Update - 1/29/17

I have started several new commodity related positions the last 1-2 weeks.  New positions are 5-10% positions, nothing crazy, have 8% stops on these.  My exposure has ramped modestly.  I'm not full on aggressive but have some exposure on.  Here is the quick recap of my positions.

IWM - still have 1/4 of my position on (from 2016).  held the 50 day nicely.  still not out of the woods.

SPY - had a smaller position last year vs IWM, still have 1/2 my position on. With regard to the market, in short term I am concerned about the bullish Barron's cover this weekend and the lack of a true flush - low volatility.  But long term trend still intact for both IWM and SPY, need to keep some on.

VIAV - wave 3 can't be the shortest.  with breakout from flat base this week, this is going on a long run.  love the 50/200 days up.

CS - still hasn't had the flush I'm looking for yet for a second major setup.  still have my 10% position on from set/oct/nov.

Z - Still trading tight in the handle.  This one could go either way.  5% position.

REMX - rare earths!  broke out from a cup and handle, 200 day flatting/curling up, 50 day up.  after a long, long downtrend.  5% position.

SEA - similar to REMX.

GDX - had a second long bear market undercutting lows from a decade ago similar to our equity indices in 08/09.  Looks like it started an uptrend and then completed its first correction.  Just had a pocket pivot thru 50 day.

Review - 1/14/17

Continued to cut my shorter term exposures this week.  I was fully long most of 2016, started to proactively cut in mid to late december on some potential offensive sell signals, now I've started to cut some more on a few short term defensive sell signals.  Here are other things I've seen.

(1) my biggest 2016 bet the IWM continues to live below the 20 day with no big flush yet

I still have piece of IWM on.  1/4 of my original bet going into election.  To get short term bullish and longer again, I want to see it test/flush the 50 day.  That's a juicy spot to get long and assume more risk.  So far it has been consolidating nicely.  I do love how the 50 day is curling up.

(2) we have had bullish Barrons covers and people crowing about how Soros is getting carried out

(3) we have a big bull - bear spread again

(4) range compression is flashing a short term bearish signal

There are some individual stock ideas I potentially love for 2017 but they might need some work in the short term.

CS
I love the 3 long term waves down in CS.  As Billy O says, you rarely have 4!!!!  Elliott Wave says that too.

I also love the 50/200 day cross.

The first proper entry was taking out the 50 to 200 days last year.  I would wait for a flush or retest of 50 or 200 day for next entry if you are not in it.  I'd love to see it flush that late December low, get close to that 200 day.  Then I might assume maximum risk like I did with IWM last year, it might look like that kind of trade for me.  At that point, you want your stop to be 2-3x ATR.  Or you could assume 8-10% stop loss off that 200 day.  I have half a position on from October/November - high 13s cost.

Z 

Z has some nice tight closes in a handle of a cup and handle.  Next official pivot point is top of handle.  riding the 50 day up.  There are some prior pocket pivots and entries lower that haven't stopped people out.  Zillow not reporting until 2/7.  No position yet.

Year in Review 2016

2016 was a great year professionally for me.  Started a new job and had some success.   It was a job that gave me fulfillment.  I helped people and also used some of my skills that make me happy.

Also, I made progress in my trading.  My trading report card said I was up 37% this year.  If I was giving myself a letter grade, it was around a B+.  You'll see below.

Here were my lessons from winners for the year:

Only focus on the best setups that you understand.

My biggest winner was my IWM trade outlined in this blog earlier this year.  I had seen that setup before in 1998.  Pattern recognition!  Your biggest trades make or break your year.   This was the one for me, similar to my AMZN trade in 09.  A very clear zig-zag (5-3-5) that had exhausted itself.

I focused really really well this year.

Panic and poor sentiment matters when you have charts you understand.  Don't be afraid to use these moments to start a position or pyramid.

Don't be afraid to pyramid when you feel like you have a great 12 month trade and use sentiment and pattern recognition to help.  80% of my capital I traded this year went into trades when that IWM zig zag was completing in January and February.  That was a great pattern and sentiment was awful.  But I put in 10% after Brexit completed.  And another 10% the Friday before the Presidential election.  I only traded 3 times this year.  The last 2 entries or pyramids were perfectly completed short term corrections in structure into the 200 day.  With major derisking events in the news!

Less is more!

Because I had a new job this year, I barely had an hour a week to devote to my trading - basically 2 cups of coffee on the weekend and 5-10 min of train reading if I had the 5-10 min during the week.  I only focused on my best trades this year (IWM, VIAV, LITE and a CS entry in Nov).  This was my second best personal trading year in the last decade!  I spent the least amount of time!  I only checked my 3-5 quotes once in the middle of the market hours.  I did any market work before or after my normal work day and the market day.  That's really important.  If it's good enough for Billy O, it's certainly good enough for me!  Checking quotes frequently makes me and other longer term swing traders too emotional.  You need to check in once to see if you've been stopped out or a trade has triggered for the day and be done with it.  If you are a skilled day trader, this doesn't apply.  But for the rest of us, less quote checking is more.

Here was my biggest lesson from mistakes this year:

When in doubt, trust the 200 day in an up trending security.

This was my biggest selling mistake of the year.  Similar to PCLN 2009.  Had a great cost.  Great fundamental case.  Never broke an up trending 200 day.  Should have had a position and SAT until I was stopped out.

My market thoughts from here:

We are in a trickier spot.

Sentiment is higher.  Bulls are higher around 50-60%.  People suspect Trump will be good for business and the markets after being totally caught flat footed in November.

There are 2 real scenarios.  The bulls scenario is markets went sideways for 2 years.  In the big picture, the markets also went sideways for 16 years since the 2000 high.  We might consolidate more for a few weeks but market is going much higher.  60% chance.

The bear scenario is the post Trump election stock market reaction was a blowoff and a real bear market is coming.  40% chance.

I don't the answer.  The post Trump market run looks a little short compared to the 10 months of stock market action that preceded it.  99/00 had a nice 4 month blowoff, not 4 weeks.

More on the bulls case - The S&P (less frothy) and IWM (the leader to date) looks like they have finished 2 1-2s (that is how I drew the IWM chart above, S&P looks even cleaner) and what we have now is maybe our first 3rd wave in the major indices.  The meat of the move you don't want to miss!  Again, we had many derisking events in 2016 including the pre election in early November.  I am using 1997/1998 and 1999/2000 as my market guides.  If we break down from these examples, I will be out of everything.  But we have not broken down yet.  Here is what the IWM looked like in late 90s for your reference.

My short term answer for my own trading is I have cut my exposures some for first time in a year.  I was 50-75% levered much of last year.  I think in mid Dec (anticipatory, IWM was out of bollinger bands) or now (reactive, we've had a few IWM closes below the 20 day) are reasonable times to cut exposures, generally get off leverage, take some profits.  I am still keeping a core unlevered market bet with trailing stops - set at 50 and 200 days.  If market rips I'm there.  If it breaks down, trailing stops will take me out.  If we get a better short term set up, I have capital to deploy.

Examples of what I've done lately is selling half of my VIAV after completing a possible 5 after a possible O'Neil climax run (up 6 out of 7 days).  But I am keeping half and listening to my own advice above.  200 day and 50 day are up trending.  I should be using 200 day as a stop for a long term core position.  My original thesis was Jan 2016 ended a 6 year downtrend in the stock.

Good luck to everyone in 2017 and Happy New Year!  Hope the above helps.  Please learn from my 2016 mistakes and improvements.

Update

Hi Everyone -

I'm sorry I've been busy at work.  But for my swing trading, there has been little to do until recently.  I'm not going to post things just to post things.  But here is the update on how I have traded my 3 favorite positions in 2016 and how I've added and monitored a 4th.

LITE - Could be forming a new 5-7 week base.  Took 8 weeks to go up 20% out of its cup and handle.  I sold 1/2 of my position then.  Then LITE broke the 50 day.  I sold the other 1/2 that day.  Broke up above the 50 day tonight.  Stock is basically at prices where I sold on avg.  Earnings tomorrow night.  I don't love the current base.  I do love the fundamental story, but I don't get the short term technical setup.

VIAV - This broke the 50 day too.  I think this is forming its first base or handle after some pocket pivots and bottoming action. Had earnings tonight which seemed in line.  Headline beat, forecast missed by same.  Core biz was weak.  I could see stock rinsing on this.  I have not sold this.  This seems like an earlier stage idea.  None of my proactive sell signals went off.  I have not gotten stopped out on my entries (pocket pivot at 5.80).  If you defensively sell names when they break the 50 day, you are out.

IWM - The follow through day from a few months ago stuck.  Long term models I see no reason to sell.  But we could be 4 days into intermediate correction.

