out of gas shortly after crossing above the 200 week MA, but this time we handily motored past it without looking back, and broke through the resistance of the April highs. We now stand at a level of the "summer shelf" way back in 2008. This ought to provide some resistance but right now I think the market will continue to drift higher into the end of the year.

As The Stock Trader's Almanac points out, November ranks as the second best month of the year on the Dow and Nasdaq since 1950, and the third best in the Dow. Accordingly, I'm not looking for any major downturn in the coming week. Indeed it would take four consecutive days of sideways action just to bring us to the lower RTC line to even begin a bearish setup.

Performance

Last week was one of my better weeks this year. I ended the week up 4.03% for a YTD gain of 26.72%. This puts me on track for a full year return of 38.45% which is slightly better than last year when I ended up 35%. The Dow meanwhile is up 9.74% YTD, so we're not doing too badly. In fact, at Friday's close, my trading account was at a YTD and 52 week high.

Thanks to the recent gains in the market, I am now just 3% in cash, not counting the bond redemptions over the last few months. With those, I'm just under 50% cash. I haven't found anything sufficiently compelling yet to put all that money to work.

Consolidation

The current uptrend in the Dow going back to the end of August (and I've decided that the small pullback last week didn't break the longer trend after all) has had six days of large one day run-ups. Five of these were followed by a narrow range day closing near the preceding day's high. After yesterday's big gains, that's exactly what we saw today, ending up a mere nine points, and pretty much what I expected.

We remain in the middle of the ascending RTC and my long hat remains on. November, at least so far, is living up to its historical reputation as one of the best months of the year for the markets.

April resistance breached

Wow. After today's 220 point pop in the Dow, I'm certainly glad I had my long hat on. In fact, this gain was so great that it completely moved above the RTC I had started yesterday and made me rethink the past week's action. Therefore, I've gone back to the uptrend that started at the end of August.
It looks like we are now solidly in a continuation of that pattern. Today's action blew the doors off the stubborn April resistance level of 11,258 with its close at 11,435. It also looks like the third time was the charm after the two previous failed attempts on 10/25 and 11/1. Next resistance isn't until 11,917. The uptrend remains in force, though I wouldn't be surprised to see at least a bit of consolidation tomorrow after such a dramatic move today.

No trades today - I was busy with other obligations that kept me away from my screens. I was gratified to see everything I owned up nicely when I returned, including CIM which recouped almost all of its losses yesterday and returned me to a profit position. LOW also continues to move up. I plan on letting this one run a while longer.

Uptrend Intact

As expected, the Dow continued moving up today and remains in the upper half of the new ascending RTC channel as shown here. Although the candle looks like a hanging man, I tend to discount that since the long tail is largely an artifact of the "ringing" caused by the Fed announcement this afternoon. The Dow went into its usual Fed day antics right after that time before finally settling down for a sedate 26 point advance. So my long hat remains on.

No trades today. CIM decided to reward its investors today by diluting their shares with a huge new offering at 3.86. Thanks a lot, CIM. CIM instantly dumped to that level down from 4.04 the day before taking all my profits with it. Fortunately my entry point is 3.99 so the damage was limited. And I am really only in this stock for the dividends, so all is well - for now.

Confirming uptrend

I was not surprised to see the Dow up today, but I was a bit surprised it rose as much as it did, +64 points to close at 11188.72. However, this does confirm what I wrote about yesterday, that last week's short downtrend is over. I have now started a new rising RTC channel and today's close puts the Dow above the top line.

So what to make of this? Today's market results weren't due to the election since there were no political results in by the close. And the futures are essentially flat as of this writing (1 AM Eastern) so no guidance there. Perhaps the election results really were baked in after all and the market just took tomorrow's gains today, or perhaps this was in anticipation of what the Fed is going to do tomorrow. Either way, I will continue to keep my long hat on. I don't really see anything bad coming out of the Fed tomorrow and the election results that put the brakes on Obama's anti-business agenda can only be good for the market. Also, note that November is historically a very strong month for the markets.

Today I managed to buy some more DHY at 2.96, which is where it closed. And my faith in Lowe's was rewarded with an impressive 3.45% gain to close at 21.92. This move took it outside of its descending RTC channel going back to October 21st. Technically, this is only a bullish setup and not a trigger since the candle did not open and close above the RTC line, but the magnitude of the gain is good enough for me. I'm looking for more short-term upside from LOW.

