Trend Following With Weekly Prices, Long Time Frames And Risk Management

Mean Season For Mr. Market

(Winter 2018, November Update)

As has been hinted at in recent weeks, the final quarter of 2018 is about rebuilding and retrenchment - the optimist in me is prepared for better weeks to come in early 2019. For the moment, this is a time for list building, and accumulation, profit-taking (or if necessary tax-loss harvesting). As there are only a few weeks remaining for both the quarter and year, this update will most likely be the final update for coverage of Rooster360’s master ideas universe until January 2019.

Let’s go through the various weekly reports quickly and focus on relevant charts.

First, the STOPPED OUT charts (first the long ideas, then the “short”). This includes prominent sectors, when you see the Energy Exploration ETF XOP and Lowes (LOW).

Let’s move on to a filtered down view of LAGGARDS, ideas which are under-performing at the moment.

Echoing some of the hints of recent STOPPED OUT updates, the Laggards includes energy-related plays.

In the under-performing “SELLS”, it looks like there is a potential bottoming out of income/cash-flow vehicles from places like cable.

And now for the latest Top 20 updates, sells first and then longs. It’s the usual suspects in the “SELL” (or avoid or short) leaderboard. Someday General Electric (GE) will be off the board I hope - I won’t lie, it’s a strange sight to behold but a humbling lesson and reminder in the impermanence of things, the importance of embracing change and a reminder that a rising secular tide can mask management shortcomings.

And now for the Top 20 LONG leader-board. I notice that the exchanges, healthcare plan managers and healthcare equipment companies dominate the list. It’s not a “growth stock” list and that’s to be expected.

What kind of other ideas might be worth our consideration? I wanted to share an assortment of charts, that could go on our watch-lists. First the “SELLs” (avoids/shorts) and then potential LONGS. That the SELL line-up basically includes the total market in the form of ACWX (an ETF for the All World Index) is Mr. Market’s “tell”.

Let’s end on an upbeat note of potential “LONG” ideas and charts to consider. My “favorite” is the most recognizable of the lot: Disney (DIS).

I have been sanguine about the market as the “FANGS” leadership began to be tested. You can see it across the board for all growth and ebullient trades - outside the U.S. markets, the damage has already been done, and active speculation is best reduced. Active watching, list-building and investment accumulation comes to the fore. I will update the lists along with actionable material here and on other social network accounts. As the holidays of the season approach, I wish you and yours the very best.

Mr. Market Recalibrating Himself

(Nov. 11, 2018 Weekly Update)

It’s as if there’s a break in the action and Mr. Market is taking a moment to collect himself and gather his wits as of this week, after all the fireworks. He’s been bloodied but remains unbroken. Let’s hop to the weekly updates and charts for each weekly report. As always, we begin with the STOPPED OUT Update and relevant charts - beginning with Stopped Out LONGS and then “SELLS”.

It remains ugly for many ideas - only REGI, EPAY and KS are stopped out with a simple positive notional return. Prominent tickers have been taken out - Match (MTCH) swipes “left”. Micron (MU) has been long gone.

Let’s move forward to the STOPPED OUT SELLS weekly update. Surprisingly many recent new leaders in the market were on the “SELL” list but now they have been stopped out - I refer to consumer staples, like PG and KO as well as media plays.

Let’s move quickly to the Laggards. Here are ideas which could be on their way out as “LONGS” or “SELLS” but haven’t yet hit their stops. Consider this an early warning list of a failing longer time frame trend. This week it’s big names like the Lithium ETF, Petrochina,Reynolds and the Energy Exploration ETF that are on the ropes for now.

The next chart are the Laggard SELLS. Here are ideas which go in the other direction perhaps in 2019. There’s no telling but the best ideas tend to do well relatively “quickly” (as in within a matter of a few weeks) and the following may join the ranks of future LONG ideas next year.

Let’s Jump to the TOP 20 SELLS and then TOP 20 LONGS as of this week. These are the leaders in Rooster360’s trend trading master ideas universe. Sadly, a lot of great biotechs, which had so much promise, have not performed well and we see the continued long march of 20th Century Stalwart General Electric (GE). What might have been.

