Thursday, August 30, 2012

Not done with this decline yet

Not done with this decline

So I had a hunch we might get a sell off today, but being close only counts with horseshoes and hand-grenades.  (My foreign readers may not get this one.. its a common saying here in south Texas.)  Anyway, the RumWave says there is still more room to decline.  So, don't go buying up long positions here.  Keep the powder dry and I'll let you know when it is time.  The daily scores indicate a very short lived bounce is probable, but I'm not trying to catch it.

I decided not to get in on the short position today.  My opinion on that may change as facts change, but for now I'm still all cash.

BIG DAY TOMORROW! (Big FED speech if you've not turned on CNBC in the last week.) Only one more day to get past this hump!


Wednesday, August 29, 2012

Picking battles vs Gambling

Pick your battles, don't gamble.

There's a big difference between choosing high probability trades and gambling.  I think about this as we approach Friday and the vaunted Jackson Hole speech by Ben Bernanke.  Most news outlets would have us believe that this is the make or break moment for the market.  I think that it all depends on your perspective and your investment timeline.  If you are looking to "get rich quick on one big move of the market" then you are a gambler.  You may win big on Friday, or you may lose your shorts.  While I'd love a big one day gain as much as anyone, my mentality is a little different than the one I just described.  I'm looking at the likely direction of the market for the next 20 or so trading days.  I use my battle-tested analytic methods to come up with the most probable direction for the market and then contrast that with the ultimate question.. what is going to make my future clients, and therefore me, the most happy?  I believe that making money is only half of the equation when it comes to building wealth.. keeping it is the other half.  

Having said all that, I'm hesitant to jump into the market ahead of Friday for a couple reasons.  First, the overall direction of the long term (multi-year) market is bullish in my opinion.  During such markets, the big money is made on the upwaves, not the down waves.  I already made my friends a nice profit on this down wave.  Going after more profit on this down wave is pure greed... but like Gordon Gecko, I sometimes think greed is good.  More specifically, I think a moderate amount of greed is good.  It keeps you hungry, which keeps you sharp.

So, what's my point?  All my indicators are at a point of uncertainty.  The only indicator that shows a definite bearish trend is the RumWave, and I'm confident that the market decline will continue for a while to come.  The risk I run in recommending that my friends go short again at this point is this: if my hyper-short term gamble is wrong and I lose the gains that they are already happy with, the trust that I've earned to this point may be damaged.  I'm going to sleep on it, but right now I'm not inclined to recommend that we re-enter short positions ahead of the Fed.

Today's scores:

Tuesday, August 28, 2012

RumWave relief

You wouldn't know it, but today helped the RumWave.

If you only looked at the major averages, today didn't seem like much of a good thing at all.  However, it was much needed relief for the RumWave.  On yesterday's post I mentioned that the RumWave chart needed a little rally to reset a couple numbers.  Despite a mildly lower close for the averages, the RumWave score bounced up a bit.  Very good for the overall health of this market.  I still don't recommend jumping into long or short positions right here, as neither are what I consider high probability trades.  The market wants to rally a little and the Republican National Convention, Jackson Hole, and a likely survival of this hurricane by the gulf states will give a bit of room for bullish rejoicing.


Monday, August 27, 2012

Patiently waiting

I'm in no hurry.

Today's market meandered its way to a modestly lower close.  No big deal.  I'm on the sidelines in cash (for the purposes of this blog anyway) and I suspect I'll be there until Friday or Monday.  Fortunately, I'm off work most of this week so I can prep my blog a little earlier each day.  Here are today's scores:

What is interesting to me is the RumWave score.  It is starting to turn green.  "Great!" you might say.. closer to time to buy.  Here's the problem.. the chart that goes along with the RumWave scores shows something pretty sinister if we don't get some kind of temporary bounce.  I don't post that chart (because it's my little secret.. sorry) but in order to complete the wave from here, without a bounce to reset a couple things, we would be looking at a massive massive cliff dive in the market.  I really don't think that is in the cards, so the more plausible outcome will be a little bounce leading into Friday's "Main Event."  Let's just watch this fur-ball from afar for a while before pitching into the fight.


Saturday, August 25, 2012

Charts and long term score

Lets not miss the forest for the trees

The market popped on Friday as I expected.  I was really glad that I had gotten myself and my friends out of their short positions Thursday.  At some point in the not-so-distant future I may recommend that we get back into the shorts, but for now we will patiently wait in cash.