Downtrend Over

Today's puny six point gain in the Dow took us right off the right edge of the steep downward trend established only last week. According to the RTC method, this means that downtrend is over. What really strikes me about today's action though is the unusual size of the doji candle - a range of 182 points between the high and the low for only a six point difference between the open and the close. This represents the second recent rejection of the April highs. Unlike some, I don't consider this to be particularly bearish. It often seems to be the case that big resistance levels take three tries to crack. Third time's the charm, as they say.

The only thing that's clear about this market is the extent of the indecision, fueled obviously by tomorrow's elections and the upcoming FOMC follies. According to the RTC, we should not be looking for a major decline in the next day or two. It's pretty obvious that the action in the next two days will be dominated by the election and the extent to which the eventual results are or are not already baked into the market. We'll see. For the time being, I'm still mostly standing aside.

Today I tried to buy some more DHY but it ran away from me and I couldn't get executed. ("Ran" is perhaps too strong a word, but I just wasn't willing to chase, even a few pennies). What I did do is buy 100 shares of LOW at 21.49. In retrospect I should have waited, since it closed at 21.19. But it's looking oversold to me on both the RSI and stochastic so I'm going to give it a chance to perform.

The Seven Deadly Sins of Trading

Just in time for Halloween, here are the Seven Deadly Sins of Trading. It's some scary stuff, let me tell you. I may not be the world's greatest trader, but I am definitely an expert on this particular subject. I've made all of these mistakes myself at least once, some more than once, and I'm still working on one or two. Hopefully, someone else can learn from my sad experience. So without further ado, here they are:

1. Impatience

I put this first because impatience has cost me more money than the rest of them put together. I can't count the number of times where I've unloaded a stock because it wasn't performing and the next day it took off. Or bought too early - that's the classic "catching the falling knife". And the most irritating case is when I'm trying to get in on something and the price just keeps hovering right above my limit order. Every time I finally get tired of waiting and bump up my limit to meet the ask, two minutes later the price drops down to my original price - or lower. Patience above all else.

Oddly enough, the opposite of impatience, timidity, can be almost as bad. I've had lots of stocks just take off and run away from me while I was debating pulling the trigger. There's nothing like the feeling of being left standing in the dust as you watch the tail lights of the bus pulling away from you. That's one reason I like swing trading - this isn't as much of an issue there.

2. Sloth

This is also one of the "classical" seven deadly sins. Trading is hard work. Just because you're not swinging a pick axe or twisting wrenches doesn't mean it's not work. Forget all those stupid ads for automatic systems where all you have to do is hit buy or sell when some blinky thing lights up. You have to stay current with the news, both financial and general, and watch the charts. Every day.

3. Avarice

Another classical sin, aka greed. Now it's well known that greed and its companion opposite, fear, are what make the market go round, but that's no reason for you to join in. You don't have to trade without emotion like some sort of financial Mr. Spock, but fear and greed will kill you eventually. Fear is what leads you to leave profits on the table or worse yet, get out at the bottom. Greed is what keeps you from getting out at the top so you end up watching all your profits evaporate. Buy low, sell high. Fear and greed are what make you do it the other way around. Try to replace fear with respect and greed with gratitude. You need to respect the power of the market and be grateful when it hands you money.

4. Undercapitalization

I don't think the importance of this is sufficiently appreciated. I think way too many people decide they're going to trade for a living and start off with tiny account, like $5000, figuring they'll parlay that sum into riches of Bill Gatesean proportions. Ain't gonna happen. Too little capital means you are limited in how much heat you can take, and unless you enter every single trade exactly at the bottom and then it goes straight up, you're going to have to suffer through some unrealized losses at some point. Insufficient capital leads you to take excessive risks to generate returns you might think are reasonable (but are usually just a dream). The net result is that your account blows up and you're done.

So how much capital do you need to start trading? Well the SEC says you need a minimum of $25,000 just to get in the game if you want to day trade. But that becomes your floor so you really need at least 10% more in order to have room to maneuver. Even if you don't want to day trade, I'd say $25K is the bare minimum, and that number won't make you a living.

I started my first account with the laughable sum of $2000 (back in the days before the pattern day trading rule) because I was afraid if I had more I'd lose it (see avarice and fear above). But that wasn't enough money to be successful, so naturally I blew it all up. I think it took about four months. As Jim Cramer always likes to say, "you've got to stay in the game".

5. Ignorance

When I first started trading, I knew nothing, and I got my head handed to me. The problem was that I'd read a few books, did a bit of paper trading, and thought I had it all figured out. Bzzzt! After 10 years, I'm willing to admit that I now at least know what I don't know. But I'm far from an expert. Trading is a performance art, like skiing or playing the piano. To get good at it, you have to constantly practice, study, and learn all you can (see "sloth" above). This was a recurring theme in Dr. Brett Steenbarger's late, lamented TraderFeed blog right here on Blogspot. I highly recommend reading that over.

