[ Jock is a professional trader and a SpikeTrade Member – Alex ]Last night PBS Newshour ran ITN’s excellent intro to rare earths. Nobody partying in Copenhagen seems to realize that “green technologies” greatly stimulate environmentally-ugly production of rare earths in China. Prius’es and wind turbines use huge amounts of rare earths.Also, Molycorp’s CEO (Goldman-Sachs-led group which bought Chevron’s Mountain Pass rare earth mine- the US’s ONLY past producing mine) “talks his book” about the importance of getting non-Chinese sources producing.China has 95% of the world market (having no internal “environmentalists” to contend with) and regularly cuts price to forestall competing exploration and production.http://www.pbs.org/newshour/bb/asia/july-dec09/chi…JockPS: A couple of years ago, I was lucky to get to know a sharp resource guy who has spent 4 years ONLY studying rare earths. He is now one of the world’s leading experts, having traveled to China (and Mongolia) many times, and attended conferences all over the world on the subject.He says he has yet to crack the code on rare earths as an investment. There was good speculation a couple of months ago, but the problem with the area is that most don’t know the true mix of light and heavy RE’s in a given deposit. (there are 16 RE’s) AND, the demand for each particular element is a function of where (fast-moving) technology is heading. Demand for a given element shoots up, then dies when a new technology replaces an old one.Then there is the tendency of the Chinese to cut prices whenever a competitor looks likely to develop a competing deposit or begin processing in competition with them. I’m told the lithium exploration plays are a scam.In Canada, the better “juniors” are CA:AVL, CA:GWG and CA:QUC on bigcharts.com – but the game, for the present, is merely speculation, as you can see from the runup a couple of months ago. There’s AU: LYC in Australia too. LYC is the ONLY one with enough volume to trade, but is only economical to buy through Interactive Brokers.Molycorp, referenced above, is still private. Their IPO will be a heavily promoted affair.
[ Jock is a very serious trader, a Camp graduate, and a friend.
Hello Everyone,I am a 35-year old SpikeTrade member from Denmark that just begun my trading career this year.Last year we went traveling in New Zealand for 3 months and it just so happened to be from 1st of October to Christmas – the exact time when the biggest financial storm of all times in the stock markets roared.I sold my business 3 years ago and invested a third of my profits from the sale in a mutual fund in the beginning of 2007. I did a lot of research on the fund before investing. They had 20 years of excellent history, including during the dot-com bust of 2000-2001 which they foresaw and survived in great style. I knew people who had been with them, and happy so, for some years which made me more confident in choosing them to look after my money, especially after I backtested some private banking stock suggestions that a few banks gave me (they were – surprise – not profitable). The mutual fund mixed bonds and stocks, so how bad could it go I thought. Their maximum expected loss over a 3 year period was 15% with a target of 90% profit over 5 years. Had I just known then what I know now about money management, I would have set a “stop” on that investment and withdrawn my money after it went X% down. But I didn’t, so to make a long story short, when we came back from New Zealand, the fund had done everything they could wrong in those 3 months, and only 20% of what I had invested in the mutual fund was left.During the trip it just so happened that I had read one of Dr. Elders books and with risk management being completely neglected by the fund while we were traveling, I sold all my shares in the mutual fund in January. And even though the huge rally since March this year, their shares are still at about the same price as when I sold mine in January – and I am still happy with that decision.A little background to the next part of the story: Denmark is the country in the world with the highest taxes. Our income tax goes up to 60% (yep!) and our VAT is 25%. Profits on stocks are taxed by 45% (one should wonder why you should even take the risk of the market if the upside is taxed by 45%!). Losses are deductible until won back.Luckily/wisely I kept enough of my money away from the stock market to still be able to live off that money for many years to come even after the money lost. And since I get taxed up to 60% on any job income I have, and my stock profits are not taxed until the loss has been won back, I set out to win back what I lost – and to do it myself rather than to trust someone else with my money. Having read more of Dr. Elders books and other trading literature, I decided that technical analysis and short term swing trading were best suited to my personality. I am actively trading and still learning, taking small