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

Despite decade-plus years of experience using IBD market direction calls - as well as 3+ C2 years testing the approach, SideShowBob, <b>The IBD Experiment</b> is still in the very early phase or stage of development -- at least in regards to putting much <i>actual</i> money to work!

Of course with true long-term success, the magic of compounding comes into effect and all bets are off, since my trading system approach can be taken off-line without sharing any proprietary detail.

Glad to share with you. pay$

PS $25/mo. C2 fee does not even cover my costs. I DO, however, take some comfort in knowing I've exceeded these exceptional expectations (<u>no affiliation</u>) -



Of course, I still fall WAY short of the many temporal high-flying systems at Collective2 that absorb the majority of system fee income.

 

Investor's Corner
How To Invest: Big Picture Maps The Market Direction

By ALAN R. ELLIOTT, INVESTOR'S BUSINESS DAILY Posted 11/30/2011 03:47 PM ET

http://news.investors.com/Article/5...-to-decipher-market-direction.htm?src=HPLNews

At this time of year in many parts of the country, you want to be sure and check the thermometer before you jump out the door in the morning. It could just as easily be 35 degrees or 65 degrees. You want to make sure you're not over or underdressed.

The same is true for the stock market.

To invest means literally to put on vestments, a word that means garments. It means to clothe yourself in something. Before you wrap your cash up in a stock, you want to have some idea whether the market is lukewarm, red hot or cold as ice.

That's why the M in IBD's CAN SLIM system stands for market direction. It's the most critical aspect of smart investing.

Is the market in a rally or a downtrend? Is it waiting for a follow-through to confirm an uptrend? Or is it struggling, freighted with a heavy load of distribution days?

These are the kinds of guideposts you want to recognize as you decide whether to move into or out of stocks.

To be sure, studying the market doesn't mean you have to predict its direction. CAN SLIM only advises that you listen to and understand what the market tells you today, this week, this month.

Like all worthwhile pursuits, developing such understanding requires a focused, sustained effort.

The most obvious place to start is with IBD's daily column, The Big Picture. The feature gives an overview of the day's market action. It frames that action in the context of the general market's recent trends.

Attached to The Big Picture is the Market Pulse. At a glance, this feature gives a continual, concise read on the market's action and outlook, as well as the best and worst performers among top stocks.

When the Pulse says "Market in correction," the message to investors is: no new buys. Rotate to cash as you sell holdings. Then sit tight and wait for a follow-through day.

A "Market in confirmed uptrend" message signals a follow-through has occurred and the buy zone is open for business. "Uptrend under pressure" hangs out a caution flag. It generally indicates rising distribution — intense selling by large institutions — threatening the market's progress. The message: Be cautious about buying, take some profits and raise some cash.

Keep in mind, the market can be cantankerous. It is constantly adjusting to revalue countless aspects of the U.S. and global economies.

It is not unusual for a series of daily flinches higher or lower to cause several turnarounds in the status on the Market Pulse.

If you feel yourself getting frustrated by such changes, it's time to take a step back. You can't will the market to become less volatile. Rather than stress about directional changes, turn back to your watch list so that you are prepared for the big opportunities that will come.

 

The Technical Indicator: Dead-cat bounce can’t mask stock downtrend

http://news.investors.com/Article/5...crisis-requires-spending-cuts.htm?src=HPLNews

CINCINNATI (MarketWatch) — The U.S. markets have rallied respectably from one-month lows.

Nonetheless, each benchmark faces significant resistance at last week’s breakdown point, detailed below.

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

The S&P has reversed sharply from last week’s low.

From current levels, initial resistance holds just under the 1,200 mark, and is closely followed by the 50-day moving average (not illustrated), currently 1,205.

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

Looking ahead, modest resistance holds at the 11,600 mark, and is followed by more significant overhead at its breakdown point, around 11,650.

And the Nasdaq Composite has also broken down.

From current levels, initial resistance holds at 2,540 — matching the bottom of last week’s gap — and is followed by additional overhead at 2,567.

Widening the view to six months adds perspective.

The Nasdaq has broken into less-charted, “crash” territory.

That’s bearish.

On this wider view, a sustained break atop the 2,600 resistance is needed to neutralize last week’s breakdown.

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

While the index has edged nominally atop its 50-day moving average, significant resistance holds at its breakdown point, around 11,650.

And the S&P 500’s wider backdrop is also technically shaky.

As detailed in Monday’s review, three inflection points stand out:

* Gap resistance at 1,198, better illustrated on the hourly chart.
* The 50-day moving average, currently 1,205.
* Major resistance around 1,215, matching its breakdown point.

From a technical standpoint, this week’s initial rally to resistance “should” draw sellers.