You also need to keep meticulous records. You absolutely need to keep a trading diary and a performance spreadsheet. Track everything. If you don't know what you're doing, you can't tell how well you're doing.

If you don't have the time or inclination for this, forget about trading. You're going up against armies of people who are smarter, stronger, and richer than you'll ever be. You don't show up to a gun fight with a knife. Don't trade until you are properly armed with a solid plan and all the time and capital you need to execute it.

6. Hubris

Oh my, another one of the classics. The sin of pride. If something doesn't go your way, just take your lumps and move on. The market is excellent at sniffing out know-it-alls and teaching them lessons. Don't let your errors get you mad (see TWM below). Revenge trading is about the worst thing you can do, and it is guaranteed you'll get your head handed to you.

7. Distraction

TWD - trading while distracted. And the results can be as deadly to your account as texting behind the wheel of your car can be to your life. You can't trade if there are kids screaming in the background, dogs barking, phones ringing, etc. You really have to concentrate. I have occasionally hit Buy when I meant Sell, or sold the wrong number of shares. This is the sort of behavior that ends with keyboards smashed on the table top and monitors thrown out the window. One time I even hit sell on the wrong row and accidentally sold one of my cherished holdings. Oddly enough, that stock tanked shortly afterwards proving once again that it's better to be lucky than good.

Also, obviously don't commit TWI (trading while intoxicated), the other TWI (trading wile ill - if you have the flu, take a sick day), TWM (trading while mad - at your spouse, at the market, or at life in general), or TWS (trading while stupid - see "ignorance" above).

Well there you have it - the seven awful, scary things you should never ever do when trading. Avoid these errors and you'll be a lot better off. I know. Happy trading!

October Monthly Review

Whew! October is finally over and despite its spooky reputation, we managed to escape pretty much unscathed. Since the month is over, we're going to take a series of progressively larger views to try and figure out what to expect next month.

Let's start by zooming in on the last few days of the action in the Dow, which proved to be most interesting. Yesterday, I called an end to the uptrend and started a new descending RTC line. Here is is. You can see that today's action took us to the right edge of the channel, since it's so steep, but I wouldn't really call it a bullish setup. Conceivably, Monday could mark the end of this short downtrend and in fact, today's narrow range doji suggests further indecision. However, I think we remain inside this new downtrend for the time being. I note also that historically, the first trading day of November is not so hot.

Pulling out to the weekly chart, this week's downturn barely registers and the whole week simply forms a doji candle, but that in iself, coupled with the highly overbought readings on all the indicators is enough to suggest a reversal. Compare the recent runup to the one last spring. There's a striking similarity there. So if the daily chart suggests the possibility of a limited downside, the weekly chart looks considerably weaker.

And since today also marks the end of the month, we might as well look at the monthly chart. As a swing trader I don't do this very often, but it can be quite instructive for strategic planning. Check it out:

Here's four whole years of the Dow, a month at a time. The whole sickening slide from the 2007 highs to the March 2009 lows and the bounce back. In this view, the troubles of the summer of 2010 look more like a stumble than a bear market and the indicators aren't overbought at all. This longer term view suggests considerable upside remains in the market. Note also that we will soon be entering a pre-presidential election year and that these historically significantly outperform other years in the four year election cycle.

So where does this all leave us? I'll be looking for a limited decline on Monday and Tuesday in anticipation of the election. I'm still betting we'll see a gain on Wednesday based on election results that may be given up by the end of the week. But I think the month as a whole will end higher. November is traditionally a good month and I'm not hearing enough bad economic news to warrant any major declines at this point. We'll see.

Performance

The Dow ended up today a paltry 4.5 points. I was down 0.12% on the day, down 0.09% on the week but still up a respectable 1.32% on the month, compared to the Dow's 3.04% gain for the month. Though it's disappointing to have underperformed the Dow on a monthly basis, this still leaves me 21.82% up YTD, compared to the Dow which is up only 6.62%, so I can't complain. My little low price/high yield sub-portfolio continues to do well, gaining from 0.22% to 2.57% today, with the exception of AOD that lost 0.71%. However, all are still in a profit position, even though I'm only owning them for the dividend.

Today, I added a new name to it: DHY, Credit Suisse High Yield Bond Fund, buying an experimental 200 shares at 2.94. It closed at 2.92. It's trading at the lower end of its recent range and looks poised to go higher next week. It is currently yielding an attractive 10.89%.