losses and small profits. I am a perfectionist but have also done my part of mistakes (even stupid ones like placing the wrong order type!) that cost some but I am generally happy to be learning without it costing too much. Setting too tight stops are one of the things I am currently working on. A couple of recent examples: I shorted AIG and got stopped out just before it fell about 15% last week. I went long NYB on Thursday last week and got stopped out the same day. It went up 5% on Friday and 10% today. Doh!We have a saying here in Denmark (I don’t know if there is one similar in the US) that “Things take time”. And I’ve found out that learning to trade with consistent profits is just one more proof of that saying. But, if trading was so easy, there probably wouldn’t be so many people with a day job.As a new trader I have been through a lot of indicators, “played” with the settings of each, read numerous blogs and trading sites, back-tested different ideas of my own for automatic trading systems etc etc. And after a little less than year at it (part time), I have ended up with less than “five bullets to a clip” and no automatic systems that work consistently and with comfortable drawdowns. Thanks Alex ? And – besides SpikeTrade – I only read John Murphy’s newsletter (Market Message) and a blog called MarketSci. Everything else has been scrapped which makes trading a lot more simple, but I also feel that I had to go through all those things indicators etc. for my education as a trader – to find out what works for me and what doesn’t.Besides being a big fan of Alex’s books, another book I’ve really appreciated this year is Brian Shannons “Technical Analysis Using Multiple Timeframes” where he shares many of the same views/approaches that Alex has, plus a few others that – at least to me – have been very useful on top of what I learned from Alex.I’ve also learnt that trading is fun (and intellectually challenging) as long as I don’t sit in front of the screen all day and every day. To me, Michael at MarketSci actually hit the nail pretty well in a recent blog post; Wasting a good life trading.As you can see (if you’ve followed me all the way here and have not been bored to death by now ?) my education in trading the markets is ongoing – and I am not expecting to be done learning anytime in the near future. So to move on a little bit in my development as a trader, I have 3 questions to Alex/Kerry/Spikers/Members. Here we go:
- Force Index:Do divergences between a price rally and Force Index have to cross the zero line to the negative side to be valid (like breaking the back of the bear in MACD-H)?
- Trading MACD-H divergences against general market direction:Alex has written that MACD-H is one of the most powerful signs in technical analysis. If it really is such a powerful signal, should one trade negative MACD-H divergences (i.e. short a stock with such divergence) seen on a daily chart when the general stock market trend is up?
- Is this a bearish MACD-H divergence?I wouldn’t usually look for divergences on 30 minute charts, but this example is from a 30 min chart of Stec, Inc. during October. The stock now trades at $12, so quite obviously it wasn’t a long lasting bearish divergence – if one at all.
MACD-H made a high on Oct 14th, ticked down and then back up on Oct 15th. Then down again and up a couple of times to almost reach a new high on Oct 19th. Now, is there a bearish divergence from Oct 14th to Oct 19th or does it not count as such because of the few small upticks in MACD-H on Oct 15th?
Thanks for reading and I hope that you will help me by answering the questions .Best regards,Rasmus
Lately, there has been some chatter about a dollar rally; and Alex mentioned that he had sold his gold and was now looking to short foreign currencies. SInce I agree, I went looking for an easy way to short the precious metals and oil. Since I don’t know a thing about futures, I pulled up my ETFs and settled on a couple. For oil, I went with DUG, which is the inverse of the oil stock index, a nice clean way of shorting the big oil producers. For the precious metals I found ZSL, a ProShare Ultra ETF that is the inverse of the price of silver (which would be SLV for a long silver trade).This ETF is priced on the commodity, and in this case, a trader who is long the ETF is short the price of silver (not the mining stocks). There’s considerable concern that these commodity based ETFs are unsound and not accurate. They have had problems, and don’t work well for long-term holding; however, I find the ones like ZSL that trade over a million shares a day, easy to buy and sell with decent spreads and just fine for short-term trading. A word of explanation about my indicators. I prefer short-term trading, so I use a 2-day RSI, coupled with a 2-day FI and a 3,10,16 MACD, and look to hold for 2-4 days. I find this version of MACD very responsive and very good at showing profitable divergences on the daily charts.
