Farewell and Adieu

The Cheetum Market Indicator was created three years ago, after the 2008 meltdown, as an alternative trading/investing method that would profit during market uptrends and downtrends. Three years of on-the-job experimentation has lead the CMI through a total of four versions. CMI 1.0 used a variation of the Arms Index in its market following decision making; CMI 2.0 was heavily influenced by relative strength and some other variations of Welles Wilder's methods; CMI 3.0 (the worst of the bunch and most extensively researched) included an amalgam of indicators from rate of change to put/call ratios. Conflicting indicators lead to late signals and poor results earlier this year.

The daily spikes and drawdowns produced by all of the CMI versions were a little more violent than I originally intended but even so, the hindsight biased, end of the year results shown in the chart below indicate that anyone willing to take every CMI signal from day one to present would have not only survived, but profited to some degree.



After a short, one-year test period, the best of each version was extracted and used to create the next version which has lead to version 4; the final and most simplistic of trend-following methods that combines ratio with price convergence and divergence. The secret to this method is that there is no secret. Any leveraged, sound, statistically-based trend following indicator used during a trending market cycle will produce positive results. Emphasis on the word 'sound'. Try one and you will see, provided that you have enough patience to wait for the next real trend.

I expect 2012 to offer better opportunities for a dedicated trend-follower. The market likes to shake the belief in trend-following systems before the next big trend can begin. As Ed Seykota once sang, "you get a whip and I get a saw, one good trend pays for them all". Good advice.

Happy trails and profitable trading to all.



http://www.youtube.com/watch?v=GVmeeYwEiQw

Related post: Here Lies the CMI

Banana Stew Stock Screening (for the bears)

I would like to finish the year with a big 'ol market surge to aid the ailing CMI 3.0 (soon to be replaced by the monkey of all market direction indicators that will simply be called the CMI 4.0). Unfortunately, the market might try to relieve its "overbought-ness" over the next few days. If that's the case and you believe it, I fixed up a new batch of banana stew for the bears out there who may be looking for a couple of quick, short trades.

This stew is a new recipe and is has no preservatives so its good for a quick 3 to 5% over the next five or six days if the market cooperates and heads lower.

Symbol, Name, Current Price
BGC Partners, Inc., BGCP, $5.67
Talisman Energy Corp., TLM, $11.96
Precision Drilling Corp., PDS, $10.15
Darling International, DAR, $12.90
Advanced Micro Devices, Inc., AMD, $5.28
Vishay Intertechnology Inc., VSH, $8.89

I have a banana stew recipe for the bulls too but that will have to wait for another day. Let's test this out on the bears and see if anyone reaches for the Pepto.

Prediction Retrospective 2011

If you want to succeed, double your failure rate.
~Thomas J. Watson

You won't see only the winning predictions in this jungle; dead wrong predictions receive equal treatment. I'm not proud. I'd just as soon call this site "Monkey Throw Dung"...but I think that domain name is taken.

2011 was a great year in the stock market if you hail from the land of Myopia. Short-sighted trading, and not betting on the long term survival of many of the lower priced, early 2011, high flying stocks, would have kept the "what was I thinking" mantra from renting any space in your cranium.

Looking back on the first six months of 2011, here are a few of the highlights and lowlights:

A Good Trade or a Bad Trap?

On Jan. 25th, 2011 Sigmund said:

Could there be a spike in price and volume coming for Sunrise Assisted Living (SRZ) between February 2nd and 7th?

Not a bad call since the $7 SRZ made a run to $9, and then spiked to it's high of the year at just over $12. Then, as with many others, it flew south for the rest of the year. An easy call if you were watching the consistent volume spikes over the previous months leading up to the high of the year.

SRZ has since changed it's symbol to SRZzzzzzzzzzzzzzz until further notice.

_____________________________________

CIM4143CKDIV?

On Jan. 15th, 2011 Sigmund said:

What I think I was saying here is that one of my current favorite stocks, Chimera Investment Corp (CIM) is trading in the lower end of its current range (around $4.10) and might head back to the upper end of $4.30. With a current dividend yield of 16%, it may be time to hop the CIM train again.

..and the high of the year ($4.34) was reached soon after. But I got off the CIM train at the next stop. Current price is $2.74 with a 16% dividend yield.

On the same date regarding IRE...

I've been holding this one for a couple of months already but I think I can still get a better price, possible under $2 before the surge. Price target for 2011: $5 to $10. Pigs can fly, right? If my price target is not hit this year I would expect a true lottery pay out of 44 cents on the dollar which would put the share price at about $1.10 by year end.

Wrong on both counts. I had to bail on this one after the 1:10 split. Current price is $4.48. You do the math.

That old Irish saying is worth repeating...
"Tis better to spend money like there's no tomorrow than to spend tonight like there's no money!"

Did ya hear that, Greece?

_____________________________


Return of the Black Lagoon

On February 25th, Sigmund said:

The following list represents stocks that show some buy volume yesterday that exceeds sell volume by enough to get my attention. Relative strength for these stock are also at the bottom of the barrel, but the recent historical price action has been in a range or uptrending.

I would be willing to hold these for a couple of weeks, and I won't get greedy so I'll try to get a stop in after an 8% gain.


HST, Host Hotels and Resorts, $17.94; target $19.37
POL, PolyOne Corp, $13.36; target $14.42
VSCP, Virtual Scopics. $2.21; target $2.39

And here's why the Black Lagoon stock screener is buried deep in the lagoon...

None of these stocks recovered except for POL when it ran up to $16 over the next five months. This is nothing but a case study that reinforces the need to dump stocks when they don't move in the expected direction. Current prices are $14.52, $11.56, and $0.90 respectively.

____________________________________


Future Stars Stock Picking Wish List

On February 19th, Sigmund wrote:


If the market goes higher you can be sure that many of these low priced stocks will rise with gains that far exceed the indices, and could become some of the more respectable high fliers that everyone wishes they had not overlooked earlier, especially when they graduate over $5/share.


Click on the link to see the list if you want but I'll save you the trouble. 3 out of 19 are still barely treading water, and combined, worth about as much as my Roger Clemens Pawtucket Red Sox rookie card.

Actually, I'm still holding one or two of these and will re-visit the list during the 2012 bull market.

__________________________________


Chart posted on March 29th:


Maybe in the future I'll do some triangulation of the CMI's expected direction and my own. I'll get back to you if the QQQ's finish up the year at $57.50.

____________________________________________


Dow 14,000

Praying to the Great Fibonacci can be treacherous business. Luckily "Fib" was in a generous mood this year...

On March 8th, Sigmund prayed...


Oh Great Fibonacci, please accept these 'never been licked' poison dart frogs as my humble offering, and allow the July 2nd 2010 bottom to be the foundation of the great C to D leg that will complete it's destiny by July (or August) of 2011...and while you're at it, allow gold to rise above 1500 dollars an ounce...and provide world peace , and if you have time, make Charlie Sheen the new leader of Libya as soon as possible.





Well two out of four ain't bad; gold is holding, and as of this writing, Charlie Sheen is still ruler of Libya.

I am still confident that the counter-intuitive Dow 14,400 will be achieved in 2012.
____________________________________

On April 27th, Sigmund wrote:

Who Bought All Those Pre-9/11 Puts Anyway?

Still waiting...

Bueller, Bueller, Anyone?

_____________________________________


Silver Lining

On April 9th, Sigmund wrote this regarding Silver Standard Resources (SSRI):

... yesterday I actual put a stop in at a couple of percentage points below the current price. Round numbers on the spot price have that affect on me (20, 30, 40).
I have little doubt that silver will visit higher, round numbers in the future but someone else can ride the retracements down into the low 30's.

Monkey see, monkey do. An easy call as silver topped in April.

_______________________________________


The HMO Inverse Proportionality Rule

On May 1st, Sigmund wrote:

Since quality of health care and health in general for Americans continues to decline, that can only mean good news for the stock price of the health care industry.

It has and it is. See the list.

_________________________________________

Obviously, there's no crystal ball in this jungle. Following the trend will eventually prove to be the best course of action. Even more convincing, if I read it correctly, according to the Chinese calendar, 2012 is the year of the CMI 4.0. The 2012 Mayan calendar is a little harder to read; it's missing a few pages.

Just a Junk Mail Junkie

I still haven't ended this addiction to reading those investment alert stock reports that I find in the tree mail every so often. The year-end clean sweep of the hut produced a few more of these well-crafted, multi-colored brochures that make for great reading for those, like myself, who can't get enough of the potential 10-baggers that give meaning to reward-free risk.

These 'can't miss' opportunities are hard to spot. Luckily, the people willing to research and produce such informational literature are kind enough to send an occasional gold nugget my way in the form of a multi-page document complete with pie-graphs, bar-charts, and grandiose expectations of future share price.

Consider the following:

"Giant Goldcorp's NEXT Takeover Target"!"Even if gold hits $3,000 an ounce-you can still own it for $11.21."

What else could this be...Lone Star Gold of course or LSTG for short...



At least this one still has some volume. Looks like gravity is getting the best of this star.

