October 03, 2014

Thoughts on the week, and bending rules.

Wednesday after-hours, the bid/ask on $SPY was reasonable, so I bought some.  It rose just a smidge the next day, but it's SMA rose faster, leaving it with I think a 0.01% break.  I kept it anyways.   It's a situation that can occur with this system.  However, I will never opt to sell after a day of strength, even when it's minimal.

I also revised upward the SMA stop of $DIS when it broke this week.  It's one of my older positions and deserves a slight revision, and how low it had dipped intraday within the last 6 months provided me with enough justification.

But from here, both with $SPY and $DIS, I need to see an increase in momentum upward.  Very rare do patterns last for very long, and if it ever were to make a large difference in exit distance, I will upgrade their SMA stops to be more aggressive. 

One thing I've learned from looking at a lot of longer term SMA breaks (anything over 50 days), time spent below them is relatively short, and exiting would have been sub-optimal.  A trader would capture most of the downside and miss the upside.  Between the first test and the exit, those trendlines and SMAs are rarely tested. I'm willing to get kicked out a couple times rather than exit near bottoms. 

It's my sincerest belief that the market attempts to shake as many traders out as it can.  It will seek out patterns and intentionally break them.  Once it's done, it's tendency is to rally (or fall) until sucking in as many buyers/sellers as possible.  The market is efficient, at screwing you.

My thoughts on this day is that if you have a stock that has been weak the last five days, and weak also today, it might be time to dump it.  I have one.  $AAPL.  I hope it continues to be a winner, but I'm not encouraged after today.

$TLT looks good though.  It's in a weird spot to buy, but I could understand someone doing it on the justification that it rose both when the market was up and when it was down.  But I will wait till it makes a new high or comes down a bit.  $GLD continues to look awful.  $UUP is probably my best move in a long time, and today leaves little doubt about it's strength. 

For company stocks, $DLTR looks tempting, but like $TLT it's at a weird place for me, but both are likely buys in the near future.

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