Weekend Review - Blast Off!!

The U.S. markets are blasting higher, with INDU making new all time highs this past week, and the SPX close to its own all time record high reached in 2000. BKX and XBD -- two of our "canaries" -- were also very strong last week, due to some good earnings reports, and the prospect for Congressional action to "bail out" lenders/borrowers with respect to problem housing loans. GSEs are also suddenly interested in buying subprime housing loans. http://www.washingtonpost.com/wp-dyn/content/article/2007/04/18/AR2007041802499.html?hpid=sec-business This news also helped our third "canary," the housing index, push higher last week. So much good news -- while the U.S. dollar hit a 26 year low against the British pound. The late February/March sell off earlier this year is a distant memory in the minds of "whoever" is buying here.

After retesting moving average support, noted in last wekend's review, the major U.S. indices switched to buy signals. This past week, our Aggressive Method remained on those buy signals for most of the U.S. indices, except one - the one we like to trade. It looks like we may be whipped out of a short in IWM. Details must be left for our members.

Oil (USO) broke down a bit last week and our Aggressive Method triggered a sell signal. Although USO had a good up day Friday, it is still below resistance of the 50 day MA.

Weekend Review

Gold (GLD) continues up -- no reason to get out of that long.

Oil (USO) gave us another long entry this week -- this was a "with trend" trade, for those who are following along.

On IWM and QQQQ -- traders following our Aggressive Mechanical Method (based on signals from Rodo) took profits on their longs this week and reversed to short. We warned clients, however, of the possibility that the U.S. equity indices would merely go down to touch moving average support and bounce back up -- which is exactly what they did.

All of the major U.S. equity indices we follow have filled their 2/27 gaps. NYA (the New York Stock Exchange index) has gone up to make a new all-time high. The economic problems that currently confront the United States are well known, and discussed thoroughly elsewhere. There is every reason for our stock markets to fall, except one: "There is too much cheap money floating around." With speculative money no longer going into housing, it needs to find a home somewhere, and it seems stocks are the place to be. Will the equity markets be the next bubble? Our "canary" sectors - banks, brokers, and housing - continue to lag the broad-based indices, with the housing index ($HGX) and the bank index ($BKX) still below their 200 day moving average. With the "canaries" so weak, we cannot be enthusiastic about the prospects for our markets, but we are not in the business of making predictions. The "bears" who warned about the Nasdaq bubble beginning in 1997 or so, were eventually proven correct, but they missed a great party !

Higher and Higher??

The major indices continue to claw their way up, and the going is slow. We are still long IWM and QQQQ. It does look like the Qs filled their gap from 2/27, as did IWM. The Qs came close to giving us a confirmed sell signal today, but it was a false alarm. Still, bearish divergences are showing up in the charts, most significantly on the chaikin osc.

Weekend Review -- Keeping it Short

Gold continues its winning ways . . . the major U.S. indices are still clawing their way up, digging through their gaps from 2/27. Trading has been low volume and narrow for the most part. All the majors are now short term overbought.

Rodo got us out of our NDX short with profits, and into a long this past week. The other indices have held their long signals. Our canaries - housing, banks, and brokers - are still lagging, but they look a little frisky lately.

The index futures stopped trading at 9:15 a.m. for the Good Friday holiday, but not before they got a big boost from the strong jobs report released at 8:30. Unless something else happens this weekend, Monday Monday should be a strong open. Unless this time good news is bad. How can anyone trade off fundamental news when we cannot even tell whether or not the news is good news? Is good news bad now or is it good now? The charts know everything, which is why Glory just follows the charts.

(When we have time (LOL), we are going to go back and look at our buy/sell signals a few days prior to every Fed meeting. It should be enlightening.)

Update on USO

We received a confirmed "sell" signal on USO at the close of 3/30 for execution at the open on 4/2. This sell signal came from our new indicator "Rodo." (Please see the previous post about Rodo.)

Introducing "Rodo"

We have developed a set of 2 custom indicators that generate buy and sell signals for any market that can be charted. We have named one of them (the faster one) "Odo" and the other "Rod." Together we affectionately think of them as "Rodo." Applying Rodo to the markets/indices we follow, we get earlier, much better entries than waiting for our "pattern" trades to trigger -- the "pattern" trades are the trades illustrated in the charts posted here in the past. Rodo also gives many more trades and catches many more moves than that other method.

Rodo back tests very well on its own, but subjects us to a great deal of frustrating market chop. To avoid chop as much as possible (it is not always possible) we require confirmation of a new signal. This confirmation can come from any one of a number of indicators, based on either volume/money flow, momentum, or price. Sometimes, Rodo triggers a new signal that is confirmed the same day. In that case, we enter at the next day open. If the signal did not confirm the same day, we wait for the confirmation the next day, and enter intra-day when it does confirm. Rarely, we get such a strong, sudden move against our current signal, that we receive confirmation before we ever received a new signal from Rodo. In this case, we enter intra-day also.

This is probably as far as we will get in developing a "mechanical" trading system. We would not want to trade a "black box" system that blindly issues signals that have no real meaning to us. This system is not really a "discretionary" system as we have back tested it - it is very objective and precise. In back testing, Glory ignored things like price support/resistance, moving average support/resistance, double bottoms/tops, etc. -- things we would NOT ignore in real life trading.

We do not have a name for our "system" yet, but we are thinking of something along the lines of SETM -- Show Everyone The Money. :)