The scores above have done what we expected, but they are still high for the daily and RumWave scores.  What I want to draw your attention to is a bigger picture view of the market.  Below is a weekly chart for your reference.  Note the slow stochastic and %B and RSI.  All are at pretty high levels so I thought it may be beneficial to put the numbers for the weekly chart into my scoring system, just to see where we are.  Remember, the score system is void of emotion, so it gives us the most analytic view of the chart that is free from interpretation error.

DJIA Weekly Chart

Weekly Chart Score
The score that my system returned was 254.  Comparing that to the charts below of historical daily and 4 hour scores, 254 is literally off the chart.  I know we are comparing weekly scores to daily / intraday scores, but the concept of the scoring system should yield the same overall results because the scales are identical.

 Over the next couple days I'll take a look at how previous Weekly chart tops have scored so that we can see how it relates to where we are now.  I say all this to keep us mentally prepared for a couple of weeks of downward momentum.  I can't say with absolute confidence that it will happen, but the RumWave and the Weekly chart score seem to paint a picture of a probable multi-week decline.

DJIA Daily Chart

 The daily chart above shows that the market started a pretty strong down swing this week.  The red line on the slow stochastic is a low levels, while the purple line is still pretty high.  The MACD looks like it is at relatively elevated levels, so it should start to move back to lower levels in the next week or two.  I interpret this as bearish in the medium term (next couple weeks).

DJIA 4 hr Chart

The 4 hr chart broke the red candle trend on Friday.  I think this was just the bears taking a siesta.  They'll be back soon enough.  I expect a continued bullish push early next week as we prepare for Jackson Hole and Ben Bernanke's speech, which I think will result in disappointment for the market, and then continued declines for the following couple weeks.


Thursday, August 23, 2012


Proverbial "Dead Cat Bounce" likely

Earlier today I wrote a mid-day post telling my readers how I recommended that my close friends take their profits on our short positions.  The end result was a 3-5% gain over the last week or so.  Stacked on the 6-7% gain I set them up for during the previous two weeks, and you come out with about a 10% gain for the month so far.  Total number of trades: 4.  

I don't personally know any successful day-traders, so I can't really compare to true day trader results, but I can compare to most any mutual fund and even most hedge funds.  The RumWave has returned more profit in a month than most of them will make all year, with only 4 trades and about 10 minutes of decision making per day.  Its a beautiful thing. 

Below are the scores for today.  We can see how the 4hr chart has turned green.  On previous waves this preceded a "very short term" market rally by one day.  We'll see tomorrow how it shakes out.


Mid market update

Got the whoosh

This morning I advised my close friends that they could take short position profits for a comfy 4% win.  The rumwave is close to a minor support level.  I don't have access to my score calculator right now, but I suspect we will see a good pullback in the 4hr chart score, indicating a short term bounce is close.

Wednesday, August 22, 2012

Decline won't be a straight line

Intraday indicators oversold

Today we saw a noble effort from QE3 hopefuls on the back of the FOMC minutes.  However, the fact that the market was not able to rally to a positive close does not bode particularly well for the bullish case.  That being said, the intraday slow stochastic on the 1 hr DJIA chart is pretty oversold, so it would not be unreasonable to expect a little bullish resurgence in the next couple days.  This probably won't change my opinion on the next 10-15 trading days and I will plan to hold my 3x inverse DJIA ETF through next week.


Tuesday, August 21, 2012

Just a drop in the bucket

Start of short term downtrend

Today confirmed the start of the downtrend I've been preparing for (and hopefully also preparing you for!).  Do notice that today's scores (below) pulled back a bit, but are not anywhere near done.  The first indication that the wave will be ready to bounce will be a yellowish / greenish return for the 4 hr score.  Until then, we just wait.

Even if the wave does bounce a bit in a few days, this RumWave impulse probably won't be anywhere near done moving to the downside.  The upward move lasted from July 26th until August 21st (18 business days).  The downward moves are usually similar in time.  What I can't predict is the magnitude of the move.. just that the market will not (in all likelihood) be higher approximately 18 days from now than it is today.

There have been some new viewers of the blog lately.  Not surprisingly, days like today tend to spike my page view count.  Welcome to all my return readers and new ones from around the globe!  I hope you find the site useful in your trading strategy!  