I did not take any short positions today but I'm also holding cash in reserve. I see a number of names that are becoming more attractive lately, but not enough to pull the trigger just yet. And I'm wishing I'd execercised a bit more patience and held on to my AUY from the beginning of hte week. Oh well.

It's Over

Finally. It's official - the uptrend is over. We have now (finally) broken the RTC daily uptrend in the Dow extending back to the end of August. Tuesday's doji was the top, yesterday was the bearish setup and today's 12 point decline, finishing well below the lower RTC line was the trigger. I think we can now look forward to at least a few days of lower prices. There are several minor support levels on the way down, corresponding to the steps the Dow took on the way up - at 10,970 and 10,825. The lower Bollinger band stands nearby at 10,820, suggesting a possible stopping point. Then there's a stronger support level at 10,685, corresponding to the August highs.

This is followed by the 50% Fibonnaci retracement level at 10,571, a 5% correction at 10,558, and the 200 day MA at 10,525. The close proximity of those three numbers suggest strong support there too. In the meantime, we will now start charting a new descending RTC channel starting from two days ago and watching for an upward break out of it. My guess would be that might happen next Wednesday, the first trading day after Election Day. I know everyone says the election results are already "baked in", but I do think the immediate realization of a Republican victory should provide at least a temporary bounce to the markets.

Finally I note that the excllent Quantifiable Edges blog here did a historical analysis today and reached the conclusion that "the stats seem to suggest a possible downside edge over the next 1-3 days." We'll see.

I made no trades today. I'm now over 50% in cash and considering taking a position in SDS tomorrow as a short proxy. I'm also pleased to see that AMD, which I mentioned on Monday when it closed at 7.26, was up 3.81% today on a lackluster day overall to close at 7.63.

A puzzler

OK, here's today's action in the Dow. I have to say, I'm stumped. You tell me what this means. The Dow closed dead on the lower RTC line, exactly where it did on October 19th. And the next day, the Dow rallied furiously. However, unlike then, today's candle is a classic Hanging Man and that's never a good sign. On the other hand, the rally off the lows at 1:20 PM suggest an absence of true selling pressure. We actually had more extreme high TICK readings today than lows.

So we have a bearish setup but not a trigger. In a way, it's simple. If the Dow is lower tomorrow or fails to close above 11,175. then we have a sell signal. Otherwise,we cannot really say the trend is broken. Which way will it go? Who knows.

I'm playing it safe. No trades today but I have also not yet gone short. I'm waiting for some confirmation that we're headed lower and I'm willing to take the heat until I get it. However, I do have to say that intuitively, I think the uptrend is over.

Waiting for Godot

I swear, waiting for the end of this uptrend is like waiting for Godot. Every time I think the turn is at hand, it isn't. Even today's meager five point advance in the Dow still kept us inside the rising daily RTC channel. However we are now in the lower half of the channel, and have been there for the last six sessions straight, as opposed to the entire earlier segment of the current uptrend. A decline tomorrow of just 25 points will cause a trend reversal setup once again, like we got on the 19th.

But that one did not trigger and if the market falls tomorrow, I'd need to see a second day of declines to declare it time to go short. But for now, I still can't go short.

In the meantime, today's action formed a long doji candle, indicating the considerable uncertainty in the market. The resistance of the April highs continues to be formidable. No doubt many of the people who rode the summer roller coaster from there all the way to the bottom on July 2nd are just so glad to finally have made back their losses that they're cutting and running.

So what to do? I'm mostly just sitting back and watching right now. I did sell my position in SD today at 5.76; it closed at 5.66. It's RTC does not quite indicate it's time to sell, but all the rest of the indicators do. I also bought some more CIM at 4.08 after it took a 5.58% dive on a 2 cent miss; that closed at 4.06. But those are just tiny trades. I want to see how tomorrow pans out before doing much else. For what it's worth, the ES futures are not looking too happy right now (1:15 AM), down 525 after having been up by 575 earlier this evening. Patience is the key.

Still no downturn

Today's 34 point gain in the Dow kept us inside the rising RTC channel, but the small size of the increase moved us closer to the lower edge. In fact the last nine sessions have more or less been just consolidation rather than consistent gains. We're really just stuck at April resistance level of 11,200. Upwards from there, there's no meaningful resistance until 11,500 which is the "summer shelf" going way back to 2008.

In the meantime I'm hearing a lot of conflicting opinions on how much further this rally has to go. There's a lot of noise about how a Republican victory is now "baked into" the market and won't do much to help the rally. My personal feeling is that this is wrong. I expect the market to post some significant gains, at least short term, following the elections. It just might be the push to get us through the 11,200 level.