_______________________________________

Can't have gold without some silver. How about First American Silver (FASV)?

"Follow this great secret to silver investing and see why First American Silver at $1 could hit $12.75 in six months or less - almost a locked in gain no matter what the stock market does."



Hmmm. I'll take my chances with the stock market.

_______________________________________


What's more precious than gold or silver. Gotta be Lithium according to this report.
What better way to power up that energy efficient Hummer. Own your very own shares of Lithium Exploration Group (LEXG).

According to the report...

"This scarce mineral is about to turn the energy markets upside down, and early-in investors stand to make money hand over fist."



The only way to make this stock profitable is to turn this chart upside down. No, that doesn't work either.

_________________________________________


What about Gunpowder Gold(GUNP)? Bulletin says...

"...the world's top geologists whispering that another MASSIVE discovery is about to be made..."



Looks more like a massive coronary judging by that six-month flat line.

_______________________________

Finally, an investment newsletter not hyping gold...

"Easy Link Solutions (ESYL) has what could be the hottest consumer electronics device of the year...it makes a small HD/Symphonic Media Player you'll drool over...but buy the stock first; it looks ready to run as high as 989%."

and...

"LOOK at what 559 million Chinese are buying right now!"



The Chinese must have bought with Euros.

_____________________________________________


Cant get enough? What about OncoSec Medical, Inc (ONCS)...

"Venture capitalists invested $114 million in OncoSec Medical, Inc. because of its revolutionary new breakthrough: It can instantly kill cancer cells by multiplying the power of a drug called Bleomycin 1,738 times using electricity."




Save a little electricity for the defibrillator. This charts going to need it.

Heading to the stream now; piranhas love this stuff.

"Four Days of Up" Stocks

While the SPY has lost around 3% for the week, a few stocks have listened to the beat of a different drum. (Linda hasn't changed a bit.) Each of these stocks has gained at least 5% over the last four days, and while some of them look like they are reaching the top of their current channel, a few others may have more upside, especially if the market pulls another one of those now overdue, overnight gap ups that start that Santa Claus rally that no one here in the jungle is really missing anyway. My best run-on sentence yet.

Symbol, Name, 4 Day Perf.

PCYC, Pharmacyclics Inc, +14.8% , Drug manufacturer filling the gap.
HURN, Huron Consulting Group, +12.4%; Attempting a new high.
MBI, MBIA Inc., +9.7%; Looks like this high-flyer might need some insurance.
ELGX, Endologix, +8.2%; Still workin' the channel.
TNGO, Tangoe Inc, +8.0%; Finishing the dance with a spinning top.
HEK, Heckmann Corp.,+7.1%; Heck of a short if this retraces from the most recent high.
ALK, Alaska Air, +6.5%; Any higher and they'll risk collision with the Starship Enterprise.

Trippin' the Breaker?

The harder I try to coax the CMI to buy the market, the more it refuses. At first I thought there was something seriously wrong...besides the fact that this will be a losing year for the CMI. (The first eight months of version 3.0 caused too much trouble.)

As it turns out the Cheetum Market Indicator is running as programmed with the version 4.0 add-on in place. I have a feeling that the quick run-up has strained the relationship between competing signals. Something will eventually give as the CMI will:

1. either change from QID to QLD if the market insists on moving up, or

2. will overheat and trip the breaker which will produce the bull/bear signal, and decide not to play anymore until things cool down.



The only other option is for the S&P to do the right thing and fall hard and fast through 1160 which would take the strain off the QID trade...a true December inverse rally!

Coppock Curve November 2011 Update

Fool me once, shame on - shame on you. Fool me - you can't get fooled again.
~George W. Bush


Although the Cheetum Market Indicator (CMI) does not use either of these signals to determine market direction, the long term "convincers" of a major market move are the Coppock Curve and the Cheetum Curve.

This recent update to the Coppock Curve shows a continuing downward trend although changes in direction for this curve are far more useful when they swing up from the bottom.



The Cheetum Curve (not related to the CMI) is beginning to tell a scary story of a market that may be on the decline in a big way contrary to recent market action. The red line has crossed below the lower blue horizontal line. You can see what happened last time it crossed this line back in late 2007, early 2008.



A refresher on using this signal is outlined below.

1. A cross of the red ROC line over the black moving average line from below when both lines are below the lower blue horizontal line triggers a 'buy' signal.

Solid confirmation occurs when both the red and black lines cross through the zero line and then continue above the upper blue line. A reversal of the red line prior to crossing through the 'zone' would trigger a sell signal as noted by the yellow arrow.

2. A cross of the red line below the bottom horizontal blue line triggers a 'sell' signal. The black moving average line is not used as an indication of a sell.

