Review Of A Bruising Rebound

August 2019 weekly update, A Mid-Q3 2019 View

This weekly update will have additional top down views in addition to the vital weekly updates of the Trend trading ideas universe. (The notes as usual make this a long post.)

The recent sharp drop and then bounce in the market has opened the door to more volatile price action - the seemingly unstoppable market of just a few weeks ago is gone.

Yes, there are individual winners doing well, some of which we have in the ideas universe which many of you are profiting from but right now the broader price action does not scream “all clear”. Hold on to your winners but not so tightly that you ignore your stop loss and risk rules. If you have losers that hit their stops then obey and exit.

The Top Down Summary looks great in aggregate but let’s look closer to start this week’s review. The short version: The total notional gains are up from 220+ to 280+K, the notional gains for longs are up from 150+ to almost 180K, and the notional gains for “shorts” are also up from 72+ to 104K. Total number of ideas went from 650 to 660.

Here’s something to keep in mind, the notional profits of long is the same as 2 weeks ago BUT the notional gains of short has DOUBLED in that same time. (I’ll share the top down summary from 2 weeks ago as the last of 3 summary charts below.)

The prior week’s top down summary is shared below.

Here is the top down summary from 2 weeks ago. To repeat, we’re back to the same gains in LONGS but the gains in “shorts” has doubled.

This is all very dry to all of you I’m sure but I start here each week to give me a truly top down view of how all the trend following ideas are doing from week to week. The short version gives me a “heads up” alert that SELLS/ “shorts” could be moving up.

Which ideas didn’t survive in the past week? Shared below is a detailed chart of the STOPPED OUT IDEAS update. Most of the ideas were LONG ideas.

As we see most of them were LONG ideas, the dollar losses are roughly the same because of RISK MANAGEMENT, of risk sizing of trades.

IN other words, I don’t trade the same number of shares for $X just like $Y and $Z. Each idea has different prices and price behavior. We can measure this with a metric that most of you know about, “Average True Range”, which to oversimplify is the average of the weekly trading range for an idea’s price.

We then can review our rules and pre-plan for trade sizes and initial stop losses with this measurement.

Below we see that NYT, the ticker for the New York Times, was stopped out. I had estimated that my risk per share was 3.8 back in March 2019. That was simply my estimate that the weekly trading range for NYT was 1.9+/share.

To keep it simple for consistent reporting, I then assumed this system was willing to tolerate a multiple of 2 times that figure, or 3.8+/share as the “risk per share”. Assuming one was willing to risk losing $500 for this long trade, that would have meant 131 shares of NYT could be entered as a long trade in the week following March 1, 2019.

The point of this explanation is to show that I was not arbitrarily picking and choosing tickers to close out as a losing idea AND more importantly that you can equalize the risk for different long ideas by trading different share amounts for them. A few of the stopped out charts have been shared below.

Now, is it possible that these same ideas could be back soon, and running higher? Of course, in fact, I think that Zillow, ticker $Z , might be one of those to recover but a stop loss exit is still a stop loss exit.

Let’s move on to the TOP 20 SELLS and TOP 20 LONGS. I want to start with the rough news that falling charts can keep doing that but then move on to some amazing LONG trends.

The TOP 20 SELLS summary chart has one interesting observation. Some ideas are close to NOT falling much more because they are nearly at $0 per share! In past years, one of the winning ideas was a seemingly endless fall in shares of Sunedison (to 0).

I won’t bother with charts of the SELLS. Let’s move on to the TOP 20 LONGS.

Now that’s all and well but we need NEW and FRESH ideas to look at is what on your mind. Presented below are the winners from the last 30 days. You might say that’s “too late” and I can tell you “maybe but you would be wrong to make such predictions”.

The Top 20 LONGS were mostly from March 2019 and they have kept on running up. So as a reward to long time readers and as a teaching tool for new signups, here is a list of ideas which might become leaders of the list by the time 2019 becomes 2020.

The short version of this Last 30 Days Winners list: A LOT OF precious metals.

Gold has just dominated for the past month. We know the news & noise data flow. I’m not a fan of this kind of leadership but price is all we have to work with. We’re not activist, control investors with mega lines of credit or access, money center bank balance sheets to play with or in the know players with access to flows to make us look smart. We are outside, passive minority investors and traders however who can play the long game of weekly prices and longer time frames coupled with risk management.

