Rules for Entering the Stock Market

1) Follow the trend

• In general, if 10 week is above the 40 week, it’s in an uptrend
• Watch the 10 month SMA for the major indices. If the price is above the 10 month SMA, consider entry. Similarly consider shorting when price is below the 10 month SMA
• Watch the NYSE advance decline line (http://stockcharts.com/h-sc/ui?s=$NYAD&p=D&yr=2&mn=0&dy=0&id=p64973690597&a=173520720)
• Watch the NASDAQ New High New Low Indicator (50 moving average shoudl be 200 moving average) (http://stockcharts.com/h-sc/ui?s=$NAHL&p=D&yr=9&mn=0&dy=0&id=p90586388045&a=172263564)
• Watch the transportation Sector (10 week moving average must be over the 40 week) (http://stockcharts.com/h-sc/ui?s=$TRAN&p=W&yr=3&mn=0&dy=0&id=p59683693524&a=168085783&listNum=1)

2) Consider entry points when the markets are oversold (Look at stochastics to determine this)

3)When Purchasing Commodities, look at the trend of the $USD, Treasury Prices (TLT), $CRB and Treasury Bond Prices

• $CRB
• TLT
• TBT
• BDI

4)Consider interest rates and the yield curve. Inverted Yield curve always signals a recession. A flat or a steep curve (current) signals aggressive expansion.

5)Remember which sectors do better in different phases of the economy. ie transportation and technology lead the way.

Do you leverage?

tis the season to be happy especially if you are expecting the crack market oops stock market to go down hard after being drunk on Stimulus. Some leveraged ideas:

EDZ – 3X EMERGING MARKET BEAR
EDC – 3X EMERGING MARKET BULL

FAZ – 3X FINANCIAL MARKET BEAR
FAS – 3x FINANCIAL MARKET BULL
TYP – 3X TECHNOLOGY BEAR
TYH – 3X TECHNOLOGY BULL

TZA – 3X SMALL CAP BEAR
TNA – 3X SMALL CAP BULL

Apple Tips – Clone the tiny flash drive bundled with MacBook Air to an image

1)Download Carbon Copy Cloner

2)Select Flash Drive as the source and new Image as the destination

3)Clone to Image

4)Clone back from Image to USB and boot.

Apple Tips – Copying Photos off your iphone/ipad/touch to your MAC

Use the built in “Image Capture” app in Mac to import photos to your computer

1)Connect your iphone to your MaC

2)Start Image Capture

3)Select All – Import to

4)Select a folder on your desktop.

Done.

End of Month Purchases (December)

• MON – Breakout 10 month Moving Average, MACD Monthly Pulling up, Oversold – AG Play
• JJC – Breakout (New High) – Copper Play
• SLX – Breakout  – Steel Play
• RSX  – Breakout – Oil Play
• Short Bonds (IEF)

ETF Replay Purchases for December 30th, 2010

80% – EPU (Peru)
20% – KOL (Coal)

Strategies for the New Year

• Using ETF Replay’s ETF Rotation each month
  • 80% Emerging Countries, 20% Commodities
• Monthly Support and Resistance for Charts.
• Single Country (EWZ or ILF) Based on Support and Resistance Charts Monthly!
• Review Charts end of Month

Keeping an eye on TYP

If TYP falls below 33.53, sell, it seems to have a base around that area. Breaking support around that area doesn’t forcast well for that stock.

Purchase for 09/27/2010

Buying Coal on Monday (09/27/2010) – justification ($USD broke down, $CRB broke above resistance over $280)

Buying V on Monday (09/27/2010) – Stochastics – oversold, macd changing up, weekly price @ support.

remember to put a stop loss of 5% after both securities have been purchased

Trend Following

• Trend Following is Crucial
• Cutting Losses is Part of Trend Following
• Always Know when you enter a position and when you should exit.

Personally, I am using the following:

1) Use the 20, 40 and 200 day EMA to identify the trend. If 20>40, go Long, if 20>40>200 (consider that as validation for a continued trend)

2) if 20<40 (Get out of the security, if 20<40<200, use that as validation for a continued trend in the opposite direction)

3) The 10 month SMA model should eventually confirm your stance ( Faber’s Model: If Price > 10 Month, go long, Switch to Treasuires, if Price <10 Month EMA

- K.

Rules for Shorting

One Rule I am learning about shorting is that shorting early is not a good thing. One thing I would do moving foward is:

1)Make sure, the market is weak (ie. major sectors are making lower highs and lower lows)

2)When shorting a stock, ensure, you are shorting a stock also making lower highs.

3)dont’ short based on your idea or a rumor or a speculation that a stock should go down. I made the mistake by shorting real estate too early which is ironically one of the best sectors in my watchlist.

/j

Commodities Swooning

Check out Long term weekly chart of any commodity stock/commodity driven country
ewa,ewc, ld, ewz, etc.

http://stockcharts.com/h-sc/ui?s=$CRB&p=W&yr=15&mn=0&dy=0&id=p92950519983