Took Profits on (MELI)

I'm very pleased to report that I booked a 17% profit on (MELI) today after selling it for $51.76. This stock took just over three weeks to meet the 20% profit threshold, so rather than hold it for eight weeks the correct move was to take profits.

This has my current win/loss/push record since my 'August reset' at:

1 - 2 - 5

More importantly, I'm profitable since that time. Not only am I up on closed positions, but I still own (RINO) with a 20% profit and that stock has qualified as a potential big winner, so I will attempt to hold it into January.

I missed (CAAS) yesterday as technical issues delayed me logging into my trading platform and it moved very quickly, but the good news is I'm still picking stocks successfully. This means if I stick to my rules, which have been working well for the past few months, I should continue to profit.

Next stock on my radar is (GFA). The future growth of this stock is huge. I'm eyeing an aggressive buy point of $35.28 reading the chart as a short, ugly cup with handle.

The market continues to see it's skeptics which is fine with me. For now the trend is up and I'll follow it.

Sell Stop:(HMIN), New Buy:(RINO)

Last Thursday I stopped out of (HMIN) by just 3 cents for a 5% loss. The stock has since recovered nicely but that's all part of the deal. In fact, I'd rather see a stock move back up after I stop out because that's a sign of overall market health. The main thing that I still need to evaluate is my stop loss choices, I just don't have much tolerance for taking an 8% loss but I need to make sure this isn't costing me more in the long run.

Today I bought (RINO), a stock which I've watch make a monster run for the past few months. The company's latest earnings qualified it for my basic fundamental criteria and the technicals still look great so I went ahead and bought it at $27.40. This buy point is 10 cents above the previous high off a pullback to the 10 wk moving average. In this very brief correction we've just had, most of the buy points I've seen are leading stocks that pulled back to the 10 week line over a span of three to five weeks. Not an ideal setup but I'll try to take what the market gives me.

This rally has been a bit sketchy but today it finally saw a nice up day on higher volume than the day before. Having said that, volume was still well below average so a cautious approach continues to make sense. In fact, that's why I waited a couple of days before making another buy once I stopped out of (HMIN) - it's worth letting a couple winners go by to make sure I'm not over trading like I used to.

Some Catching up to do...

Once again I've fallen behind here. Time is short these days so I'll keep it brief.

Towards the end of October when I saw the market heading to a correction I moved up my stops to protect my gains (small though they were). I knew there was an issue with my timing and that by the time I'd gotten my system on track the best days of the rally were over. Therefore I was happy to exit that foray into the market even, and that's exactly what I did. Not bad really for a tough whipsawing market.

Then late last week the market looked as though it may have a follow through day on Thursday, so I took a position in (MED) which I've been looking to get into for a couple of months. The stock did well but the market did not follow through, so I closed the position with a 1.5% gain at the end of the day. Hard to sell a good stock I've wanted to own, but I will not initiate new longs in a correction.

I was out of town for a long weekend and the market did stage a follow through day yesterday which has us once again in a rally. I took a look at my watchlist last night to prepare and found that (HMIN) had released earnings and was up considerably after hours.

I bought (HMIN) on the gap up to a new high at open - this is one of the setups I look for. Additionally, I bought (MELI) as it pulled back within a couple percent of the $42.55 buy point it took out last week. I'm not totally comfortable going in this fast to a new rally, so I kept my stop loss orders tight at 4% to reduce my capital exposure until I see how things shape up.

Adaptation

We've been having some interesting discussions on the Trade to Retire forums and I wrote a post there that I'd like to put here on my blog as well as it highlights my thoughts and approach to this currently rally.

Here's how I handle market analysis - it's one thing to have an opinion about the market (it's gone too far too fast, etc.) but it's another to act (trade or not trade) on that opinion. I try to separate the two. If the market is in an uptrend and I see a stock I like in a position I like then I will buy it - whether or not I think a rally is extended. This probably adds to my risk, but I'm just not good at picking market tops, so it's best for me to let the market posture and/or my three strikes rule handle that for me.

