The IBD Experiment: Trade $100k into $1M In (4) Years

Yes piezoe, this has come up, before. (see previous post: http://www.elitetrader.com/vb/showthread.php?s=&postid=3004791#post3004791)

 

All Collective2.com results are hypothetical.

 

The Technical Indicator: Legitimate breakout, or the latest whipsaw?

CINCINNATI (MarketWatch) — The Standard & Poor's 500 Index has just cleared its
50-day moving average for the first time since July.

http://www.marketwatch.com/story/legitimate-breakout-or-the-latest-whipsaw-2011-10-11-1127240

While the upturn is constructive, it's not clear that a true trend shift has
been signaled. The charts below add color:

Before detailing the U.S. markets' wider view, the S&P 500's hourly chart
highlights the past three weeks.

The S&P has extended its rally from the year's worst levels.

Looking ahead, next resistance spans from 1,194 to 1,204, matching the
late-September peak.

Conversely, first support holds around 1,172 to 1,174, an area matching its
50-day moving average.

Meanwhile, the Dow industrials' near-term backdrop is similar.

From current levels, initial support holds around 11,370, and is followed by a
deeper floor at 11,240.

Conversely, major resistance holds around 11,555, matching its breakdown point,
better illustrated on the daily chart.

And the Nasdaq Composite has also rallied sharply from the October low.

Modest support now holds at 2,550 and is followed by the top of Monday's gap at
2,519.

Conversely, next resistance spans from 2,590 to 2,600 matching its breakdown
point, illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has gapped sharply atop its 50-day moving
average, currently 2,503.

Significant resistance now spans from 2,590 to 2,600 bracketing the
late-September peak and its breakdown point.

Moving to the Dow, its six-month backdrop is similar.

In its case, the blue-chip benchmark has also knifed atop its 50-day moving
average, currently 11,210.

On further strength, major overhead holds around 11,550, matching the
late-September peak and its breakdown point.

And the S&P 500 has also cleared its 50-day moving average, currently 1,174.

On this wider view, its next notable overhead holds at 1,204, and is followed by
significant resistance spanning from 1,220 to 1,230.
The bigger picture

As detailed above, each major benchmark has broken sharply its 50-day moving
average.

This marks the first time in more than two months that all three indexes have
concurrently traded above the 50-day.

Constructive price action.

But as always, it's not just what the markets do, it's also how they do it.

And by this measure, the current rally attempt — or "breakout," depending on
your view — still raises questions.

Moving to the SPDR Trust S&P 500's SPY backdrop points to the first issue.

Consider that the SPY's breakout was driven by its third-lightest volume since
the August downdraft.

This is technically unusual, raising doubts about sustainability. The Columbus
Day holiday was the culprit.

And looking elsewhere, both small- and mid-caps have yet to follow through.

Starting with the Russell 2000 Index, the small-cap benchmark remains capped by
its 50-day moving average.

Moreover, this month's rally attempt has been driven by progressively lighter
volume.

Meanwhile, the S&P MidCap 400's backdrop is similar.

Here again, the MDY remains capped by its 50-day, and its upturn has been
punctuated by decreased volume.
Summing up the backdrop

Both bulls and bears have a case after this week's lukewarm breakout.

Market bulls will contend that each major benchmark has cleared its 50-day
moving average, and moving averages aren't useful if they're ignored. Price
action matters.

Meanwhile, bears will point to the rally's lack of conviction, and the fact that
the markets haven't truly "trended" since March.

To split the difference, a more practical view is that the near- to
intermediate-term bias points higher barring a violation of the 50-day, and
opens the path to a retest of the range top.

The S&P's next significant resistance spans from 1,220 to 1,230.

- G

 

The Technical Indicator: S&P 500, Nasdaq maintain first support

CINCINNATI (MarketWatch) — The major U.S. benchmarks have pulled in this week from two-month closing highs.

http://www.marketwatch.com/story/sp-500-nasdaq-maintain-first-support-2011-10-18?pagenumber=1

But to this point, the Standard & Poor’s 500 Index and the Nasdaq Composite have maintained first support, preserving a guardedly bullish near-term backdrop. The charts below add color:

The S&P 500’s hourly chart details the past three weeks.