We’ve seen what works. Let’s look at what has NOT worked out so far, a LAGGARDS LIST of under-performing LONG ideas which are losing and could be stopped out.

Amazon, AMZN, which was just added back to the LONGS is already near its stop!
Monster, MNST, which has been a 30+ year juggernaut, is briefly under pressure. Really when you look at years and decades, then Amazon and Monster and many mega winners of decade-long eras will have these moments of near-term price weakness.

Just a few of these LAGGARD LIST charts.

A few macro style futures charts which have been bothering me for months.

SCARY BUT 3 charts from the TOP 20 LONGS as a reminder it’s not all gloomy.
Shopify, Match and Shake Shack. We still gotta shop, “meet people” ;) and eat.
Shopify +79% (3/1/19), Match +54% (3/1/19) and Shake Shack +47% (5/3/19).

That said, there are still stop loss exit prices for these 3 bright spots in the gloom.

Market Update: Prices Hit The Brakes

Q3 2019 Market Decline As July Closes

No sooner were we poised for higher highs and higher lows than the market put a halt to this in the final days of the final week of July 2019. A weekly review of the trend following ideas universe confirms the near-term decline’s impact - it’s not at Q3 into Q4 2018 levels of sentiment but it can’t be ignored.

Let’s review the Top Down summaries, the Top 20 lists and all relevant charts but we will also review some charts on other time frames to get a better feel for what just happened. I focus on weekly prices and weekly averages. I don’t focus on daily trading but I am aware many of you have different time frames and systems. This update was written with the impact of the past week, and what you likely do as traders, in mind.

There is a lot to review here. The caution light is on and the flight got bumpy but we still have to keep up the reviews and updates. Multiple time frames are the focus.

First the Top Down Summaries

First off, a top down summary of the notional Profit & Loss ("P&L") of the ideas universe.

We're still at almost 700 ideas with 55:45 balance of LONGS to SHORTS, and total gains have inched up from 215+ to 220+ K

The LONG ideas’ gains have been hit from 180K down to 150K.
The SELLS gains have bounced from 34 to 72+K.
A dozen LONGS were stopped out, and just a few SELLs stopped out.

I know these stats make no sense at all for most of you who just signed up or who are not regular room readers but the short version is: the LONGS took a hard hit and the sells/shorts have almost doubled their unrealized gains in just the past week - with most of the pain in the last couple of days of that week. Presented below is this week’s Top Down Summary and the prior week’s Summary.

The TOP 4 (of Top 20) charts, all added to the ideas universe in March 2019 as of this week are a mixed bag - the best 4 LONGS from the Top 20 over the past month.

Solar/alt.power leads (ENPH) and the top internet commerce platform (Shopify) lead.

$ENPH +220% (an updated stop that is way behind at 16.1)
$RUBI +66% (5.76 updated stop)
$SE +60% (29.6 updated stop)
$SHOP +60% (302.4 updated stop)

(Once the stops leave 50% gain in the rear view mirror, I use a trailing weekly low from the last 4 to 8 weeks. YES, these are VERY wide stops that risk giving back gains but this is only one system of many.)

The Total Top 20 LONGS list as of this week is presented below. Let’s take a moment to review it and then some relevant charts for this list. The Koyfin list version link.

These charts reveal that we should use the suggested stop loss points as the final surrender price levels for these leaders. The daily charts signal room for declines.

One last thing about the LONGS. We ALSO have laggards in the LONG ideas. They are potential sells and may become potential "shorts” as well.

Worst performing LONGS so far, down about 15-20% so far for 4 of the worst performing LONGS are

$AMRN (with a risk/share of 5.3/share, current stop is 15)
$ETSY (with risk / share of 15/share, current stop is 57.7)
$ADVM (w risk/share of 4/share, current stop is 10)

$RAD (w risk/share of 3/share, current stop is 5.8) none of them have hit their suggested stop loss prices but we can see they are getting close to it.

To repeat, time frames are at the heart of this week’s update for both longs & sells.

I wanted to share the Top 4 of the Top 20 SELL ideas. Just like with the longs, we can see which ideas led over the past month - making them leaders on the downside.