Now on the other hand, I do think it's important to adapt to the current environment. Standard CAN SLIM buy points have not worked for weeks. They just haven't. The stocks have closed below the buy point, shaken out holders, then turned and advanced. They advance 10 or 15% from traditional buy points and pull back to a moving average instead of the 20% one could historically count on. I saw this through the middle of the year (it was a very expensive lesson) and since I've adjusted my buying strategy I've managed to survive for a few weeks. I would NOT attempt any buys on breakouts/new highs at this time UNLESS the 50 dma/10 wk line were within about 8% of the buy point - that would allow me my standard stop order while giving me the cushion for the stock to pull back to support ((HMIN) did this).

Better yet, I'm looking to buy around the 10 wk line if I like a stock. I think (PWRD) is setting up perfectly for this, and I will look to purchase this if it dips under $42 (assuming nothing else changes). This position would allow for a tighter stop around 4 or 5% and let the stock work up the moving average or just stop out if it can't hold that area. This is how I bought (EJ) and it allowed me to ride out a lot of volatility.

I've decided to conduct the following exercise. I will go back to August 21st on my watchlist and pick my favorite five stocks, then look at the charts from that day and see what would've happened if I'd picked them up around the 10 wk line (within a percent or two - I bet most or all of them touched off this line since August 21st) with about a 5% stop loss order. I'll bet about 75% of these trades would've yielded a 20% gain, possibly before the stock even made a new high. Furthermore, I'll be I could still own the stock today and be in good shape - in fact I do still own (EJ) from that type of purchase around that time.

Short version is this - I think in the current market, traditional CAN SLIM thinking has had me buying when I should be selling (around the new highs) and selling when I should be buying (stopping out around the moving averages). I don't think it's ALWAYS going to be like this and I firmly believe in CAN SLIM, but I also believe in reviewing past trades and adapting as necessary.

Sell Stop:(FUQI), New Buy:(HMIN)

I never got much more than 5% in my position in (FUQI), and on 9/18 I stopped out for an 8% loss - the first since my 'new beginning' this year. I'm now 0-1-1.

I took that money and invested it in (HMIN), another small Chinese stock I've been watching that had actually broken out a few days earlier. It was back within a percent of the buy point so I picked it up there.

Having said that, I will hold (EJ), which now has the stop at breakeven, and (HMIN) until they profit or stop out, but after that I will not reload until I see the market acting differently. Right now I just don't see leading stocks leading, breakouts are having trouble, and it's just very, very hard to make a profit. That's not the time to have money in the market.

I don't want to get in the business of predictions, but I think it's reasonable that the market needs to correct before we'll have another nice opportunity. Until then I'll keep watching and do my best to be ready the next time there is a chance to profit.

New Buy:(FUQI)

Early this week I took a long look at (FUQI). I reflected on some of the lessons I've learned over the past two years: I tend to overtrade, I often look for the next big winner when I already have a proven winner right in front of me, I lack patience, I lack discipline.



With this in mind I decided to chart my watchlist of leading stocks in a comparison mode (my dailygraphsonline.com subscription has this feature), using a couple of different date ranges. First I compared the stocks (I have about eight on my watchlist) from the start of this rally in early March. I found that (FUQI) and (STEC) had outperformed the rest of the stocks by a significant margin. Then I ran the comparison from a starting date of August 21st, which is the first time IBD changed the outlook to 'Uptrend Resumes' after the rally had hit a rough patch.

The picture is slightly cloudier there - (ARST) has been the top performer since that time, mostly because of a nice breakout last week. (ARST) has had a habit of failed breakouts, but so far this one has held it's gains. After that (FUQI) and (STEC) were close second and third, and then came the rest of the pack.

The reason I ran both date ranges is that I wanted to see which stocks have been the best of the entire rally, and which are showing recent strength. The answer is that (FUQI) and (STEC) fall into both categories, so this is clearly where I should focus my attention. The stocks that have led will most likely (but not always) continue to lead absent some material change.

I already own (EJ) and it's acting well, but I had enough capital for a second stock so instead of watching (HMIN) - which I do think will do well - I decided to put that money to work in (FUQI) if it broke to a new high. It's rebounding from a trip to the 50 dma so this is a valid purchase, though I now try to buy rebounds close to the moving average, not at a new high. In a stock that has done as well as (FUQI), I'm willing to risk buying after it's already made some progress.

The breakout on Wednesday was actually a failure. The stock reversed and closed lower on above average volume. I had a number of thoughts about what to do during the day on Wednesday as the stock price dropped lower and lower. I thought about putting my stop loss below some key levels and cutting losses short. Then I recalled that all the meddling I've done with my stop losses this year has cost me a fair some of money. I followed my rules, left the stop loss order at 8% and just let it go.

Thursday (FUQI) close up a percent, and Friday up 4% after being up as much as 8% intraday. It's certainly not acting great, but I'm green on the position and that beats being red. This stock has outperformed every other stock I've seen in this rally, and I'm simply betting that it will continue to do so, and that if I'm patient with it I'll profit.

(EJ) has woken up a bit, and early morning Friday my position was up 10% so I've moved my stop loss to break-even according to my rules. That leaves only the 8% on (FUQI) currently at risk.

The market itself continues to act very strangely. It was up on good volume this week, but I didn't see leading stocks acting the same way as the indexes - the leaders tended to trade on average to below average volume. This is certainly something to watch, but the system should take care of me and get me out if the market begins to falter.

Sell Stop:(STEC)

Monday (STEC) advanced to $41.74 intraday, meeting the 10% threshold from my purchase price. Therefore I moved my stop loss up to breakeven. Before the day was over I had stopped out as the stock staged a huge volume reversal from a new high to close down around 8% (if I remember correctly).

I don't know what the stock will do from here, but I'm very happy with this new rule. If a stock returns to a proper buy point after being up as much as 10%, I'm just not willing to let that trade turn into a loss. Sure, I'll miss some winners this way - but if I've learned anything this past year it's more important to focus on not losing than it is to focus on winning - this is contrary to almost everything else I've learned in life.

My other position, (EJ) came within 3 cents of my stop loss order, found support around the 50 dma twice this weekend, and is now knocking on the door around $20. Chart looks good to me, fundamentals look good to me, we'll see what happens.

As for the overall market, once again we're in a strange position. Distribution days have built up to the danger zone, leaders have seen some pressure, but the market has not given up and succumbed to a correction, yet.

It's a time for caution, not a time to be aggressive.

New Buy:(ARST)

Since I sold (ARST) for a 20% gain earlier this month I've been watching the stock closely. It couldn't have been any more 'by the book' in the way it's behaved. It advanced just over 20% from it's buy point and then began correcting. Over the course of a few weeks it pulled back to the 50 dma, on progressively lower volume. Once it reached the 50 dma it traded below it intraday a few times, but always closed above this level - a clear indication the stock is finding support.

With the stock acting so well I decided I would purchase it again on any big volume move up. This came around noon on Friday, as the stock exploded for a 13% gain. I got in a bit late around $15.60, but that's fine. I took my time and made sure the volume was coming in as it should. I don't worry much anymore about buying a bit high - if I'm right about a stock a couple percent here or there shouldn't make any difference.

The stock closed above $16 and I'll add to my position if it makes a new high above $17.26.

Market still looks good to me - closed up Friday on higher volume than Thursday with a powerful move in the last fifteen minutes. Still watching the Nasdaq 50 dma which could cross the 200 dma as soon as this week.

Addon Buy:(FUQI)

I had been concerned that (FUQI) would pull back today and stop me out after making such a dramatic move over the past couple of weeks, but instead it gapped up at the open again and never came back to yesterday's close. In fact, it ran up to almost $13 before closing at $12.34. I adding to my position with my second and final buy at $12.10. I'm prepared for this type of volatile action, after all the stock has doubled in two weeks, plenty of traders are going to want to take profits. What I'm trying to look for is the stock to find some sort of temporary support area and ideally consolidate it's gains before pushing higher.