The S&P has pulled in from resistance around the 1,220 mark. Last week’s high came in at 1,224.

From current levels, notable support holds at 1,190, and is followed by a deeper floor around 1,172, roughly matching its 50-day moving average.

Meanwhile, the Dow industrials’ near-term backdrop is similar.

In its case, initial support holds at its breakout point of 11,370, and is followed by a deeper floor around 11,240.

And the Nasdaq Composite’s near-term backdrop remains the strongest.

Looking ahead, initial support holds at its breakout point of 2,590, and is followed by a modest floor around 2,560, not illustrated.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has knifed atop its breakdown point, notching a “higher high” vs. the September peak.

Though near-term extended, and due to consolidate, its straightline October spike is longer-term bullish.

Moving to the Dow, its wider backdrop is slightly weaker.

While the index notched a two-month closing high last week, it’s reversed back to its trading range.

With this week’s downturn, notable support spans from its 50-day moving average, currently 11,210, to the 11,240 area, better illustrated on the hourly chart.

And the S&P 500 has pulled in from significant resistance.

Three inflection points stand out:

* The mid-September peak of 1,220.
* The late-August peak of 1,230.
* Trendline resistance, matching the early-August breakdown.

The S&P topped last week at 1,224, and has initially drawn sellers in this area.
The bigger picture

Just two sessions removed from a two-month closing high, the major U.S. benchmarks have pulled in this week.

And from a technical standpoint, it’s the response to first support — detailed in Monday’s review — that’s worth tracking.

Returning to the S&P’s three-week view, first support holds at 1,190, roughly matching its breakout point.

Consider that the index has sustained a slight breakout across five sessions.

Meanwhile, the Nasdaq’s near-term backdrop is similar.

In its case, first support technically holds at 2,589, matching its breakout point and Thursday’s low.

And the Dow industrials’ near-term backdrop is similar, though slightly weaker.

As illustrated, first support holds around 11,370, also matching its breakout point.

Summing up the backdrop

With the areas above detailed, it’s the response to support — especially the S&P 1,190 area — that’s worth tracking technically.

On a strong-volume violation of support, the trading range is confirmed, and a more extended consolidation phase is likely in order.

But to this point, the pullback has been orderly.

Moreover, the October rally has culminated at a two-month closing high — consistent with a trend shift — meaning that the bull case gets the benefit of the doubt until proven otherwise.

- G

 

The Technical Indicator: Nasdaq, Dow hesitate at the 200-day average

CINCINNATI (MarketWatch) — Despite a recent breakout, the U.S. markets have balked at major resistance.

http://www.marketwatch.com/story/nasdaq-dow-hesitate-at-the-200-day-average-2011-10-25-121260

Specifically, the Nasdaq Composite and the Dow Jones Industrial Average have both peaked near their 200-day moving averages, and the response to these areas should set the near-term technical tone.

Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past three weeks.

The S&P has broken from major resistance, notching two-month highs.

With Tuesday’s downturn, its first notable support holds at the former range top, around 1,230.

Meanwhile, the Dow Jones Industrial Average has also broken to two-month highs.

From current levels, modest support holds at 11,775 and is followed by a firmer floor at its breakout point, around 11,650.

And not surprisingly, the Nasdaq Composite has also broken out.

Looking ahead, initial support holds at its breakout point of 2,667 and is followed by the late-September peak of 2,643 (not illustrated).

Widening the view to six months adds perspective.

The Nasdaq has sustained a break atop former resistance at the 2,600 mark.

Moreover, it briefly edged atop its 200-day moving average, currently 2,692, before pulling in with Tuesday’s downturn.

Hesitation at the 200-day is to be expected, and the response to this area should set its near-term technical tone.

Moving to the Dow, its six-month backdrop is similar.