4 of the Top 20 SELLS, most added in March 2019 include the following

TWOU 60% (added week of June 7, 2019)
INGN 38%
WLL 42%
ATRA 62%

We see when something cracks, or breaks down, it can stay that way for weeks months or indefinitely. It's NOT "easy" but we can use these charts to reduce hits to our funds.

And now for the Top 20 SELLS - these are “leaders” to the downside. Koyfin link here.

The Top 20 SELLS are cautionary lessons about how bad things can be in price action.
BUT many SELLS can eventually bottom. They can become future longs.

4 under-performing SELLs (that may become future long ideas later on) with an average loss of 12-14% so far

$WAB (w a stop of 77.5, risk/sh of 10.2/sh)
$YELP (w a stop of 36.6, risk/sh of 5.1/sh)
$LIVN (w a stop of 86.2, risk/sh of 16/sh)
$ATVI (w/ a stop of 51.6, risk/sh of 8.8/sh)

Remember that stop prices for SELL ideas means that if the stock price moves UP and hits/breaks past it, then it is "stopped out" as a SELL idea.

They may or may not have "bottomed" but from experience it could take 2+ quarters or more before they end up being traded as potential LONGS.

I’m not making this up, this idea that SELLS have to be watched and could someday become new LONG ideas. MAYBE. Here are some potential LONG ideas for us to consider for Q3/Q4 2019.

4 potential LONG ideas, coming out of some ugly bottoms

$USB (4.3/sh risk, 51.2 stop price )
$FISV (9.6/sh risk, 94.7 stop price)
$DAL (5.5/sh risk, 54.6 stop price)
$SLV (1/sh risk, 14.2 stop price)

Let’s watch for some future leaders, that may go from ugly to beautiful in late 2019.

Let’s move to the top down views of various futures charts - this is a part of my review of more than just equity prices from a current 700+ trend ideas universe.

$EURUSD is ripe for a bounce near-term but it's an ugly trend so far (will the rate cuts ding the USD or will the market's near term uncertainty maintain bids for the dollar?)

$ZN_F likewise for USTs, we'll just use the 10 years trailing 5 year high: new highs.

GOLD $GC_F hits new highs on a trailing 5 year basis - not comforting but no shock.

$HG_F copper keeps getting dinged ,(NO reference to "Dr Copper", let's just look at the price); is there a tradeable near bottom for bullish traders?

Maybe but not my primary wheelhouse, I would rather save swing type trades for equities, like back in Q4 2018 when everything was being sold.

One bright note comes from a chart Sean D Emory of Avory has shared that highlights a period of potential equity bargins, at least broadly in terms of yield. No rush however.

Review of New Market Heights

Final Week of July 2019 reveals continued market heat

The updates for this week are simple enough to post, including: Stop Loss ideas, Top Down summaries, Top 20 LONGS and SELLS, new potential ideas and top down macro views. The market’s message may also be equally simple to explain: new highs, continued gains, fewer sells are working and with all of this a likely increase in animal spirits. Let’s move through each report as quickly as we can.

The Long ideas stopped out are far outnumbered by the Sell ideas stopped out. This is no surprise and serves to reinforce a market trend which began in March 2019.

Long idea ENB has been stopped out. But there were far more SELLS stopped out.

A selection of Stopped Out SELL charts include the following - they may be candidates as longs as of Q4 2019. Keep one eye on them but not too closely.

Let’s move on to what continues to both work and lead. The Top 20 lists. The Top 20 leader-board keeps running hotter and the initial risk per share and updated final stop loss exit prices have been shared to provide a worst case scenario stop loss price. The point is to remind us that trends end eventually. They also can be volatile as they age and they are useful exit points to allow us to prevent turning a win into a loss when possible. I don’t offer estimated profit targets - I think quite often we end up hurting ourselves with over-clever jumping in and out of long-time frame trends. Being right and sitting tight is not just a Livermore inspired trading motto, it’s an aspiration.

The Koyfin Top 20 LONGS list link has been updated for your review. The Top LONGS based on the past month’s performance includes the following leaders.

And now for the Top 20 SELLS leaderboard. Again, I offer risk per share and updated suggested stop loss exit prices on the SELL trends that are tracked. The point, as in long ideas, is to keep us from getting hurt with overstaying our welcome with winning trends turning into losing positions.