As we closed out the month of November and head into the last month of the year, we thought we would post the equity performance of the leading Spikers. 8 Spikers have outperformed the SP-500 this year as the end of November. 11 Spikers are outperforming their peers. All 11 Spikers are in double digit returns and one has triple digit returns thus far for 2009.Lets look at the list and see the equity curves of the top 4 Spikers Year to Date…
We have one month remaining in 2009, my how time flies! Sergey leads the pact with a triple digit return of 142%, followed by Colin, Steve, and Jeff. We posted those Spikers that are outperforming the group average YTD along with their recent 4 week performance. 68% of the Spikers are positive for the year. 42% are outperforming the SP-500. This is all accomplished by restrictions of the Spike rules of one pick per week and bet the entire amount on that pick. Amazing Spikers, simply amazing!!!
Banks negatively diverged from the SP500 and did not participate in the recent rally to new highs.They now have formed lower highs. This along with weakness in small and mid caps show why this market has been so thin and market breadth so weak.When we have these type conditions, most long strategies are not following thru. Only a few stocks are working and many of those have been difficult to find good risk reward entries.All the best!Kerry
Steve is our newest Spiker. His presentation on Squash Bottoms received the top rating at the 2009 Spike Reunion.Remember last Spring when we were waiting for an interim bottom? Bullish divergences were showing up but we kept getting false bottoms that led to whipsaw trades. Now it feels like we’re at a similar juncture, waiting for an interim top while the bearish divergence signals continue to become more evident. After observing the SPX then versus now, their similarity became apparent. Back then we had a triple bullish divergence, similar to the triple bearish divergence now. That was followed by an exhaustion move down which led to the current bull run. The divergence pattern seem to give an alert or warning of change, but the exhaustion move was the pivot point that led to a solid tradable run starting with an immediate explosive move.Is the current SPX MACD-Histogram peak forming the last gasp before a significant drop? Could it be a pivot point?
This market is ruled by exhaustion moves, sometimes with an additional punch down – orchestrated by the market makers. Stocks get shorted like there is no tomorrow, down to support, pull up slightly, then they drop the bid and run the stops so the big boys can get shares on the cheap for the next leg up. This pattern provides a very profitable opportunity IF the impulse stays blue thru the retest as shown in these charts:
So if the inverse holds true in consideration of the SPX and this latest MACDH peak in fact develops into an exhaustion peak then we should see a subsequent retest of the high without the impulse going green, followed by a hard sustained drop?Happy Thanksgiving,Steve M.
Those who have been hanging around Spike Trade for awhile probably remember watching Alex and his past epic trading of CPST, an alternative fuel company. It was a multi-month drama–full of reward, bruises, and redemption. As we watched Alex wrestle with this small-cap rocket, I realized we were watching a master at work, picking entries and timing exits skillfully. It was very educational, and maybe one day Alex will take us through another long-term trade, so generously sharing his thought processes.Flipping through my charts yesterday, I stumbled on CPST again. I noticed that it has avoided complete disaster–though plunging from a high of $4 to a low of $0.45. After several months of sideways action, we’re now recapturing the 39 week EMA. This is about as clear a Fallen Angel pattern as you will see; so it may be in our best interests to pay attention. The weekly chart clearly shows support around 1.14 and resistance at the 5-week EMA around 1.20. The daily chart shows price is ST/OB and it looks like a squeeze is developing. Target is around $2.50. Personally, I’ll wait until the short-term indicators sag before taking a shot; and for now it goes on my watch list with a glow of anticipation.
New members often ask what brokers we prefer.
This headline comes from Sunday, November 15 SpikeSpeak in which I shared my market views with Members.