Namely, the blue-chip benchmark has knifed from its “crash” trading range, notching two-month highs.

The rally places it within view of the 200-day moving average, currently 11,967.

Though near-term extended, the first pullback toward the breakout point — the 11,650 area — “should” draw buyers.

And the S&P 500 has also broken out.

First support now holds at 1,230 — matching the former range top — while the 200-day moving average, currently 1,274, marks the S&P’s next upside target.

Within this band, S&P 1,250 remains an inflection point.
The bigger picture

Despite Tuesday’s downturn, the U.S. markets have thus far sustained a breakout.

Namely, each benchmark has knifed from its “crash” trading range, notching two-month highs.

Constructive price action.

Against this backdrop, the S&P 500’s 11-year backdrop adds perspective. Each bar on the chart represents one month.

Consider that the S&P has effectively maintained support at the mid-point of its one-decade range.

Moreover, the rally from support has been directionally steep, placing the S&P back atop resistance and its 20-month moving average.

The 20-month moving average currently holds at 1,216, and has marked a useful longer-term trending indicator.

Meanwhile, the Volatility Index is retesting the 30 mark, also supporting the bull case.

A sustained break lower would signal an escape from crash territory, and a reversion to more stable market conditions.

If the VIX can sustain its breakdown, it has further room to fall. (Notice its recent posture under the 50-day moving average.)
The technical levels

Moving to the technical levels, familiar areas stand out.

Starting with support, each benchmark’s breakout point is the area to track.

Specifically:

* Dow support at its breakout point of 11,650.
* Nasdaq support at the 2,600 mark, illustrated above. Last week’s closing low held at 2,598.6.
* S&P support at its breakout point spanning from 1,220 to 1,230, matching the former range top.

The market recovery attempt is intact to the extent these areas hold. (Support “should” hold on the first retest.)

Next test holds at the 200-day moving average

Conversely, each benchmark faces obvious resistance at its 200-day moving average.

Namely:

* The Dow’s 200-day moving average, currently 11,967.
* The Nasdaq’s 200-day holds at 2,692.
* The S&P’s 200-day moving average, currently 1,274.

Generally speaking, the 200-day defines the primary trend, with a posture above this level signaling a longer-term uptrend.
Summing up the backdrop

The market recovery attempt is intact, though the areas above define the bull/bear tension.

Looking ahead, the technical question is the response to the 200-day moving average. Namely, do the markets sell off aggressively from the 200-day moving average, or can they hold tightly to resistance, positioning for a breakout?

Time will tell, but the bull case technically gets the benefit of the doubt barring a violation of the support points detailed above.

- G

 

So You Missed the Rally… Here’s What To Do Now

http://philpearlman.com/2011/10/28/so-you-missed-the-rally-heres-what-to-do-now/

* Posted by ppearlman <b>(no affiliation)</b>
* on October 28th, 2011

Many missed the meat of this rally or were even caught on the wrong side of it.

The normal irrational reaction is to want to chase here and there were a ton who finally got long into yesterday’s monster move or who covered.

I use the phrase normal irrational reaction because its just that.

With psychopathology, the irrational thinking associated with a mental illness is abnormal as only a small percentage of the population exhibit the associated cognitive profile.

But in trading, its just the opposite as irrational thinking is actually normal as a majority in a specific provoking situation (including missing a rally) exhibit the associated irrational cognitive profile. Crazy but true…

So what do you do now?

First, go back and read this post called The Tao of Missing a Trade. Its a must read for you. Next…

If you have a good plan, you stick to it. Behind the scenes you might want to adjust for new market conditions but that needs to be a deliberate process. I would recommend this weekend as the market is closed and you might be less distracted.

If you don’t have a good plan, then what the hell are you doing?

The market is inhabited by sharks who eat people with no plans or who abandon their plans under anxiety.

Only one out of ten reading this who were wrong footed and got caught up in yesterday and this morning’s euphoria will heed this post, take a deep breathe and adjust their risk profile rationally.

While nine of ten chasers reading will ignore the advice.

The Tao of Missing a Trade

* Posted by ppearlman
* on September 26th, 2011

Whichever the way the wind blows,
Whichever the way the world goes,
Is perfectly all right with me!

- Smullyan

When you don’t care about missing something, it makes it so much easier not to miss it.

This is natural law or Taoist as Smullyan might say. Some are born understanding this while some learn it in time while still others never quite manage to figure it out.

In trading, missing the trade gracefully is as much a part of the craft as executing.

The beauty of it is that there is always another setup coming around the bend so the missed trade is really nothing more than one more opportunity not to chase.

@ppearlman

 

I thought the system followed the big picture? Why then did you close a short position on 10/26 when IBD had been posting confirmed uptrend as far back as the 19th? Shouldn't you have been long?

Just trying to understand the system.

Thanks.

 

I apologize for any confusion I caused. I have both a futures trend-following system that holds long and short NQ contracts & an ETF trend-following system that holds long ULTRA Proshares QQQ (QLD and QID) that as you say follow Investor's Business Daily (The Big Picture) signals: based on "market in confirmed uptrend" or "market in correction".

There was a slight discrepancy between the (2) C2 accounts. In the futures account trades were executed per IBD's 13-OCT-2011 shift. Additional exposure came on 19-OCT-2011. However in the ETF system account the last (current) open trade (and previous closed trade you refer to) was opened on 26-OCT-2011 - the date I paid the next 6 month listing fee (w/o which you can't place trades). Furthermore I added additional ETF exposure at the open on 01-NOV-2011 - to be fully vested at the now desired 1.25X level in both accounts.

The late entry amounted to ~2% in loss...but from a long-term view arguably not significant.

Thank you for following and <b>welcome to the "IBD Experiment"!</b>

 

The Technical Indicator: U.S. markets plunge to major support

CINCINNATI (MarketWatch) — U.S. stocks are on the defensive to start November
following their best October performance in 37 years.

http://www.marketwatch.com/story/us-markets-plunge-to-major-support-2011-11-01

In the process, each major benchmark has plunged within view of major support.

Before detailing the U.S. markets' wider view, the S&P 500's hourly chart
highlights the past three weeks.

The S&P has sold off from two-month highs.

With Tuesday's downturn, important support spans from 1,220 to 1,230, matching
its "crash" range top, better illustrated on the daily chart.

Meanwhile, the Dow industrials' near-term backdrop is similar.

Namely, the blue-chip benchmark has reversed from two-month highs.

On further weakness, its next significant support holds at 11,650, matching the
breakout point.

And the Nasdaq Composite has also pulled in from the October peak.

With Tuesday's downdraft, its first notable support spans from 2,590 to the 2600
mark, better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has reversed back under its 200-day moving
average.

Significant support now holds at the 2,600 mark, an area that has drawn buyers
in Tuesday's early action. Specifically, Tuesday's intraday low has thus far
come in at 2,601.

Moving to the Dow, its six-month backdrop is similar.

Recall that notable support holds around 11,650, roughly matching its former
range top.

The Dow has bottomed early Tuesday at 11,666 — just above support — and thus far
drawn buyers in this area.

And the S&P 500's wider view rounds out the benchmarks.

The S&P has reversed back under its 200-day moving average following a failed
test of trendline resistance.

Significant support now holds at its "crash" range top, spanning from 1,220 to
1,230.

The bigger picture

U.S. stocks are on the defensive to start November following their best October
performance in 37 years.

In the process, each major benchmark has plunged within view of major support.

The specific areas were initially detailed last Tuesday , and fall out as
follows:

* Nasdaq support at the 2,600 mark. Today's intraday low has thus far held
at 2,601.
* S&P support spanning from 1,220 to 1,230. Today's intraday low has thus
far held at 1,218.5.
* Dow support at its breakdown point of 11,650. Today's intraday low has
thus far held at 11,666.

Loosely speaking, these support points delineate the barrier between "normal
market" and "crash territory."

And to this point, they've held.

But as always, it's not just what the markets do, it's also how they do it.

And by this measure, the recent price action raises a caution flag.

Most obviously, each benchmark has staged a two-session nosedive straight into
major support.

Pullbacks are to be expected, but healthy markets don't plunge to the first
major support point.

And separately, the pullback's early signs point to an expansion of bearish
market breadth.

Consider that Monday's down volume surpassed up volume by 12 to 1 on the NYSE —
a statistically unusual reading — and bearish momentum has accelerated in
Tuesday's early action.

Summing up the backdrop

The U.S. markets are coming off their best October performance in 37 years.

Against this backdrop, a pullback is to be expected, and concerns over the
downturn's aggressiveness are debatable.

But from a strictly technical standpoint, the "crash" range top — the S&P 1,220
area — is worth tracking.

An immediate violation of S&P 1,220 places the index back within crash
territory, raising the flag to further weakness. (This would be bad for market
bulls.)

Conversely, a successful retest of S&P 1,220 preserves the late-year rally
attempt.

Tuesday's price action should add color.

 

The Technical Indicator: S&P 500 within view of major technical test

CINCINNATI (MarketWatch) — The major U.S. benchmarks are digesting their gains after breaking out last month.

http://www.marketwatch.com/story/sp-500-within-view-of-major-technical-test-2011-11-08

Against this backdrop, the Standard & Poor’s 500 Index has risen within striking distance of notable technical territory at its 200-day moving average.

Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past three weeks.

Consider that the S&P closed last year at 1,257.

So it’s edged nominally into positive year-to-date territory, and within view of its 200-day moving average, currently 1,273.

On a pullback, modest support holds around 1,240, matching this week’s low.

Meanwhile, the Dow industrials’ near-term backdrop is slightly stronger.

In its case, the blue-chip benchmark has edged atop its 200-day moving average, which currently holds at 11,975.

On further strength, its next notable overhead holds at 12,284 matching a three-month peak.

And the Nasdaq Composite has also edged atop its 200-day moving average, currently 2,689.

Looking ahead, modest overhead holds at 2,716 (gap resistance) and is followed by its three-month high of 2,753.

Widening the view to six months adds perspective.

The Nasdaq has rallied to its 200-day moving average following a successful test of the 2,600 support.

To the extent that it holds tightly to the 200-day — suggesting sellers are absent — its prospects for a “real” breakout improve.

Moving to the Dow, its six-month backdrop is similar.

In its case, the index has edged slightly atop its 200-day moving average following a successful test of the 11,650 support.

On further strength, its next notable overhead holds around 12,280, matching the October peak.

And the S&P 500’s wider view rounds out the benchmarks.

Notice this is the only major benchmark positioned under its 200-day moving average.

Nonetheless, the S&P has sustained its break from the “crash” range. Constructive price action.

The bigger picture

As detailed above, the major U.S. benchmarks have diverged slightly.

Namely, the Nasdaq Composite and the Dow industrials have both edged atop their 200-day moving averages while the S&P remains capped by its 200-day.

And technically speaking, the 200-day is a widely-tracked trending indicator that generally signals the longer-term market bias.

So this is a slightly bullish divergence.

Against this backdrop — with the S&P lagging behind — three inflection points stand out.

Specifically:

* The October peak holds at 1,293, matching trendline resistance.
* The mid-point of its range rests at 1,257, matching the 2010 close.
* Major support holds at 1,220, matching the former range top and trendline support.

From a technical standpoint, the S&P’s new playing field is defined by the trendlines above.

And looking ahead, it’s the response to these areas that matters.

Consider that the first downdraft from the upper trendline was directionally sharp, and driven by sharply negative breadth. It came with conviction.

A comparable failure on the second test would raise a caution flag.

But to this point, the 1,220 support has drawn buyers, and the S&P has reversed to the middle of its range.

So collectively, the S&P 500 is consolidating — digesting last month’s breakout — and the market recovery attempt is intact barring a violation of trendline support.

- G