Monday, August 20, 2012

Ready for the whoosh.

Da Bears!

I've been saying it for some time now, and today's end of day action (push higher in last few hours of trading compared to the first few) pushed the scores even higher.  Decline is imminent.  

There is plenty of opportunity this week for the market to be disappointed.. FOMC minutes, Euro talks, resurgance of "Grexit"... take your pick.  The newest thing I heard for the first time on CNBC today was a discussion about some country in Central America on the verge of default.  Something is going to push us over the edge, and I think it will be very, very soon.


Saturday, August 18, 2012

Sell-off soon


The RumWave has triggered a sell signal.  I have positioned the UltraWave to take advantage of any declines, which seem to be just around the corner (early next week).  

 My scoring system is full of red and pink numbers on the internals.  Interestingly, of the 5 numbers that go into the RumWave score, 3 are dark red and two are pink.  I haven't seen that happen since I started the score system a few months ago.  AND, the final score is red even after I re-baselined it to a higher threshold.

The 4 hr chart (above) would not necessarily lead you to believe there is a big looming bear in the wings.  In fact, the only thing that looks kind of scary is the %B and RSI.  Other than that, the candlesticks look like they are starting a bounce after a long sideways consolidations.  This is where the RumWave is going to save us, I think.

The same could be said for the daily chart (above).  Nothing too scary, except the slow stochastic red and blue lines are both at very high levels.  In my experience, it is unusual to see both of them riding this high.  Something has to give, and it probably won't be to the upside.

Additionally, I heard a couple interesting discussions on CNBC yesterday about the VIX.  It is at very low levels and the commentators made intelligent arguments as to why it shouldn't stay there.  I also heard that August is a vacation period in Europe.  That would explain the vacuum of information from there.  

All that being said, here's how I see the 2-4 weeks... "surprise" declines through the end of the month, then a big bullish push based on the return of European lawmakers and their "Support of the Euro", AND speculation about QE3 leading up to the hallowed Jackson Hole summit, where the FED is hoped to announce (or at least give hints at) QE3.

The best we can do is use all the info we have to be ready for this.  I like to think that luck favors those that are prepared...  lets hope to be on that side of the coin!


Thursday, August 16, 2012

Wave Killer

Today marked the beginning of the end

We've been calling for (and needing) a market gain of a couple hundred points to kill this wave.  Today was a step in the right direction.  Ultimately, I expect we will climb higher tomorrow (option expiration Friday) and then maybe on Monday.  I'll be watching the RumWave closely going into the close tomorrow to determine if it is time to buy my 3x Inverse DJIA ETF.

The calculated scores above are pretty hot for the RumWave.  The internals of the RumWave score are not quite at a pure sell signal, but they are quite close to it (probably within 2-5 trading days).  Once we get the sell signal I'll position the UltraWave to profit from the impending decline.

BEST OF LUCK TOMORROW! (Time for me to get back in the books for the Series 65 Exam!)

Wednesday, August 15, 2012

Who pulled the plug??

Did someone turn off the computer algos??

This market the last 8 days has been very interesting to me (and other stock nerds!)  The sideways action on very low volume is very very strange.  Volume today on the DJIA was around 77 million.  The recent average is around 132 million.  It is almost as if someone turned off their big trading algorithms.  I'm not sure if that is what is really going on, but it all seems very very strange.  Nonetheless, the sideways action is cooling off the 4 hour scores and RumWave scores (below), but the daily scores are still quite high and do not give a lot of room for continued gains in the very short term.  I'm still looking for a sharp turn up for a couple hundred points before a more sizable decline that I can capitalize on.  


Tuesday, August 14, 2012

Whole lot of nuthin'

Getting my series 65!

Dearest RumWave followers,
If you have read the "About RumWave...readme" tab above, you know that I am not a professional investment adviser.  As a result of the popularity of this blog (over 100 page views a day, worldwide participation!) I have decided to pursue becoming a Registered Investment Adviser.  So, the big takeaway for all of my readers is that I have to cut back on the content of the blog.  I'll still post every day, but I won't post additional charts unless they are of significant value.  I only have a limited amount of time each day to sit in my home office and do this stuff, and the Series 65 studying is going to take the driver's seat.  So, please bear with me the next two months as I knock this out!

