JWH

Hammy PT

2009-06-16T11:47:00.000-05:00

Been running hills the last few weeks, usually every day.

Yesterday got my p90x workout in. Today is going to be a swim day.

Hammy Trade: SDS

2009-06-16T11:38:00.000-05:00

6/16: Bought SDS at 55.37 to hedge against my longs. Last night i remember wishing I had bought some during the day, and was pissed I hadn't when SPX futures were so low.

The SPX is indecisive, and I don't feel like getting "dropped down an empty elevator shaft" as Fly would put it.

UT O-Course proposed location

2009-06-16T10:33:00.000-05:00

Hammy Trades: ABAT, CEP

2009-06-15T16:01:00.000-05:00

Got in ABAT on 6/10 at 4.10. Current chart (6/15): Pattern not yet broke out, or down. Hold.

Update 6/16: Still consolidating. Breakout box listed. Will either break out, or be sold soon.

Got in CEP on 6/11 at 4.24. Current Chart (6/15 close): Viable triangle breakout. Still holding. Price target around 5.00

Update 6/16: Still healthy, looking fine. Large price range ahead though. Not sure I like holding onto these, when the market is stalling out.

Hammy Trade: UNG

2009-06-15T11:46:00.000-05:00

Triangle breakout-- plain and simple. Also not a bad fundamental play. Talked about a lot on Fly's blog:

Bought at 15.65

Stories:

http://seekingalpha.com/article/143167-natural-gas-the-next-big-thing

UPDATE 6/15/09: Still holding:

Update 6/16: holding, good technicals and good fundies.

UNG Breakout?

2009-06-15T11:29:00.000-05:00

and the SPX:

Position Review

2009-06-15T10:47:00.000-05:00

Down day today. I'm down about a buck fifty. Here are my positions and their trading ranges:

ABAT:

GLW:

XTXI:

ACAS:

CEP:

Position Review - June 12, 2009

2009-06-12T13:30:00.000-05:00

Sold WTI - it broke down from its pattern after a fake-out breakout. Rather not "hope" with a stock, so sold this one down a few percent.

Sold COMS - a sloppy formation that morphed from a solid bear flag to a piece of crap. My money can do better elsewhere.

ABAT - Ascending triangle breakout, hasn't been stellar but also hasn't failed yet. Still holding its own.

CEP - Triangle breakout still performing within the box.

GLW - Good, still bouncing around its range box.

XTXI - My fave, still striving to reach that price target at the top of the box.

Position Review - June 10, 2009

2009-06-10T18:13:00.000-05:00

Still no mac, so still no graphics.

General condition: Banking coin like crazy this week. Up 6% the last 3 days alone.

ABAT: Stop buy bought at where it should have broken out, but it was a fake-out. Still in ascending triangle. Still good. Hold.

COMS: Bull flag pattern ascended upwards. Upwards consolidation not very good. Hold, but watch for it to break down below handle. Set stop for just below handle at 4.71.

GLW: Poised for breakout, sitting at the top of the channel. This could also backfire and dip back down into the channel for another oscillation. Should have waited to see breakout before buying. Hold, though with stop at bottom of channel at 13.29, a good 20% down. This is not the type of position I like to be in. Might sell tomorrow.

TRID: Sloppy. Should have sold at 2.03. My money could do better elsewhere. Sell.

XTXI: Still in breakout from triangle formation. Still holding the formation, but hasn't reached price target. Hold.

Sold: LDK reached price target. TEN reached price target.

Potential buys: LDK forming a tight bull flag. Stop buy set at 14.35.

Position review

2009-06-08T18:08:00.000-05:00

GLW - Hold. Tightening up its consolidation (hopefully). I'm prepared to hold this longer-term. Box forward goes down 10% to about 14.20, and up to about 16.05. A break above 16.05 is long-term goal.

LDK - Hold. Broke out of a 5 week triangle, and holds its pattern.

TEN - Hold. Still holding breakout pattern fine.

TRID - Sloppy consolidation, but is up big after-hours (6% or so.. not that big). Hold at least to 2.25 (supply)

XTXI - Performing well, but not perfectly. Still holding the breakout, so its a hold.

Potential buys: BIOS and COMS. Each are showing tight consolidation on flag formations.

Hammy Trade: LDK

2009-06-08T14:00:00.000-05:00

Bought @ 10.28. Month long triangle pattern break-out from 100 and 50 DMA. Could have caught this one lower, the actual breakout was at about 9.77, so this was about 5% above the breakout point.

No pictures today since my Mac died.

The only thing I need to be careful with, when buying later stage break-outs, is that they can correct down past my buy point while still holding their breakout pattern. Getting it earliest, and lowest, is key to staying sane while holding a breakout.

UPDATE 6/10: Sold at 13.49.

Hammy Trade: GLW

2009-06-04T22:35:00.000-05:00

Bot @ 15.63

This is more of a fundamental play. GLW has stellar fundamentals and prospects for business with small LCD screens.

Here's a chart, which looks like it could break out of a cup with handle. This wasn't a patiently timed out trade, so I may see some volatility before a breakout.