Again, the Koyfin Top 20 SELL list link update is provided for your down-trend notes. Some SELL charts, based on the past month, include the following decliners.

And now for 20 LONG ideas not in the Top 20 LONGS leaderboard which are also doing well and may continue to do so. Nothing is necessarily “too late” to trade.

The top down views of futures charts are shared to give us a sense of trends. The message is clear: we continue to go higher. We can’t time it but we can manage risk.

Energy charts are not a part of this story.

As for US Treasuries, we should be cautious but not overly ambitious about shorting.

The US Dollar remains strong - this is a shocking development. I’m not talking book, I have been watching for signs of weakening USD but not yet so far.

The Yen is one to watch as well.

These updates are primarily for U.S. equity focused investors and traders, so they are doing well. The summer heat continues to grow hotter with each passing week. Stay cool and stay focused on your risk management rules no matter what.

Market Still Running Hot

July 20 Weekly Update & Notes

It is hot right now in several ways - the market is still hot and there’s a record heatwave in the Northeastern U.S. - it’s hot and a little dangerous for the unprepared.

Let’s review the top down summary, Top 20 lists, relevant charts and forward looking notes. But first a quick look at stopped out charts to find out what ideas have hit their suggested stop loss prices.

First stopped out chart is a sell in Pan American Silver (PAAS) - surprise, surprise.

It doesn’t mean an outright long idea has emerged. As we see the price of silver and relevant charts have all done this “fakeout” bounce before.
Another chart that had a similar bounce is First Horizon (FHN). Not silver but an equally dramatic price move.

A big long, CSX, a transport major had a sharp move right down to the 50 week SMA. Again - it’s not a new trend idea in the opposite direction. As we see prices have done this before - frustrating but not atypical price action for the trend follower.

It goes to show that even with the longer time frames and averages used, price moves can come and stop out an idea. That makes the ideas which persist all the more valuable and the strongest examples come from the Top 20 LONGS and SELLS.

First the Top 20 SELLS. Here is the Koyfin Charts Top 20 SELLS updated list link.

A few relevant Top 20 SELL charts include the following decliners - five charts that were the biggest decliners over the past month. Inverse Gold is a loser, no shock, and the same goes for energy related plays for those who watch energy futures prices.

Let’s focus on the longs. The Top 20 Longs summary chart has been updated. As we see Shopify rules in the top 5 ideas from the summary chart. It came back strong after long ideas began to reemerge in March 2019. Here is the Koyfin Top 20 longs list link.

As we see many of these ideas were part of the earliest LONG ideas that were found in March 2019 and they have kept running up and the right.

These lineups are very similar from week to week and that’s not a bad thing. We want trends that we can ride week after week, and hopefully for many months if possible.
Novelty is good for personal hobbies, not for the business of investing and trading.

But I admit there will be changes, there will be new ideas and new leaders.
Let’s review the following charts for possible new longs that could lead as we get closer to 2020 - no promises of course. There’s just no telling but it won’t hurt to look.
(I’ll volunteer one thing, these charts are related to ideas which hit the list as of last week and many of them are basically the same trend: gold. I won’t post all of them.)

Quite a turnabout in a variety of challenged sectors/industries. But wait, there’s more. Here are more potential LONG ideas which are for the novelty seekers. They could easily implode now that they’re emerging out of the gate. We begin with AMAZON.

Big “oldish” tech, precious metals and emerging markets. Who would have thought that back when Q3 2018 collapsed into Q4 2018? This year’s leadership could be marked with a lineup by the time the holidays roll in and summer is a faded memory.

Let’s close with a top down view. Crude Oil is getting crushed in the near-term. I mentioned how this has not popped above the longer term averages and that holds.

The Russell 2000 is not joining the broader U.S. Equities Index party so far.

The AUDUSD futures chart still down the staircase month after month. I’m watching this as part of watching metals, raw materials and emerging markets.

The Brazilian Real getting stronger and we saw that in various equities charts already.

Watching US Treasuries for a near-term pause or rollover but not quite there yet.

Looking further afield, a chart of European Steel Rebar futures.

Is the EURUSD bottoming out?

Eurodollar, which I have been looking at and sharing with you. Did the tightening stop or at least pause?

Watching The Market's Rise

H2 2019 Begins Strong, Weekly Update & Notes

The second half of 2019 is a U.S. market offering a return to highs thought indefinitely lost in Q3/Q4 2018. We begin with an updated view of the broader indices and charts.

