LunaticTrader

Investing with the Moon

Posts Tagged ‘Scutify’

Why a trader should experiment and how

Posted by Danny on October 20, 2014

Remember the now defunct TickerSpy.com? I used it a few years ago to conduct some live experiments with random stock portfolios here on this blog. You can still read the results and conclusions here: Random stocks experiment. Just like science improves through experiment, a trader can improve from doing experiments as well. More on how and where a trader can experiment will be discussed further on in this piece, let’s first take our customary look at the market.
Here is the current chart of the Nasdaq (click for larger image):

Nasdaq

The Nasdaq has dropped below some important support levels in recent weeks. It has found a (temporary?) bottom on Wednesday and now appears to be bouncing back. I have been talking caution and standing aside for weeks, mainly because my Earl2 indicator (orange line) keeps dropping. Earl2 still doesn’t show any signs of turning up, but at least it is now in deep bottom territory and the faster Earl and MoM indicators are finally turning up from major lows. So, we can start to become a bit more optimistic at this point, but another quick drop to ~4000 cannot be ruled out yet.

We remain in a lunar green period so I expect this to be a bouncing back week, with upside targets of 4350 and even 4450. What happens next will tell us whether we are in an ongoing correction/bear market or in a continuing bull market. But that will be a topic for the next weeks. This is still not a safe market (as if it ever is), but it is a bit safer to enter than the last weeks.

Another topic that will start coming into play is the seasonal tendencies. Nearly everybody knows that stocks tend to perform very well in the autumn through winter period, and those seasonals have not failed to show up for 5 years in a row now. Buying with your eyes closed in Sep-Oct has been profits in the bank since 2009. Will the winter 2014-15 make it 6 in a row? If stocks start going up after the recent correction then many investors will take that as a signal to buy going into a strong period for the next 4 to 5 months. But could investing continue to be that simple? Or are the seasonal tendencies overdue for a hiccup? More on that next week.

***

As I said in my opening remarks, experimenting can help an investor improve. There are many ideas we can try, we can experiment with different timeframes or with stocks we normally never buy, or we can just test to see what happens if we follow the recommendations of the pundits on CNBC. There is always something left to learn.
How to do it? Well, experimenting within the comfort of our own PC is perfectly possible. But the disadvantage of trading experiments that nobody else sees is that we are doing it in a completely unrealistic “nothing to lose” setup. In a public experiment we put at least a bit of our reputation on the line, so it is more like trading for real money. TickerSPY closed down last year, but Scutify is now opening up very similar portfolio manager functionality in their new Hedge Fund Manager. They are starting today and I will participate with a few public portfolio experiments. It is open to everybody so feel welcome to join in with your own experiments.

Good luck,
Danny

Posted in Financial Astrology, Market Commentary | Tagged: , , | Leave a Comment »

On broken clocks and social networks

Posted by Danny on May 12, 2014

Even a broken clock is right twice a day. It is a classic saying, but it is only partially true. In my birth region there was a pub with a broken clock that was right four times a day. It just moved backwards! I suppose it was designed as a practical joke, and more importantly, as a way to give the pub’s customers a good excuse to come home late after a few glasses too many.

How is this relevant for investors? Well, markets can be cruel, not so much because they are cruel, but because some investors have a deeply rooted habit of being cruel to themselves. Give some folks a bull market and they will start selling short or bet on put options. Then let a bear market begin, and for some reason they change strategy and start “buying the dips”. This are the backward clocks of the market. They get it right once in a while, but they are drawn to the wrong side of the market like moths to bright light. And these investors can provide as useful a service as the experts who get it right most of the time. If somebody is wrong fairly consistently you can make good money by taking the other side of their market calls. If you can find the worst investor you have found a gold mine.

Of course these investors are not easy to find, but social networks are making it a lot easier than it used to be. Because there are some typical characteristics that set them apart on those networks. They tend to be sarcastic and cynical in their remarks. They continue to repeat the evidence that supports their position while blaming the fact that their forecast hasn’t panned out yet on being a bit too early with their call. And when the market continues to go against them, as it often does, they start blaming it on manipulation by banks, markets being rigged, high frequency trading, the weather, and so on.. If you can find such traders on social networks or blogs, follow them.

Where to look? Besides Twitter, I use Stocktwits, and Scutify, which is a new social platform that is starting to grow nicely. Check them out. Some services are also starting to use social network streams to generate useful sentiment indicators. Downside Hedge is a good example. I think this kind of indicators will become better and better. With a bit of Bayesian logic these indicators will not only reflect what kind of market calls are being made, but also who makes them: a reliable expert or a broken clock.. And that will level the playing field again, because right now banks and brokers already have that kind of information. They can see what positions their clients have and what kind of orders they have in the market. Would you be able to win at a poker table if you can see the cards of some of the players, but they can’t see yours?

Let’s end with our weekly look at the S&P 500 (click for larger image):

S&P 500

The S&P 500 has gone mostly sideways since the start of the current lunar red period. This is completely in line with our main scenario. We have another week of red period to go, and my indicators still display bearish divergences all over the place. But as the market drifts sideways near record levels the odds are rising that the S&P will climb above 1900 before giving way. Sometimes markets take the path of max confusion.

Good luck,

Danny

 

 

Enhanced by Zemanta

Posted in Financial Astrology, Market Commentary | Tagged: , , , , | 6 Comments »

 
%d bloggers like this: