Trading Signals

The last post, Long Term Trading Signal, described a trading signal that can indicate trend changes in the market to help with long term investing.

The cross has to be material, and the current cross has not yet had enough of a gap to show clearly a trend change.  Click here for updated chart with a start date of a month ago (zoomed in chart).

So for right now, wait and see.

After quite a while of long time of losses, this past week in Gold miners and Oil was refreshing.
Some of the stocks I am playing with.

So I looked at the price of gold to see what is going on.  For perspective see Gold over last 10 years then the recent price range.  Notice the 6 month view that gold seemingly broke out of a range.
The last chart shows US Dollar price range, no trend change yet.

Long term investment trading signal

After watching the markets since 2006, and being a professional day-trader in 2000-2001, I have learned quite a few things.  As an analytical person, I search for logic in a the markets, which do not operate by any rules at all.  If you have a rule-based trading system that makes you money, one thing is for sure, eventually the system will break.
Upshot: Great to have guidelines for trading, but nothing is absolute.

Couple of mantras I heard as a day trader is 'don't fight the trend' or  'the trend is your friend'.   Basically if the market is going up, many stocks will be going up, and vice-versa.   The market has been on a tear up since 2009, will be 7 years this March!!.  That is quite a trend!
Unfortunately I did not listen to this rule to my detriment, and second-guessed when the market is topping.
Upshot: Spot the trend and play in the direction of the trend.

Today I bring back a post I did in 2008, I am re-writing it simply because my original post is a mess, and this week we may have a trend change upon us.

The concept is simple, have a MACRO tool to spot a trend change to help remove the emotion of guessing the market direction.   I present to you today a tool that has worked as far back as the market has been trading.  Take the weekly simple moving averages for 20 week and 50 week average and use its trend direction to indicate overall market direction.  In the image be,ow when the 50 week (blue line) is above the 20 week (orange line) the trend is up.  If reversed, the trend is down.

Does this mean we are in for a multi-year market fall? Perhaps.  As we can see on the chart the two may flip back and forth and the trend does not change (one example around 2012 below).  But even if this happens, simply sell when the indicator shows, and buy when it flips.  Historically speaking the 'profits' lost is minimal compared to the typical risk of ignoring this indicator.
I do think the markets may someday reach a flat-line when this indicator will be broken.  But until today, it has shown to be a very useful tool.

So look at the image below, take the emotion out of your trading, what do you see?

I see a time to be conservative.  Combine this with China production at 78 month low with china stock market collapsing,  Japan contracting, Brazil collapsing, along with other emerging countries.  USA indicators include (click to read) Factory orders down, payroll is shrinking, GDP is revised lower,  US 3 month treasury yield has gone NEGATIVE, Chicago PMI collapses, home prices are weakening, durable good orders declining, Fed reports plunge in orders, backlogs, and workweek, Fed reports US households contracting in spending, existing homesales decline almost 5%, Philly Fed manufacturing survey collapses, NY manufacturing plunges, Illinois (the Greece of the US) has halted payments due to lack of funds, US export prices collapse most since 2009,

Combine above with my article on future of work, US income levels are back to 1971 levels for men and 2001 for women,

All doom and gloom, not at all!  I see a very bright future AFTER we go through some more hard adjustments to the new economic model.  What matters now is preserving wealth.  For that, consider the long term trading signal below.  For current chart click here:

Video from Karl Denninger, explaining this signal history

MarchOfTheRobots recognized by Jim Chanos!

Jim Chanos is by far my favorite investor.  He speaks his mind honestly and open since the start of his career in the 1980's!
He addresses a basic problem I have identified in the post "Employment of the Future", basically identifying that #marchoftherobots is a HUGE problem!

He calls out that as companies become more profitable, they invest in eliminating people.
WELL worth the watch