The stock is almost twice it's 50 dma and 200 dma, and that's why I'd like to see it take a bit of a break. The 50 dma is about to cross the 200 dma and they are both trending up, which is also technically bullish.

IBD has featured (FUQI) several times with various comments to the effect that the stock hasn't formed a proper base. I knew this was true when I purchased, but I tend to value clear accumulation in a chart far more than a perfect pattern. I'll learn over time whether or not that's a mistake.

The general market still offers reason to be concerned, five distribution days on the Nasdaq is nothing to ignore. However the other indices are doing well, and there is a particular setup that I'm watching with great interest. The Nasdaq 50 dma line is about to cross the 200 dma. My understanding is that many technicians look for the 50 dma to be above the 200 dma and the price to be above the 50 dma as a green light to buy stocks. Though the markets have been consolidating gains for the past few weeks, they could get a push higher once the moving averages line up this way in the next week or two. I'm anxious to see how this plays out.

New Buy:(FUQI)

I made a new purchase today with an initial buy of (FUQI) at $11.75.

This stock appeared on my high relative strength screen and I was impressed with the massive volume the stock has seen as it's exploded out of the right side of it's base. It's now the top industry group in IBD.

I have to admit though that the chart is ugly. I'm reading it as a nine month cup with an $11.75 buy point, but it could also be seen as a double bottom with a $7.99 buy point. The stock has never traded over $11.95 and if it can break that level has no over head resistance. That said, the chart is deep and the stock has made a massive move in a short time. Not only that, it's a small cap and a Chinese ADR. These factors point to high volatility and with my 5% stop losses I don't have much room. The stock closed a few percent below my purchase price today, so there's a good chance I will stop out tomorrow.

If I do I will continue to keep an eye on this stock though - I'd like to own it if it gets above $12 a share.

Market action was good today. The distribution days are still out there and it's hard to read much into a holiday trading week, but the Nasdaq retook it's 200 dma and the S&P 500 is getting close to that level too.

Sell Stop:(TNDM), Addon Buy:(ARST)

Well, I said yesterday that the market was due for a pullback, and we certainly got that today. As ugly as it was, I'm not ready to say the sky is falling. The market's had an amazing run off an ugly bottom and really needed to correct. Of course I'd prefer a gentler correction on lower volume (the Nasdaq volume was considerably higher than Friday), but with violent up moves come violent down moves.

The combination of the overall market and a downgrade shook me out of my (TNDM) position for a 5% loss. This stock still could do very well, but I'm through second-guessing my sell stop orders, I put them in and leave them alone now. I'm not going to be right on every trade, though I have to admit I'm anxious to log a winning trade - it feels like a very, very long time since I've done so.

Whenever I stop out I try to reflect on the general market and my plan going forward. I gave it quite a bit of thought today. The market has behaved very well, but the ride could end any time if folks remember that the economy sucks (sorry to use such a technical term). I don't know what it will do in the future, so all I can go on is the current state, which is a confirmed rally with two distribution days. Nothing to panic over at this point.

Next I looked at the two stocks high on my wish list, (TNDM) and the other that I had a buy stop order in on. There would be nothing wrong with entering another buy stop order for (TNDM) if it crosses the pivot again - some winning stocks do stop out before going on to big gains. However, I've decided not to put another buy stop in on (TNDM), and to remove the other buy stop order I had open, for a couple of reasons.

For one thing, both stocks release earnings a week from Tuesday. Best practice is to avoid buying a stock within three weeks of an earnings announcement. The reason for this rule is to ensure that you have a suitable cushion in case the stock takes a dive on the earnings release. I was willing to give (TNDM) a shot one time this close to earnings, but I won't do it again.

Secondly, when I consider my early trading history, one of the biggest problems I had was over-trading. Instead of being content with a winner when I found one, I continuously looked to add more stocks to my portfolio. The profits I made were overwhelmed by the losses.

Since (ARST) held up well today, I decided to add on to that position, which was working, rather than open a new position with some unproven stock. I added to (ARST) at $14.30 and $14.64 for an average cost of $14.42. We'll see how this approach works, and what the market has to say tomorrow.