And here's my box of future movement. As long as the price remains in the box, I hold. If it breaks out, I'll buy more. If it breaks down, I'll sell for about a 12% loss:

Update 6/15/09: STill in the box, still holding. FLY just bought more:

Update 6/16: Still in the box:

Hammy Trade: TEN

2009-06-04T10:07:00.000-05:00

Bought @ 7.24

Update 6/4/09: I put a stop at 7.16, because I was leaving the desk. It stopped out. This was a stupid trade to begin with, since it never actually broke out. I will keep it on my radar, however, because it might be a good trade (tomorrow perhaps).

Hammy Trade: APL

2009-06-03T10:19:00.000-05:00

Bought APL @ 6.11 on 6/3/09:

BOX 6/4/09

update 6/4/09: sold at 7.50 for a 22% gain. This got outside the box, hit the target, and did its job well.

Hammy Trade: MIDD

2009-06-02T13:23:00.000-05:00

In at 48.1995

Update: This just didn't seem like it was going to do anything. I had little conviction for holding it, and let it go at 49.06

Hammy Trade: AXL

2009-06-02T12:57:00.000-05:00

in at 2.55

Update 6/3/09:

Out at 2.29. This was about 10% down. It didn't break formation, but this is more than I wish to wait for.. for now. I'll get back into this if it shows an actual breakout.

Hammy Trade: XTXI

2009-06-02T12:47:00.000-05:00

In at 3.85.

Bull flag breakout. Nice pattern, though it got a little close to the apex for my tastes.

Update 6/4/09: Decent pattern so far, not perfect,but not failed.

UPDATE 6/15: Still holding:

Update 6/16: Not sure if I wanna keep holding these breakouts when the market is stalling. Still holding until SPX breaks down:

Hammy Trade: BEE

2009-06-02T12:35:00.000-05:00

bought at 1.32. I'm in a bit late, and will be getting out later today.

Triangle Breakout:

UPDATE: 6/4/09 Sold at 1.44. There was support at 1.43, but thick selling in this area. Got out with around 9 percent.

Chart Addict's Q & A

2009-06-01T11:48:00.000-05:00

Copied here for my future reference.

This will be the weekend educational post. I decided to openly answer some recently submitted questions. Apologize for any grammatical errors in advance.

—

1) “OpihiMan” wanted to know about my trading routine, post-trade analysis, record-keeping, my definition of trading success, if I pay attention to macro situations/news, the stylistic differences between day and swing trading, and whether I subscribed to any paid services.

a) Trading Routine - I create my watch list the night before. Then, I try to be ready 2 hrs before the market opens. I watch the futures market as well any gap ups or downs on any of the stocks on my watch. I plot them on “blank boxes” to see if they will fade or break higher. I also plot the approximate open of the market on the chart. I go through my scan one more time in case I missed anything (and I do miss things anyway).

b) Post-trade Analysis - I review the daily charts of my holdings and the market indices. I mark all holdings as either “hold” or “possible sell” for the next day. The ones with a “possible sell” are given higher priority the next morning.I also monitor the Asian and European markets and plot them on the daily as they progress.

c) Record-keeping - A simple spreadsheet for the trades. The blog is my trading journal.

d) Trading Success - My personal definition is measured on monthly percentage returns. My goal is 10%+ per month. If I don’t hit double-digits in any given month, then I know I did something wrong. March 2009 was the first month in 15 months where I made less than 10% and I did make quite a few mistakes.

e) Macro Situation/News - I do pay attention, but I don’t put much weight on them at all. I let the charts do the decision making. Sometimes, news can gap the markets beyond a consolidation range and form a breakaway, in which case it is technically significant.

f) Day/Swing Trading - same patterns, different time frames. Tolerance for risk and loss and the margin of safety is greater for swing trading than for day trading.

g) Subscriptions - I only have a monthly membership to Stockcharts.com, which I highly recommend for candlestick chartists.

—

2) “Kush” wanted to know how trading the opposite of the media (CNBC, Cramer) makes you money, finding a trader that’s a contrary indicator, best time to buy, and FAS/FAZ range trading.

a) Trading Opposite of Media - I use CNBC only for breaking news, economic data results, etc. I do not watch Cramer’s show and ultimately, you shouldn’t blindly trade a stock because someone mentioned it. You have to do your own homework. Sometimes the media is right, sometimes they’re wrong. You should trust in your decisions based on fundamental and/or technical facts.

b) Contrary Indicator - Josh. He bet against me for 7 weeks, and look what happened to him.

c) Best Time to Buy - For anything, the best time to buy is when a high-probability setup emerges. Doesn’t matter when. Same goes for short setups. High-probability setups ensure that the odds are in your favor in most cases.

d) FAS/FAZ Trading Range - First of all, when and if I trade FAS/FAZ, I use the SPY. It may not be as accurate, but it will help when the market gets to become too volatile and it can help you control your emotions. I personally do not recommend day trading within a tight range, such as the triangle we’ve been seeing for the entire month of May. The range is about to close, and the market will make a major imminent move.