BSFT - Recent new idea.  Great reaction to "poor" earnings guidance yesterday.  Lots of tight weeks on weekly with a rinse last week and this week.  Earnings did decel.  Technically, I think this is going higher.  I like yesterday's lows as a stop.  Stock broke out from 39 handle in cup and handle and has formed a bigger deeper handle after.

Market and Leaders Update - 3/6/16

Market Health

The follow through day from a few weeks ago continues to stick.  My working thesis is a new bull market has begun and this is not a bear market rally.  One big reason is the sentiment stats (from Ryan Detrick) I retweeted in last 2 weeks.  People were as panicked, short, underinvested as they were at 2003 and 2009 lows.  That is pretty remarkable.

The bears say we are having a bear market rally.  I have circled the major bear market rallies in 2000-2002 and 2007-2008 to show you what they look like.  In Elliott wave terms, the big question is will we have a double or triple "3".  There is no doubt we completed one major "3" down.  See my IWM charts here and in past reports.  The question is are we having a corrective rally that will set up our next "3" down.  Does this current rally look like the circled areas in the bear market charts?

So far if you look at the chart of the IWM (which led again on Friday), it is too early to tell.  So far this looks impulsive, but there is way more "work" to do in this rally to figure out of it is corrective (bear market) or impulsive (bull market).  All we had is one very small pullback in this rally.  I'd expect one more similar minor pullback and a rally before we have anything more severe bull market or not.

Leader Update

I have kept the list narrow.  There have been a lot of damaged charts with stocks climbing up the right side of bases.  Candidly, I have been busy with my day job recently and feeling insecure that I don't have enough ideas for my trading and for this blog.  Having said that, I've still flipped through a lot of charts for 30 min most days and paying attention.  And ideally we should be focusing on our best 3-5 ideas whether you are a day trader or longer term Billy O style swing trader.  We do have this tendancy to want to have more ideas.  It feels safer.  It makes me feel like I am working hard.  But Billy O would say those are all excuses.  Do your work and believe in the best of your work.  Diverisification will lead a trader to mediocrity.  For better or worse and for whatever reason, I have been focusing on 3 ideas - IWM, LITE and VIAV.  I did add a few below for you to review this week if you haven't seen them already.

Existing Ideas

LITE handled CIEN's miss well.  Just because you have one guy in the group struggling, it's not a reason to throw your stock to the side.  LITE is 5 weeks post breakout, too early to sell, no sell rules have gone off.  Usually when these handles fail, they fail quickly.  They breakout, and a few days later they are forming a new base which stops you out.  Not so with LITE.  LITE is still holding the 10 day too.  I'm doing my best not to overthink it.  (this can be hard sometimes!)

VIAV continues to hold all pocket pivots and act well.  It continues to be around levels where I would anticipate a handle or a base.

New Ideas with Potential

Alarm.com broke out from a decent base.  Cloud home security provider with good Billy O earnings and sales stats.

There are a bunch of telecom, cloud component names in the IBD Friday "Weekly Review Section".  MXL, MLNX, MTSI.  I am going to show MXL chart.  I am still focusing on LITE for myself and not adding a second name.

Hope that helps.  Have a good weekend everybody.

Market Update - 2/21/16

Market Health

We got a day 4 follow through day this week.  So far it hasn't failed.  There were sentiment gauges that were showing investors were at similar levels of caution shown in 2008.  There is a good chance this one will stick.

The Russell, the weakest on the way down, is now the leader off the bottom.  It looks to me like it completed the final 5th wave in a zig zag discussed in previous reports.  I like how the MACD is turning up.  At the lows, the Russell was down 30%.

Leaders

Leadership is narrow.

LITE is still holding its pivot.  I'm trying not to overthink it.

VIAV is still holding its pivot point and now its trendline breakout without a stop out.  Again not trying to overthink it.  I could see a handle starting some time next week.  Could be a nice add if it forms properly.

Watchlist

There are other stocks like FB where I am trying to see if they right themselves after stop outs.  Not a lot of setups I like right now.  I am just focused on 3 favorite long trades - IWM, LITE, VIAV.

Update - 2/16/16

Update - 2/16/16

I don't have much to add this week.  We haven't had a proper follow through day yet but we are on the look out for one given the market made new lows in a 5.  You never know when a 5 is going to end.  But we were out of the weekly bollinger bands again for the indices and at key spots outlined in the past.

LITE and VIAV still look good and haven't stopped you out since last pivot and pocket pivot points.

FB has stopped people out yet again.

Hopefully I can add more thoughts in the weeks to come.