New Buy:(TNDM)

The chart for (TNDM) looks even better now than it did the first time I bought it about a month ago. Of course I wish I hadn't sold it then at $22.90, but I had a good reason and was playing the odds so I really shouldn't regret the decision.

Instead, I've watched the stock and the overall market, and given the positive action of both I looked for another opportunity to purchase (TNDM). I got my chance when the stock pulled back to the 50 day moving average on April 8th, rebounding to close in the upper 60% of the day's trading range. This was a positive test of support, so from that point I looked for the stock to trade higher on volume 50% above average levels.

It did so on Friday, and at the same time passed a conservative buy point of $26.46 - ten cents above the recent high set prior to the 50 dma bounce. My order went through for $26.50, and the stock finished the day above the buy point on big volume, almost twice average.

I have one more buy stop order in for another stock that I like, and after that I will sit tight. My only concern now is that the market is certainly due for a pullback, and with my purchases being so recent I run the risk of getting stopped out. Nonetheless, I can't see the future so when I see a breakout on a strong stock in a market that is acting well, I buy it.

Sell Stop:(SNDA), Stupid Short Behavior

Unfortunately, I'm once again making this post 'from the future.' Though it's always my goal to post trades within 24 hours of making them (the same day ideally), it doesn't always work out. I think it's less effective to post about my decision once I have the benefit of hindsight. However, my son and I had a wonderful trip to see family in Florida, and my time was well spent with him rather than on the internet.

Back to the market. I stated in my post on March 12th that the market's action on March 6th felt like the beginning of something new to me. I perked up and began to watch in earnest for a follow through day with my watchlist ready.

That follow through day came on March 12th, and I bought (SNDA) that day and (TNDM) the next. Having done that, I began to watch closely for a distribution day. The odds of a rally failing are very high (I've read over 90%) if it logs a distribution day within three days of the follow through day.

The market did suffer a distribution day on March 16th, two trading days after the follow through day. Though both of my positions were doing well, I followed my rules and tightened up my stops, trailing them up through the day if the stock price rose.

I stopped out of (SNDA) at $34.45 for a loss of under 1%.

Then I did something stupid.

Once again, I got too smart and impatient for my own good, and decided to use the S&P 500 ultra-short (SDS). The results were not good, and will be covered in tomorrow's entry.

-Geoff

New BUY:(TNDM)

Whether we're getting an over-sold bounce, a bear market rally, or the beginning of a new bull market (seems pretty unlikely), the market continued to show strength on Friday. I've seen plenty of pessimistic commentary, which I view positively. IBD claims there is a dearth of leading stocks breaking out, but I have seen a fair number. I might be wrong, but I'll continue to make careful purchases and manage my risk until I'm proven so.

I added to my (SNDA) position with my final buy, bringing my cost basis to $34.61. I'm up 5% in this stock in the two days I've owned it - that's the kind of move I'm looking for. I have my stop set around 6% below Friday's closing price now. I want to leave some room for the stock to pull back, but I'm still not willing to put much capital at risk given the current environment. Capital preservation is still (and always will be) the name of the game.

I also took a position in a new stock Friday, (TNDM). This stock made my screen about a week ago, and the one thing that got me was the accumulation evident in the weekly chart. Five of the last six weeks show the stock up on above average volume (one closed down but in the upper half of the range, which is considered accumulation). Additionally, the stock has been finding regular support on the 10 week moving average. It broke out past a $21.19 buy point quickly Friday morning and I got in at a cost of $21.58, higher than I would've liked. This could be an issue because the stock reversed later in the morning after making a new 52 week high, and though it closed up on the day it was in the lower part of the day's trading range. This is decidedly negative action.

Nonetheless, I'm holding the stock for now and looking at the chart I think if it can close above $21 it could really move.

I also like (HMSY) which had a great breakout Friday, I would've purchased this stock but I don't want to put any more capital in play at this time.

Still need to get into my reading and quantify my business trading plan. Hope to make some time to do that tomorrow (fat chance, with it being Selection Sunday - March Madness).

-Geoff

New Buy:(SNDA)

It's been so long since I've posted anything here, I'm glad I remember how to type!

I've had a few friends ask me about the lack of activity, and have to admit I'm glad there's someone besides me who reads this blog.

I try to make it a point not to come here and post my general thoughts and opinions about the market. For one thing, they are almost always wrong. I'm guilty of getting caught up in the moment, and often get dragged a long a bit by whatever the market has done the last day or two. More importantly, my opinion just doesn't matter. It's best to stay out of the habit of formulating predictions and opinions about the market as these can only serve to hurt me.

I believe the only thing that matters is the actual action of the market. That means until we get a confirmed rally accompanied by leading stocks breaking out of sound patterns, there really isn't much to talk about. Cash is king.

To that point, I'm proud to say that I think it's been something like three months since my last stock trade. I've let a few 'confirmed rally's go buy without making any trades, because I just didn't see the necessary leadership. In a market this bad, patience is the best practice. Capital preservation is the most important thing. I've been very successful in this, my only losses are the cost of research materials.

Having said that, I could've made more productive use of this down time. I intended to define a business plan for my trading using my current read - 'Trade Your Way to Financial Freedom.' Unfortunately, a very stressful period at work took almost all of my time and emotional energy for the last six months or so, and the rest went to my family (as it should be).

So, I still have this homework to do, and for the first time in awhile I actually feel up to tackling it. I look forward to commenting on the process here.

Now, about the market. For some reason, last Friday got my attention. It felt 'different.' I certainly don't invest money based on a feeling, but I started paying closer attention to the market's action. I began to look for a follow through day, and consider which stocks on my watchlist seemed most promising.

Today we got the technical follow through day on the NYSE indexes (Dow and SP500). I say 'technical follow through) because it met the definition of up at least 2% in higher volume than the prior day. Whether it will develop into a tradeable rally remains to be seen. We'll need leading stocks to break out of sounds bases and make nice gains.

I liked the action of the market over the past week enough that I made a first and second purchase of (SNDA). The relative strength line on this stock is great, it's in a group with momentum and has a running mate in (NTES), the fundamentals are there and I like the price and volume action in the chart. I made my initial purchase just above the $33.70 buy point at $33.75. I then pyramided up with a smaller purchase at $34.54, 2.5% above the ideal buy point.

We'll see what tomorrow brings, I have to admit it's nice to be back in the market after such a dreary period we've seen. Whether it will end tomorrow is anyone's guess...

New Buy:(ACM)

Today I bought (ACM) again. I felt that it formed a handle with a $31.15 buy point and my order was executed at $31.19. The handle was not ideal as volume didn't drop as the handle formed, however the shape is good and it's formed in the upper part of the overall cup pattern.

I think what keeps bringing me back to (ACM) is the overwhelming strength it's shown for the past five weeks - all up on heavier than average volume. This is the kind of quality in a stock that will cause me to overlook characteristics like a flawed handle or a weak industry group rating.

I also see the overall market showing strength one day after another. Again today the indices dodged a distribution day following the accumulation day yesterday on the news of the Fed lowering rates to 0%. If I looked purely at the indices and ignored the daily news (which is what I'm training myself to do) I'd think we're in a solid bull market.

There are however some caveats. For one thing, volatility remains extremely high. This factor alone can frustrate even the most seasoned investors. In times of uncertainty I react by using tighter stops on my buys, increasing the likelihood they will fail, creating more uncertainty (fancy word for fear). Certainly it's prudent to limit my risk when the market is unsettled, but I wonder at times if keeping such tight stops creates a self-fulfilling prophecy.

The other issue I see is a lack of quality stocks breaking out of sound bases. This may take some time to develop but for the time being I don't see any obvious market leadership.