Let’s move on to the more sunnier list of the TOP 20 LONGS. What a lineup - nothing like the end of Q2/ beginning of Q3 2018. That’s how dramatic Mr. Market’s mood has been. It’s now includes healthcare, financial exchanges, and tech OEMs.

And now for the “New Ideas”, or more accurately, the younger/new ideas which are doing well and may continue to do well. First, the SELLs which have been doing well. I am sanguine about this lineup. This feels more like an avoid list that is best used for shopping in 2019.

And now for the last list, the "New Ideas Longs”, or younger LONGS which have done well. These might be more palatable to trade in or consider keeping on watch. Look for some backing and filling before lining up your books with these ideas.

With any luck, we have been getting ready. More ammo from all those stops leaves us prepared for new opportunities. Discipline keeps us from wasting said resources. Have a great week ahead - I will create more notes to see how we can prepare for Q1 2019.

Mr.Market Has Caught A Cold

(Nov. 3, 2018 Update) TREND TRADING UPDATE

This update marks the end of the first month of Q4 2018. We are in the home stretch as active speculators with near-term time frames wonder if we have “bottomed" out”. This is not for me to say. I can only report the current results from a long-running “experiment” in sharing trend-trading observations with weekly prices.

My limited experience (in point of fact everyone has limited experience due to lifespans and actual real investment experience) tells me that this is a rough Q4.

Time for another massive update. If you rely upon these reports, please take your time. Ordinarily, the standings don’t change much from week to week but over the past few weeks as the leaves turned for autumn, so did Mr. Market turn over in sentiment.

Let’s begin with the STOPPED OUT weekly updates and relevant charts. Frankly, I’m not “happy” about it but this is what has been unfolding and we should treat all price action with equanimity.

Time for another very long update. (Pardon the formatting of the “spreadsheets” shared, I have edited them down and did my best to load them for your review.)

If you would rather look at them in chart form, they are shared afterwards.

Most have hit a suggested stop loss price target and a handful survived, including two “favorites”, AAPL and MSFT, Apple and Microsoft, two stalwarts and former “rivals”, founded by young drop-outs in the 1970s, which have since matured into dividend platforms we all can’t live without for life and work.

As an investor, I would pay more attention to them, and begin to consider putting them on watch and wish lists for accumulation at some point - in fact, some folks are likely doing just that.

$FTNT $AAPL $MSFT $SEAS $CF $SNE

Let’s move past the damaged STOPPED OUT charts and move on to the LAGGARD updates, same format, with “spreadsheets” and charts. I will post first the LAGGARD “SELLS” - these are sell/short/avoid ideas which have “underperformed” - which means they are in fact rising. Then I will post the LAGGARD “LONGS” - these are long ideas which have a notional negative return, meaning they have gone down since the week they were added to the Rooster360 master ideas universe. The reason is that you may have “shopping” ideas from the "Laggard SELLS”, which might become potential buy ideas. In a market like this, we are looking for trend changes and these lists can help provide an early “heads up” about what might be unfolding. No promises, no holy grails but we can use this information to provide notes.

This week’s takeaway from LAGGARD SELLS includes KO, UUP, XLP, XLU and AU among others. Consumer staples, utilities, gold may be coming back to favor since they’re not working out as “SELLS”. Judge from the charts and you’ll be able to form your own biases and judgements.

On to the LAGGARD LONGS notes and charts. As we see, underperforming LONGS include XOP, LIT, PTR, and more. My top-down takeaway is energy has softened.

The Top 20 leaderboard is so different from what was reported when summer began and Q2 turned into Q3 2018. Gone are all the 200% plays that dominated the upper half of the Top 20 leaderboard. There are no “FANGS” to be seen on the list, and techs are closer to OEMs and vendors, pharma and health is on the list and Mcdonalds is a Top 20. Quite a shift in sentiment and leadership.

And now the “Top 20 SELL” list. This is the most dismal of the lists reported. These are the falling knives which never quite seem to touch bottom and turn or disappear. A cautionary list of market pariahs. That said, here may reside the best potential value plays only to be discovered perhaps many months later - hope springs eternal.

And now for ideas which are in the running for LONGS and SELLS which continue to do well, culled from the last few months in Q3 and Q4 2018. What stands out for me? Verizon (VZ), Church & Dwight (CHD) and McKesson (MKC) are some ideas, all these kind of “homey” plays. Mr. Market seems like a house-bound shut-in with these ideas. (well, if you don’t count the airlines, some of which are picking up, as energy softens.)

Mr. Market's 18th Inning

(Oct 28, 2018 Weekly Update)

This week included conclusions in long running dramas in both the counting houses of our age and on a baseball diamond. Pick your time frame or your stats - whether it was 8 years or 8 hours (give or take), price action slicing through various 200 day SMAs or Brooklyn expats closing 3-2 over Boston*, or the litany of errors that end up in the “despite” column (e.g. what could have he been smoking, literally, to tweet those magic numbers, how could there be stranded runners on both sides in multiple innings, and a whole lot more), some long-running streaks (like this sentence) have an end. (*post-script: It would be Los Angeles losing, Boston breaking out to victory with 5-1.)

This weekend also included a wonderful, educational and fun gathering at StockTwits’ west-coast original “Stocktoberfest” gathering. I remain grateful for the privilege of meeting and befriending remarkable smart, hard-working and funny folks and for the joy of reconnecting, “IRL”, with long-time friends. What’s great was the friends, both “old” and new, were people I would be happy to spend time with whether or not it was about the markets, money or macro - now that’s great.

This year’s gathering, had as usual entertaining talks, from a market-wonk P.O.V., including from Phil Pearlman (Thousands of years of Banking Behavior meets cute with “Bobby the Brain” -and I will never be the same again), Todd Harrison (his coverage of the investment landscape from Cannabis-related medical research which hints at a multi-decade-scale opportunity), J.C. Parets (whose amazing and bracing set of charts, which overlapped with my trend-trading approach, hopefully some BTFD-folks will consider), Tinder product chief Brian Norgard (whose thoughts about tokens, decentralization and future models of work and compensation, were personally exciting as they overlapped with thoughts I have explored on my sibling site “The Big Stack”) and much more.

I also caught a nasty cold. But it was so great to hang on the “Deck” of the “Del”, learning and laughing a whole lot the whole time. I am lucky.

Let’s go to this weekend’s Rooster360 update. The past few weeks have been entitled “Measure”, “Moody”, and “Mad”. This week I suggest to friends could be “Mashed” or “Messed Up”. But it’s not a permanent state of being, just as unbelievable momentum was not a permanent state of things either. Ed Seykota I think mentioned that Mr. Market has to both breathe in and breathe out. Mr. Market has been “waiting to exhale’ as it were, after taking a whole long deep breath in.

On to the charts, lots of them. Take a breath, hold, release slowly. Repeat.

Let’s begin with who struck-out, the STOPPED OUT ideas. Like last week, there are quite a few, in fact I had to create three chart images of the notes, shared below. Some big names have left the field, and less than a handful of them were “SELL” / avoid ideas. Please comb through the lists, and then the STOPPED OUT chartfest. It’s a lot to absorb, I admit, but from my trend-following point of view, it looks like time in the dugout. Shorter-term traders, however, may be eager to prep for a potential post-over-sold bounce (not my wheel-house but I think some readers are about to go make hay pretty soon).

$EPAY $FTNT $FIVE $AAPL $MSFT $SEAS $SNE $CF $PF $WTI were the top 10 STOPPED-out plays which made from 112% down to 15%. What a line-up of retirees.

Here’s a link the rest of the STOPPED-OUT CHARTS. The list is simply too long.

Here are, however, are the bottom 10 charts from the STOPPED-OUT charts. Former high-flyer $ALGN was completely wiped out. Let this be a reminder of what can happen even to a “can’t win”, seemingly “unbeatable” team in markets and elsewhere.