But for the time being, one just has to sit tight and watch the RTC. And there is still no sell signal there.

Political Aside

Personally, I don't think it's going to make much difference who wins. As far as I'm concerned, the Demicans and the Republicrats are just two sides of the same tarnished coin. Our choice at the polls is basically a choice between Jack L. Johnson and John L. Jackson. To quote those astute political analysts, The Who, "Meet the new boss, same as the old boss". Even worse, nearly half the races on our own local ballot are going completely uncontested this year. We have become like the old Soviet Union - one party, no choice.

Trades

I got tired of waiting for AUY to perform and dumped it today for a whopping 2 cent profit. It's just floundering around right now and I'm out of patience. See ya.

I could find nothing else to replace it with but I did notice something interesting in AMD. Check out this daily chart. Notice how on September 27th, AMD broke out of a declining RTC going all the way back to April and has been in a horizontal channel since then. It made two attempts, one last month and one this month to top 7.46. After that double top and a 5.37% gain today, it seems like it's about to make another run at it.

But here's the interesting part. Note how the indicators now are much less overbought than the last run (blue arrow). There has also apparently been a lot of call action in AMD recently on news of some new product (from a tehnical analysis point of view, it doesn't even matter what this product is). I think AMD could be poised to break out on this attempt. Note also the increased volume. I'll bet something's up here. Disclaimer - I am long AMD (though still underwater).

The Week Ahead

It's time to move out to the weekly chart on the Dow to see what might be ahead this coming week, the last trading week of the month. Here's a year's worth of action for your perusal. There are two things that stand out. First, we remain solidly in the rising RTC going all the way back to the end of August, and second, there's getting to be a lot of similarity between the current pattern and the February to April rally which ended very close to the current levels. The resistance at 11,258 is not to be overlooked.

Although it's too early to call an end to the current rally, it is definitely worth noting how overbought all the indicators are now looking, and also how the dollar has stopped its decline in the past week. I wouldn't be surprised if we got another 200 point drop sometime this week, but it's impossible to call it right now. As a swing trader, I'm trying to be less concerned with individual one day moves and look more at the overall short-term trend.

If the Dow stays around its current level (11,132) for three more days, that will take us to the lower edge of the RTC channel and setup for a trend reversal. A one day drop to 11,090 will do the same thing. I'm not going to try to call the top, but I will try to call the end of the trend using RTC analysis.

It might happen this week, but it's looked like a possibility for several weeks already and hasn't happened yet. Still, I'm starting to see more risk than reward in the current environment and it's getting harder lately to find anything that looks like a decent buy. It looks to me like the road higher is going to be a tough slog from this point.

That's about it. Trade well, do well, be well.

Performance update

It was a pretty blah week overall for me. I ended the week down 0.49% while the Dow was up just a bit. But I am still up 21.93% year to date which puts me on track for a 34.6% annualized return, very near to what I realized last year. Also, since the Dow is up just 6.76% YTD I'm currently beating the Dow by a decent margin.

I had one good trade in Lowe's last week, netting a quick point in two days. My AUY play didn't fare as well - if it doesn't perform tomorrow, it's see ya. My cheapo dividend stocks (AOD, CIM, NRF, RSO, SPIL) continue to do well.

Disclaimer

As always, this isn't investing advice, just a point of reference you will hopefully find interesting. I'm retired, I work for no one other than myself. There's no ads on this site, I am beholden to no one. I will always disclose my position in any stock I mention here, or my association to any product I may talk about. My performance numbers are honest (really, if I was going to lie about it, would I claim to be up merely 22%?) What you see is what you get.

Still rising...

I am just tickled pink with the performance of the regression trend channel technique. Since I learned about it this spring, it has become my analytical tool of choice. Yesterday it foretold of a continued rise in the market and today that's just what we got. Just look at the daily Dow to see how well this works.
Look back down the rising RTC channel from today to its start back in August.

Notice how in at least four different spots the curve flattens out and just looking at the candlesticks you might be tempted to call a top. But looking at the trend lines of the RTC, you can see that it wasn't in the cards. Today's small rise keeps us near the centerline of the channel and affirms a continuation of the uptrend. In fact, the traditional indicators (stochastic, RSI, momentum, and money flow) in the lower panels have come off their oversold levels lending additional support to the bullish thesis.

I made no trades today. I am now 50% in cash, though that is a function of some bonds maturing recently. Modulo those, I'd be fully invested according to my strategy earlier this year. The "high yield" section of my portfolio continues to do quite nicely. I'm in AOD, CIM, RSO, NRF, and SPIL.