I'll continue to evaluate these factors, but I think when you cut through all the crap the bottom line is investing is tough in a bear market and less tough in a bull market. It's easy to look dumb right now. I don't mind taking chances when I feel the market warrants it, as I do now. However, if I stop out again I will put myself in the penalty box for three weeks - barring myself from any new buys during this time period. I've read about similar strategies and feel it's an effective move. Whether the problem is me, the market, or dumb luck, if I'm striking out it's time to step away and get a new perspective.

Anyway, it would help me to relax and enjoy the holidays.

-Geoff

Stopped Out (THOR) and (ACM)

Stopped out of both of my positions yesterday, I had moved the stops up a bit so I took about a 3 to 5% loss on each.

This market continues to whipsaw, yet it doesn't roll over. As I'm typing this it's absorbed the news that the auto bailout was voted down and is now trading positively.

I can't predict the market and I won't try, but I'm still seeing evidence of a rally here. Whether or not it's tradeable remains to be seen - my results have been poor so far.

I've got one stock left on my watchlist that is setting up for a possible buy point next week. If I have another failed buy however, I will put myself in the penalty box for three weeks. I've heard of this strategy and I like it. No matter what the market is doing, if I fail on three to five trades in a row something is wrong and I need to take a break and re-evaluate.

New Buy:(THOR)... and a Confession

I have to admit I purchased and stopped out on a stock last week: (EBS). It's a great stock I had no business buying. It was nowhere near a buy point and I basically just took a stab at it, stopping out the very next day. I didn't post about it because I was so disappointed in myself - but of course that's not the right way to handle a mistake. Instead I'll post it here and use it to remind myself not to be such a dope next time.

I do see a real change in the market the past week and think we could have a tradeable rally here. Suddenly the market is acting well, shrugging off bad news and powering higher.

My problem is that work has me so busy right now I probably don't have the time, attention, and emotional fortitude to be in the market. I've had 4 days off in the past 5 weeks, and I'm exhausted. It's taken a toll on myself and my family. I'm doing what I can to change the situation and believe I'll be in a different organization early next year, but for now life is very chaotic. This is not the ideal scenario for investing.

It's hard enough for me to keep a level head under normal circumstances, now I find emotions dominating my investing actions. I have a nice watchlist but I was plagued by doubt and missed the buy point on (ACM) while I purchased (THOR) at $29.68 only to see it close slightly below the $29.60 buy point at the end of the day.

Sticking with the theme that the system is where my success will come from, not some grand stroke of genius on my part, I'm going to have to find a way to handle this market without emotion or just stay out altogether.

Signs of Opportunity

I found today's market action positive.  I viewed the distribution day immediately following last week's follow through day as an end to that rally attempt, as something like 90% of the time rallies fail if they suffer a distribution day one of the first three days after a follow through day.  I don't like those odds.

Therefore I started tracking the market anew last Thursday, when it began what I considered a new rally attempt.  Based on that view, today was a follow through day on all three major indices.

I think there are some compelling reasons to market can mount a successful, if short term, rally now.

First, the election is over.  For better or worse, the issue is decided and the market hates indecision.  Now that we will know who we have in Washington, the market can get on with pricing the new establishment in.

Second, volatility has been steadily declining from it's historic levels.  The market is calming down.

Third, the S&P 500 retook the 1,000 level - there could be psychological support here.

Finally, and probably most importantly, there are some quality stocks breaking out of decent bases this time.  Worth watching is that most are related to the medical field - typically defensive - but that doesn't mean some money can't be made from them.

I had a nice candidate come up on my screen tonight and I'll have a look at it tomorrow.  If it acts well and I can get in near the buy point (it would need to pull back some) I'll take a run at it.

-Geoff

One and Done?

Today the FOMC lowered short term interest rates 50 basis points to 1%.  The market stayed true to form and was very volatile following the news, concluding with a massive drop in the final 10 minutes or trading that landed the Dow and S&P 500 negative on the day.  Both indices also logged a distribution day.

Traditionally, a distribution day within the first three days of a new rally signals the rally will fail (about  90% of the time).  Since there are nearly no high quality stocks breaking out of sound bases it's really moot point anyway.

Patience is still key, there is no need to swim against the tide.

-Geoff