Today's action was unremarkable all around.  No big changes to speak of.  I decided not to go long here just to catch a potential rally.  The potential cost does not outweigh the benefit at this point.  I would really like to see a big pop to the upside.  Such action would put a definite end to this wave and I could go short with the UltraWave.  For now, I'm all cash waiting to see how it all shakes out.


Monday, August 13, 2012

Sideways consolidation

Sideways consolidation almost done

The market has seemingly been trending sideways, potentially setting up for another jump.  If / when we get it, it should be the last impulse on this particular RumWave move.  I'm debating whether or not to put on a small play in the event we see a break to the upside.  I'll sleep on it and see where we open tomorrow.  Ideally, the market would break downward a bit, allowing some of the oscillators and the daily scores (below) to descend.  The 4 hr score backed down a bit, but the Daily score was little changed.  The RumWave chart does support another move up before ending the wave.  

I thnk the slow stochastic red line (on the 4 hr chart above) has declined enough for the bulls to reattack.  The %B also shows room to move higher in the very short term.

The daily chart (above) still looks like it wants to decline a little before pushing back higher.


Saturday, August 11, 2012

Still trying to push higher

Market trying to keep uptrend going

Friday's action started off lower then ended with a pop to the upside.  The early and mid-day action brought the 4 hr Slow Stochastic down a bit.. enough for bulls to jump back in apparently.  We may be seeing the start of another brief push to the upside after a sideways consolidation period.  The RumWave would support another move up for a short time (something like the next 3-5 business days).  Ultimately, I am on the sidelines for whatever happens until we get the definite sell signal.  Then I'll position the UltraWave for a downward move.
Of note for the daily scores (above), I re-baselined the color scheme for the RumWave scores.  So, now the scores are not as red.  The maximum score I assigned it was 450.  The highest score I've seen was 500.  This will give me a little red-flag warning before the all-time high score is reached just in case it doesn't make it that high.

The 4 hr chart is showing a little strength, particularly on the RSI with a higher low.  We also see an uptick in the %B and TrendQuality.

The daily chart (above) was relatively un-phased by Friday's action.  No real changes to speak of.


Thursday, August 9, 2012

Took profits today

Pigs get fat, hogs get slaughtered

Today I decided to close my long positions.  The RumWave isn't showing a definite "sell" signal, but there is not a lot of up room and plenty of down room to run.  So, I took my 7.5% profit to the bank.  Not to shabby for two weeks worth of minimal effort!

One of the big deciding factors for me today was the calculated scores (above).  There is just SO much red that I can't keep looking at it without any action.  The scores are not the highest I've ever seen, but they are high enough for me.  If the market does decide to make another move higher from here it will probably result in a more severe decline on the backside.  We'll see what happens, but my investing ship is safe in the harbor just in case that "unexpected" storm shows up.  There hasn't been much negative news (or positive news for that matter) from Europe lately.. 

The 4 hr chart (above) is showing a sideways consolidation move so far.  We'll see if it breaks to the downside in the next couple days I think.  

The daily chart (above) is displaying what I call the "twisted ribbon" appearance on the candlesticks.  Coupled with the Slow Stochastic running at high levels, I have to think that a break to the downside is very likely.

For what its worth, the two best Elliot Wave counters I follow are calling for a continued move higher.  A lot of times they are right, but I find that the RumWave usually lead-turns their predictions by a few days.  Especially when their wave counts "fail".

All that being said, I'm on the sideline for the next little bit. 


Wednesday, August 8, 2012

Still Holding

RumWave says HOLD

Over the last couple days I've had several people ask me if I am still holding my long positions.  The answer is yes.  However, I could take a 6+% profit here and walk away.  That's not what the RumWave's emotionless recommendation is telling me to do.  It says to continue holding.  So I still am looking for a fairly strong down-move before continuing higher for one more impulse.  

The daily scores (above) are showing a lot of red.  Today didn't help those 4 hr and daily scores cool off any.  The pending decline is inevitable, and the longer the market waits the more violent it will probably be.  Regardless, the RumWave chart (that I don't post on this blog) has not met its sell criteria.  So, I will keep holding.  I think there is one more leg up to go before a sizeable decline.

The momentum is drying up on the candlesticks and the slow stochastic is still really high.  Not strong bullish signs.  It is worth noting that the market doesn't always behave in a totally rational manner, so we could go a bit higher.

The daily chart is still showing overbought indications.  I still expect a pullback to cool off those oscillators that are at very high levels.