Let’s press on to the next list, the LAGGARDS as of this week. They haven’t been stopped out but they are under-performing and negative. The lists are filtered up to Q2 2018. The results are similar for Q3 2018 and what there is of Q4 2018 but those ideas are excluded for a variety of reasons - primarily that they are bit too “young” to track. Just the “top 5” LAGGARDS charts are shared this time: $XOP $SHO $KEYS $PTR $CTXS. With any luck, the story might be different in 2019.

Let’s move on to the Top 20 Leaderboard, for both SELLS and LONGS. We’ll begin as is the house-style, with SELL lists. Here is both a portrait of the falling-knife and potential in the basement bargain in the making. Not that I would fight them, not me.

Let’s move on the TOP 20 LONGS Leaderboard. What a sea-change. I have written that for most of the time, these lists will typically be almost the same from week to week, but that they tend to reflect the shift in market leadership, and that an avid observer will notice the shifts in leadership and sentiment early enough to follow along.

The Top 10 LONGS as of this week includes:

$I $ANTM $REGI $IDTI $BSX $LOPE $MCD $FBR $FBP $SCI

And now let’s move on to ideas which may yet prove themselves from recent weeks.

Let’s move on to the SELL ideas list, the flip-side list of ideas which have the potential to ruin somebody’s day or make it, depending on their system, investment or trading edge and just plain luck.

Let’s move on to closing thoughts.

I’m a trend follower. I have already hinted at what was unfolding and it has most decidedly been confirmed. I don’t know how long it will persist and what the washing out will require. Many of us have seen massive long trends wash themselves with either declines and/or winding trading ranges over protracted time-periods.

Here’s a list of the Top 20 from before Summer 2018 really kicked off, June 2018: $NFLX $ETSY $SRPT $TDOC $FMI $ARWR $ADBE $GRUB $USAT $BZUN

It’s been four months and full season. The leaves have turned. Long time leaders have been eclipsed and replaced, some to never return and some on a long retreat and rest. and now for some long time-frame charts. In between there are going to be some great rallies in-between. If there was ever a good time for a bounce, whatever the animate state of the cats involved, get ready. Otherwise, stick to your investment plans and “enjoy” some bargain price events.

But NOT all is lost. RedHat has apparently been bought out by IBM as of this writing, with a massive premium over this past week’s closing price. Just another chapter, another inning for a long running game for IBM, including mechanical calculating machines, “Holleriths”, through on to room-sized “big iron” mainframes, PCs and software and SaaS. The game plays on.

Mr. Market's Notes Of A Mess

(Week ended Oct. 19, 2018)

Mr. Market is in a mess - time to survey the damage. Over the last few weeks, I have characterized the price action with a short-hand of puns: “measured”, “moody” and “mad”. This was deliberate, and as we see, a concise description of market conditions.

Last week’s change of format will become the standard reporting format, with summary reports and charts. This is again an omnibus report, in four sections. A word of advice to readers, review this when you have time, get a cup of coffee, tea or whatever keeps you going, use a tablet, or something with a large screen - if you do this on your smartphone, that’s fine but be patient. This is a long report willed with lists and charts for your review. (Really, take your time, I took mine to make this specific update for your review. Given the past few weeks in the markets, I thought it important to create a deep and detailed weekly update in one post. I wrote last week that readers should embrace new trends in Q1 2019 but this final quarter will be challenging.)

Take your time, grab a pencil and please review in this sequence. There’s a lot of information here and hopefully I have kept it as concise as possible. Let the numbers and pictures shared with you do most of the work and talking.

1-STOPPED IDEAS (Ideas which have been stopped out)

2-LAGGARDS (Ideas not yet stopped out)

3-TOP 20 (The current Top 20 LONGS and SELLS)

4-“NEW” IDEAS (Newer ideas which may continue to perform) and CLOSING remarks and notes

STOPPED IDEAS (SELLING and then LONG ideas):

Charts for STOPPED OUT SELLS include the following:

the STOPPED LONGS ideas, presented first in list format:

Charts for the STOPPED LONGS include the following charts: As we see LULU got “pants” (pun intended). I was surprised by Mastercard’s (MA) exit but that can happen. TNDM’s ascent, in less than 6 months, was hot and so its exit was equally hot as well for about a 180+% notional simple gain from May 2018.

And now for the LAGGARD reports, both “short” and “long”.

The most recent closing price has triggered the most recent suggested exit price and may either survive and become winning trends or hit their stops and join the ranks of STOPPED OUT ideas. They may become candidates for exit before the end of the year and become candidates for 2019 trades in the opposite direction.

And now for some charts of LAGGARD “SELLS”, just a few of them. As you see, the list is long. These may in fact become contenders for LONG ideas in 2019.

And now for the LAGGARD LONGS. Given the current environment, this may in fact serve as an “early warning” list of potential new stopped out LONG ideas.

And now for the relevant LAGGARD Long charts. Not yet down & out, on the ropes.

And now for the TOP 20 SELLS and TOP 20 LONGS.

As I have suggested in recent posts, this leaderboard will look very different by Q4 2018. Here we are, well into the final quarter and the market has changed quite a bit. We begin with the TOP 20 SELLS and then the TOP 20 LONGS. Charts of interest accompany this report. First the SELLS list is shared and then related charts.

And here is the current TOP 20 LONG list. It has some familiar names but what a change from Q1 2018. Presented below is the list and then related charts.

Charts for the Top 20 LONGS

And we close, with potential ideas and notes for your review and files. As always, we try to begin with “SELLs” and then go to the “LONGs”. These ideas are culled from Q3 2018 entrants, which have resulted in a positive notional gain since the week of their addition to Rooster360’s master ideas universe. There are no guarantee, just possibility.

Some NEW ideas SELLs charts for your review.

and now for the LONGS ideas pulled from the Q3 2018 quarter. They may keep running, or they may hit their stops. I wouldn’t say dive in but review them and the current weekly charts and adjust your lists accordingly. In light of the past month, these ideas may very well join the ranks of future STOPPED OUT updates.

This updates is long for those you spoiled by life on the Internet but these notes are summarized, believe it or not, from a much larger data set of an average of 1000+ ideas tracked and updated weekly. This kind of thing can then be used to track Mr. Market’s moods and provide active trading ideas. And this kind of things usually costs plenty of money, when submitted with a few pithy words and “actionable items”. I do these updates as one part ritual and one part homage to a now gone mentor, and hope that they push you to focus more on preparation and process and less on “action”.

Final remarks. In summary, sentiment is not at the top of mind but price action is. I chose “measure”, “moody” and “mad” in the previous 3 weeks deliberately to sum up market conditions. I use the equally corny word “mess” to describe the market before us. That said, I am optimistic that together we will gather new trends to benefit from in this quarter and in Q1/Q2 2019. It’s the same as it ever was, there will be leaders and we will adjust our plans to suit what Mr. Market is trying to tell us.

Right now, I have watch lists of potential longer-term investments increasingly at the ready. In terms of active trend-trading, cash is less a choice and more a consequence of following what prices are doing. Let’s look at what prices are doing in terms of the “big picture” in futures. We’ll just review Euro Stoxx 50, Gold, Euro and the Russell index.

It’s funny to look at gold after a long period of neglect. I read about how a recent precious metals conference was filled with more empty tables than attendees. The contrarian in me felt a twinge of nostalgia for when it was a 3-handle trade that nobody gave a damn about. I’m not saying become gold-bugs (please don’t send me stuff about inflation, death of fiat, etc. I’ve read it all) but it’s something to take note of.

Back to more “top-down” charts, which help me think about credit, including: lumber and first-world sovereign bond futures. Top of the heap ma!

It’s not yet time to exit risk but it is an anxious time: I like to use Brent & S&P 500.

No need to look at China and emerging markets. Everyone knows how those charts look. That said, there are some value nuggets in there and I will be looking privately.

These notes may be updated for more charts and thoughts on tactical plans. For now there is a lot of material for all of us to digest in this massive update. Good Luck.

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