The bigger picture

As detailed above, the major U.S. benchmarks have dropped back into the technical muck.

Market bears are on offense.

And for better or worse, the breakdown points remain the areas to track.

The specific levels fall out as follows:

* S&P resistance spanning from 1,215 to 1,230.
* Nasdaq resistance spanning from 2,590 to 2,600.
* Dow resistance around 11,650.

Looking ahead, the first retest of resistance — roughly speaking, S&P 1,215 — should be a useful bull/bear gauge.

But barring a break atop resistance, the current upturn is technically a corrective bounce, and the U.S. markets’ path of least resistance points lower.

 

IBD Editorials

Fed Leads Other Central Banks In Applying Band-Aid

Posted 11/30/2011 06:36 PM ET

http://news.investors.com/Article/5...crisis-requires-spending-cuts.htm?src=HPLNews

Debt Crisis: Led by the Fed, top central banks added dollars to the global financial system on Wednesday as Europe's crisis deepened. We hate to rain on anyone's parade, but this won't solve the EU's problems.

The central banks' bold action, though met with wild enthusiasm by financial markets, amounts to little more than a multibillion dollar Band-Aid on a deep, dangerous wound.

It also turns the U.S. Federal Reserve into Europe's lender of last resort — a dangerous precedent, and something we don't recall American voters approving, though they'll certainly pay up if it fails. Obviously the Fed, worried the EU's crisis will take down the U.S., thinks the risk is worth it.

We understand the fear. The central banks' coordinated move came after desperate European officials said they might boost the size of their $600 billion emergency bailout fund and seek financial help from the IMF.

Central banks also see signs of an EU credit crunch that could sink the world — and U.S. — economies.

As Reuters aptly put it, "investors are fleeing the euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits, and a recession looms, fueling doubts about the survival of the single currency."

As if that weren't enough, Standard & Poor's decided Tuesday to cut its ratings for many of the world's largest banks due to their exposure to the European debt crisis.

But even as they juggle and sell off their portfolios of bad loans, major banks in Europe, the U.S. and Asia are being forced to raise capital to meet new international banking standards. The result: a credit crunch.

In short, the global financial system is near collapse, and the central banks are madly pumping dollars into it to keep the collapse from happening.

It's an emergency, we get it. But while such actions might help in the short run, they won't in the long run.

The EU faces the same problems today as it did yesterday, and no amount of central bank money-printing changes that.

Namely, its 17 members, used to an ever-expanding welfare state and leisure-class lifestyle, can't sustain that way of life with their chronically weak economies and aging, low-productivity workforces.

Contrary to recent actions, the EU's problems aren't short-term and financial, but long-term and fiscal.

Unfortunately, EU leaders continue to debate the placement of deckchairs on the Titanic as the ship takes on water. In recent days, the EU has discussed plans for creating special eurobonds backed by all members of the EU; for the European Central Bank to print money and buy Greek, Italian, Spanish and other country debt; for the creation of special "insurance" for newly issued debt; and for tapping the IMF for bailouts.

In short, everything but what they should be discussing: Massive cuts in out-of-control government spending and an end to the EU's promise of cradle-to-grave security through its all-embracing welfare state.

The U.S. should learn from this charade. After all, we're on the same path. Neither the U.S. nor the EU will thrive until they address their real problem: too much spending and overreliance on government.

 

Ever see a fat-ass voluntarily lever himself off the sofa, put down the bag of chips, and start working out regularly and eating healthy? It takes a real crisis to get them moving, something like the onset of obesity related diabetes or a heart attack.

Ever see an alcoholic voluntarily give up the drink? Not without a crisis, something like a third DUI and serious jail time coupled with loss of a job.

People would rather die than change.

 

This is why you should dismiss the IBD editorials:

Italy debt to GDP
<IMG SRC=http://research.stlouisfed.org/fred2/data/DEBTTLITA188A_Max_630_378.png>

Spain debt to GDP
<IMG SRC=http://research.stlouisfed.org/fred2/data/DEBTTLESA188A_Max_630_378.png>

Ireland debt to GDP ( they ran a surplus before the took on that bank debt)

<IMG SRC=http://research.stlouisfed.org/fred2/data/DEBTTLIEA188A_Max_630_378.png>

Where's all that supposed runaway spending in those trouble countries???????????????

This is also the same paper that claimed that Stephen Hawkings would not have survived if he lived in the UK with its govt healthcare system. To which Hawkings held a press conference stating that if it were not for UK healthcare, he would not be alive today!

IBD has enough lemmings following it to probably move the markets in the short run but their editorials are downright stupid!

 

WASHINGTON (MarketWatch) - The notion that the European Central Bank can run to the rescue of Europe is "overplayed" in financial markets, said James Bullard, the president of the St. Louis Federal Reserve Bank, on Thursday. The notion that inflating is like a free way out of the sovereign-debt crisis is incorrect. Bullard said. It is actually "the worst way" to solve such a crisis because "there would be an inflation-risk premium in the future for all countries that are borrowing in euros. So you would be punishing the countries that have had fiscal rectitude," Bullard said in an interview on Bloomberg Television. The European debt crisis won't be solved "with a silver bullet," Bullard said. "You are talking about governments that have borrowed way too much. It is going to take years for them to get the fiscal rectitude and the fiscal austerity that they are going to need to work down that debt over time," he said. The Fed could reopen its liquidity facilities used in 2008-2009 if the crisis spilled over into U.S. markets. "The first step would be to use these battle-tested things we've used before," Bullard said.

 

He comments are too vague. The whole zone is not problematic, it's the peripherals who can't live inside the currency that will have to undergo at the very least some form of austerity measures to right themselves. Think Greece, Portugal, Ireland(?), Spain(??). These will have to be removed to allow market forces to make the further necessary adjustment via their own currency. The Fed governor is right that there is no silver bullet for their problems, but he needs to be more specific.

For the rest that stay, they need to look more like the US with a central treasury and a more open FED that doesn't insist on chasing an inflation boogieman that doesn't exist.

I am curious whether there is an IBD effect on the markets; whether their rankings do cause certain stocks to outperform/underperform than they would normally do.

 

The Technical Indicator: Market recovery meets technical resistance

CINCINNATI (MarketWatch) — While the market backdrop remains volatile, it’s also distinctly technical.

http://www.marketwatch.com/story/market-recovery-meets-technical-resistance-2011-12-06

Consider that each benchmark is vacillating near major resistance, and the response to these areas should set the near-term technical tone.

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

The S&P is retesting resistance at its 200-day moving average, currently 1,264.

On further strength, next resistance holds at the November peak of 1,277, while its first notable support rests around 1,240.

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

In its case, the index topped Monday at 12,186.5, matching the November peak.

This area remains first resistance, and is followed by significant overhead at its four-month high of 12,284.

And the Nasdaq Composite has also risen to major resistance.

Namely, its 200-day moving average, currently 2,672.

On further strength, additional overhead holds at the mid-November peak of 2,695.

Widening the view to six months adds perspective.

The Nasdaq has extended its break from a bullish island reversal.

Its sustained rally attempt is constructive, and again, the 200-day moving average, currently 2,672, marks the next technical test.

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

Consider that the blue-chip benchmark has sustained a slight break atop its 200-day moving average which currently holds at 11,944.

On further strength, significant resistance holds at 12,284, matching its four-month high.

And the S&P 500 has also rallied to significant overhead.

Namely, it’s undertaking the third test of its 200-day moving average, and major resistance is typically cleared on the third or fourth approach.
The bigger picture

While the market backdrop remains volatile, it’s also distinctly technical.

Consider that each benchmark has closely observed significant resistance as follows:

* S&P resistance at its 200-day moving average, currently 1,264. The S&P topped Monday at 1,266.
* Dow resistance at the November peak of 12,187. The Dow topped Monday at 12,186.5.
* Nasdaq resistance at its 200-day moving average, currently 2,672. The Nasdaq topped Monday at 2,674.

So more plainly, each benchmark has topped this week within two points of obvious resistance.

And technically, the response to these areas should be a useful bull/bear gauage.

To the extent that the major benchmarks hold tightly to resistance, the chances of an eventual break higher improve. Conversely, a sharp sell-off from these areas keeps the bull/bear debate alive.

Against this backdrop, consider two additional points.

To start, the SPDR Trust S&P 500’s /quotes/zigman/714403/quotes/nls/spy SPY -0.30% major moving averages — its 50-day, and 200-day moving averages — are converging, as detailed last week. ( See Dec. 1 column. )

As they converge, the bull or bear case “should” strengthen. A posture higher signaling a positive bias and vice versa.

And within this band, the S&P’s third test of its 200-day moving average is currently underway.

Major resistance is typically cleared on the third or fourth approach, and this is widely-tracked technical territory.

Summing up the backdrop

All told, the six-month technical backdrop is relatively balanced.

The S&P 500 is positioned between its major moving averages, and these trending indicators are converging.

So both bulls and bears have a case.

But within this framework, the bull case is marginally stronger. Consider that the S&P has re-escaped “crash” territory, and to this point, the subsequent sell pressure has been limited.

So collectively, the market recovery attempt remains jagged, but is technically intact barring a violation of S&P 1,215. Again, the S&P’s response to its 200-day moving average should be a useful bull/bear gauge.

 

Trading systems at C2 (or for that matter anywhere) do not have continued success with any longevity (more that 2-3 years). We've seen the very best (ETF Timer, Topaz NQ100 M, Solaris) just stop "working", which of course does not allow for the power of compounding to take full effect.

Most C2 members are relegated to jumping around - in-and-out - of various systems (mostly at inopportune times) using only risk capital. This has to be frustrating as most probably give up, altogether.

Some may have seen me, years back, chronicle in Forums an approach (not tracked as a C2 system) that "contra"-trades a portfolio of high-fliers - betting that they'd already seen there best days. This "system" kept losses contained in the event a trader continued ascent, but for the most part this approach overall banked respectable, consistent long-term gains.

We've seen 17k+ systems come and go with a small minority taking in most of the subscription revenue. Since 06-DEC-2010 (1 year ago today) at C2, I did create an "affiliate" site to chronicle what I thought would be the Best Trading Systems.

I'd like to now re-visit all systems featured at Best Trading Systems.

Summary Update (06-DEC-2011)
The following current (14) Best Trading Systems list contain (2) that I created over a year ago, along with (3) added nearly a year ago. (1) has remained since April & (5) since the JUN-AUG period. Since 27-AUG-2011, the list has remained the same (excepting Direxion TNA/TZA, added yesterday).

Note: All C2 reported statistics are HYPOTHETICAL

Shorting Options +36.10% +13.96% (0.41%) +11.03%
(added 15-JAN-2011)
The Cake +43.42% (21.86%) (7.27%) (8.77%)
(added 15-AUG-2011)
Qusi FX +90.88% +26.27% +1.25% (1.21%)
(added 26-APR-2011)
Moderate Trader +46.14% +6.24% +5.50% +0.24%
(added 27-AUG-2011)
My ETF System* +1.08% (9.09%) (5.69%) (5.52%)
(started 22-NOV-2010)
My Futures System* +8.94% (6.88%) (5.88%) (4.34%)
(started 07-OCT-2010)
S&P ETF TIMER +25.18% (6.12%) (4.66%) (0.49%)
(added 12-DEC-2010)
Futures Trader Daily +110.86% (21.13%) (9.68%) +0.39%
(added 05-JAN-2011)
Interlink-2 +78.63% +18.28% +1.28% +7.06%
(added 15-JUN-2011)
RD30 Day Trading +34.37% +0.36% (2.53%) (0.60%)
(added 17-DEC-2010)
Direxion TNA/TZA +61722.40% +89.62% (10.03%) (16.75%)
(added 05-DEC-2011)
Stock Swing Trader +108.41% +14.25% +10.65% +0.52%
(added 14-JUL-2011)
Kagi Capital Growth +36.88% +4.78% (0.54%) +5.76%
(added 09-JUL-2011)
zFutures Diversified +19.07% (2.46%) +0.37% (1.28%)
(added 05-DEC-2010)

* my systems (not actual name), currently in drawdown near historic levels.

The following are past systems - taken off Best Trading Systems list:
BMFX
Patience Forex
ETF Global Investor
ES Oscillation
Professional Forex
Stock Opportunities
Trend Trading
RM Commodities
EMD Dragon
Tera Qubes
Qusi FX
Superior Returns
Super Star trading system
Equity & Volatility Global Macro
Naga
Project Athena
Smoke on the Water

You may recognize some of these as they garnered much (albeit temporal) attention.

The following are currently on my Best Systems, yet now have tenuous standings:

The Cake: 44.4% compounded annual, now in 28.48% DD (tracked 22 months).
Consistent multi-year gains followed by fairly sudden, large drawdown.

Direxion TNA/TZA: monstrous 3 month gains, now in 25.29% DD (tracked 4 months). Huge start our the gate, only to now pull back markedly.

zFutures Diversified 18.7% compounded annual, now in 15.8% DD (tracked 17 months). Nice gains for first half-life of fund, followed by consistent loss during second-half wiping out half of gains.

S&P ETF TIMER: 25.4% compounded annual, now in 13.56% DD (tracked 23 months). Consistent multi-year gains followed by consistent 3.5 month downtrend.

Futures Trader Daily: 110% compounded annual, now in 29.96% drawdown (tracked 16 months). Strong initial 7 month gains, less strong next 5 months gains - followed by a 2 month drop, losing one-fourth of gains.

In conclusion, please keep following the IBD Experiment. Our trend-following system has thus far only garnered marginal traction, yet we expect our - the long-term - success will separate us from the pack.

- pay$