The top down view is an impressive lesson in how this market, from a long term point of view, can change direction very quickly. I do not mean day trader or HFT quickly, I mean that inside a single quarter, we went from a closed list in mid-November 2018, and a lot of sitting on hands, to a brand new ideas list by March 2019 filled with leader that have produced double digit returns that were coming from a variety of sectors.

Let’s survey the Top 20 LONGS and Top 20 SELLS and then move quickly to the stopped out charts. First of course, I like to post a Top Down summary sheet for this week and from pre-July 4th holiday. The short version: Long and Strong is the signal.

This is the latest Top Down summary. The longs continue to chock up gains, and the losing LONG ideas have smaller losses in aggregate, going from 10K to 5K over the last 2 weeks. It’s not just the winners I look at, but also the laggards of ideas that have not yet hit their stops. The SELL ideas haven’t budged much in terms of notional gains which tells me they are truly weak ideas that long-focused traders should be careful of.

Here is the Top Down summary from 2 weeks ago, from before the July 4 holiday.

These little summary charts are my way of taking Mr. Market’s temperature via the lens of my trend trading ideas universe. For your notes, it reads as “longs get strong”.

Let’s move on the Top 20 LONGS and then the same for the SELLS plus charts. What I hope you will find useful are my suggested updated stop loss exit weekly prices for these LONG ideas. For all the leadership at this point the minimum stop loss price is the entry price (which is usually the closing price of the week the idea was added).

For those of you who want to see all the charts from this Top 20 LONG list here’s a Koyfin Charts dashboard link you can use. I would like to share a few charts from this list which have run the hottest over the past 30 days for your review.

And now for the Top 20 SELLS. This is a cautionary avoid list or even a bargain hunters list for those of you adept at finding unimpaired values with a catalyst.

Again, here is another Koyfin Charts dashboard Top 20 SELLS list for your notes and just a few related charts from this list for your notes and review. Weak gets weaker.

Let’s move on to ideas that may become Top 20 leaders eventually - no promises.
Here is a nice free list of LONG ideas which could continue to run and move higher.
You will see the ticker, the week it was added, the weekly close at that time, the current price, the gain in dollar and percentage terms, and most critical of all, a suggested “risk per share” figure and the current stop loss exit price. That is the biggest nugget of “secret”, “holy grail”, “magic recipe” info you can get that you should focus on: how much to risk on an idea. I can’t guaranteed success but I can suggest how you might be able to limit your downside in case a trend fails.

(example, in the below chart, you will see a figure of “2.1” for ticker TGNA, that’s the “Risk per share” that could be used for figuring out where to close out a long if it’s wrong and just how much to trade. Imagine you have about $100 to risk: divide $100 by 2.1 and that gives you less than 50 shares as your trading size. Imagine you entered at $X so your stop loss exit price is equal to “$X minus 2.1”.

It may sounds dumb or simple but really most folks are complicating their lives and assuming stress when they have a day job, a business, and/or a larger portfolio of assets and savings to worry about. If you respond with “I know ALL about this, etc., etc.” that’s great - hopefully you also know about having discipline and detachment when it comes to risk taking. Nobody cares what’s in your portfolio, not really, when they ask, they’re really asking to help themselves deal with an internal concern about their own decisions, for confirmation bias, or to reduce cognitive dissonance. Pay them no mind and focus on your process.

Anyway, here is a summary chart of potential long ideas which haven’t run too far yet, plus charts via a simple Finviz screen to provide a quick and dirty overview of them.

Let’s close with just a few top down futures charts to get a broader view of markets. This is just a sample view of the world’s various markets to give us a sense of trends.

S&P 500 Consumer Discretionary is on my mind. A random thought.

Louis Vuitton. Shopping. Luxe. Fashion. A Berkshire Hathaway of Luxury. This was part of a theme I liked in December 2018 when I shut down the trend following list in November 2018, when it was dominated by short ideas and inverse ETFs.
“Lumpy Luxe” doing well so far. Ferrari (RACE) is another one, and on the domestic U.S. not as deep pockets end Amex and Disney have done well too. Animal spirits on the long thin tail of global luxury consumers continues to run up and to the right. Ultra discretionary.

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