3. If the lines are in the 'zero' zone (between the blue horizontal lines, continue with the previous trend. In other words, if they are in the zone, leave 'em alone.

2011 NASDAQ Price Gap History

Unless the market is starting a new major trend, gaps created by massive buying and selling can provide good entry points for a quick gain. The recent upsurge has created these very opportunities. The last few days on the NASDAQ chart below illustrates what a gap "ups" and "downs" look like. It is important to note that I am referring to gaps that do not fill the same day that they are created.



After the price action this week, you may feel like you are missing the boat but recent history shows that the chances are good that price will reverse and fill those spaces created recently between the high of the previous day and the low of the current day.

Within the last year the NASDAQ has gapped up 25 times and gapped down 16 times. Of these 41 gaps, 97.6%, or 40 of 41, have filled. The one gap that did not fill occurred on July 27th. This was the beginning of the first real downtrend of the year.

Accepting the fact that all gaps do not fill, the question that comes to mind is, "how long does it take to fill a gap?"

The chart below shows clearly that 83% of the gap "ups" have filled within 20 days, and 88% of the gap "downs" have filled within 20 days.



You can see now why I worship the gap. It's like free money...what's the catch?

Approximately 85% of the gaps have filled over the last twelve months. What happened to the other 15%? The four non-conforming gap "ups" that refused to fill within a month took 24, 31, 50 , and 173 days to fill. One of the two non-conforming gap "downs" took 44 days to fill. The other one (the 41st mentioned above) is still waiting for NASDAQ 2850, or another 8.8% before a close can occur. Maybe the market will take care of that tomorrow morning.

This gap review has only a skimpy data set but the overall results correlate nicely with some of the other larger studies I have come across.

Related post: Gaps R Us

Buy December or Sell Saturn

December: Friend of the Bulls

December stands out as one of the months that consistently produces gains. The chart below shows that December had gains 81% of the time (17 of 21 years). Not bad. The data for each December included all trading days between the close of trading on the last day of November to the close of the first trading day in January.



Will the market go for 18 of 22 as 2012 approaches? Only time will tell. Personally, it would be better if the S&P500 continued to fall to 1050 where it really belongs. That way the CMI won't overheat and can coast for the remainder of the year without moving out of the current QID trade. Of course, that would be free ride, and this year has been anything but a free ride. With that said, I'll expect the magic of December to kick in again. Bulls get ready. The CMI will have to catch up.

Saturn Plays to the Bears

For those that insist that the market will drop further, perhaps you are under the spell of Saturn. Astrologically speaking, and according to that fortune in that cookie I just ate, the relationship of Saturn to the Sun can have an affect on the rising and falling tides of the stock market. I won't go into the past predictions that happen to include some significant market reversal dates but as you can see in the list below, the most recent Saturn/Sun opposition date was October 28th 2011. Digging a little deeper ( I'm as skeptical as you), the success rate for the Saturn/Sun tango in the sky appears to be about 55%, so take the list of upcoming dates with a grain of stardust.

Saturn in opposition to the Sun (negative market reversals)
Oct. 28, 2011
Jan. 22, 2012
Sept. 7, 2012
Dec. 2, 2012

This obviously leads (try to keep up) to positive market reversal days of...
Feb 25, 2012
May 14 2012
Aug. 4, 2012

Also, fortune say, "lucky trends bring lucky friends".

So there you have it. I do know for sure that the market will move either up, down , or sideways.

Best Day-Trading Day 2011

Everybody has a plan until they get punched in the face.
~Mike Tyson


Day traders will agree that price action that includes volatile swings timed correctly make for a profitable day. But is there a bullish or bearish bias for each individual day of the week? Pre-2011 historical data is presented in a previous post back in February of this year.

For 2011, the chart below shows a divergence between Tuesday and Wednesday after the first half of the year. The chart was constructed by simply summing the point gains and losses since the beginning of the year for the S&P 500 between the opening and closing bells.



Currently, Tuesday has been the day of the bull with a total of 151 points, and Wednesday has been bearish over the last few months with a total point count of -124. Thursday is the only other day with a positive point count (53 as of last week).

Monday is a little out of sync since there were fewer of those days and the line was not adjusted accordingly to fit the year-to-date timeline.

Since the Dow, Nasdaq, and S&P were all down today on bullish Tuesday (-0.46%,-0.07%, -0.41% respectively), will this mean that bearish Wednesday will be a banner day for the QID-laced Cheetum Market Indicator, and my FSLR puts? We can only hope for more blood in the jungle. If not, maybe Tuesday and Wednesday are just reverting back to the mean.