—

3) “GonzoTrader” wanted to know what intra-day scans I am running, the most reliable chart setup, pre-market homework, setting stops and limits on buy orders, finding stocks with the most market orders pre-market, and what sectors are in play for next week.

a) Intra-day Scans - I hardly run intra-day scans. I get my slaves to do that. Since I am a swing trader, I can get away with scanning after the market closes each day. My scan right now is all stocks between $1-3 with volume above 100K. Prior to the dollar stock circus, my “normal” scan was stocks above $5 with volume above 500K.

b) Most Reliable Setup - This one goes to the High-and-Tight Bull Flag. I drew it out below:

c) Pre-market Homework - refer to (1a).

d) Setting Limit and Stop Buys - In cases where I believe that a multiple number of stocks will breakout at or near the same time, I will set limit orders immediately above their breakout resistance levels. The vast majority of time, I use market orders and manually make entry.

e) Finding Stocks with most Pre-market Interest - You can use http://money.cnn.com/data/premarket/nyse (also contains NASDAQ stocks). You can also go to http://www.allstocks.com/markets/premarketactive.html or http://dynamic.nasdaq.com/dynamic/premarketma.stm.

f) Next Week’s Sectors in Play - TBD, but I am long biotech/pharma, oil/gas, and commodities.

—

4) “Cuervos Laugh” wanted to ask how I managed my information flow.

a) I actually do not read blogs on my blogroll unless something is brought up to my attention. As for the links on the sidebar, I primarily look at pre-market action and analyst upgrades/downgrades. The link library is for the readers, not me.

—

5) “P” wanted to know about using different time frames.

a) Using Different timeframes - Intra-day, daily, weekly, and monthly time frames should all support each other. Which time frames should you use? It all depends on your holding period. I use intra-day and daily charts since I am a swing trader. If you are a buy-and-hold investor, you should use the daily and weekly charts more frequently. Intra-day and one-day breakouts or breakdowns are your earliest signals for entry or exit.

When you mentioned the SPY, the weekly pattern is not a bear flag, it is a bull flag as noted below:

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6) “Juice” wanted to know how I spot s FEED, CAR, DDRX in it’s early stages and how I can tell if it’s going to go to sub-$1 to $5+, and if ATSG can get over $5.

a) Finding Next Multi-bagger - This is a difficult question because no one knows for certain whether a stock will go from sub-$1 to $5+. The only thing that I can tell you is to keep true to the technical pattern of the chart. If the chart remains intact, then hold the stock. It also depends on your time frame. In these cases, you’ll most likely have to be a positions trader, holding positions for several weeks or longer. The important thing is to catch the first high-probability setup for the stock and ride it until one of the wheels fall off.

b) ATSG - I would be mindful of the May 2008 breakaway gap down as it will create some resistance. Like I mentioned above, ride the trend until it trends no more. See chart below:

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7) “Kel” wanted to know about target setting.

a) Targets - Usually, my targets are located at major moving averages and support resistance areas. I do not use MA crossovers, because they are lagging. Instead, I first determine which MA a stock is following (e.g. 15-day, 20,day, 50-day, etc.). When the stock reaches striking distance, it is automatically placed on my watch list. An intra-day setup and/or breakout will confirm the entry. As for exits, I usually sell at least a partial position at the first major resistance area (by major, I mean the 50,day, 100-day, MA’s or 200-day or any large previous breakaway gap downs). It all depends on the individual stock.

—

8 ) “Susannah” wanted to know about setting stops and exiting positions.

a) Stops - I rarely use them. The last time I used stops was when I was on vacation in Mexico. I use flexible and mental stops and the shorter-term MA’s, such as 15 or 20-day MA’s, dictate my decisions. If a stock closes below a short-term support area, I would most likely exit the position. If I am wrong, I can always re-enter the stock.

—

9) “Yogi & Boo Boo” wanted to know how I keep myself from blowing up.

a) Anti-Blowup - Keep most of your positions small. With the exception of CTIC, all of my positions are between 5-10% per position. This way, ff a stock drops -20%, you don’t freak out (you shouldn’t). In addition, make sure your stocks have the best setups, thus ensuring a higher success rate. Sometimes I recommend stashing away your gains to protect them during times of extreme uncertainty.

—

10) “Lindsay” wanted to know if I watched any bellweather stocks during the day, hedging long/short positions, the US Dollar, China, hyperinflation, and ETF use.

a) Bellweather Stocks - I do not, but that doesn’t mean people shouldn’t. I keep things very simple, so basically I simply keep an eye on the SPY, my existing positions, and my watch list stocks.

b) Hedging - Hedging is highly recommended during times of consolidation to avoid whipsaw and during times of uncertainty of market direction. Once it becomes apparent that one side has the greater odds of winning, release the hedges.

c) I do not particularly pay attention to the US Dollar, China, or hyperinflation for my trading. I refer to the other bloggers to answer these questions for you (feel free to chime in).

d) Using ETFs - The positives are less vs. individual stocks, diversification. The big negative associated with ETFs (I’ll refer to the 2x & 3x ETFs) is time decay. Over time, price will decay as a result of the daily compounding of the NAV. This is especially true for the 3x ETFs (e.g. FAS, FAZ).

—

11) “Fortune8” wanted to know about trading options the “right way”.

a) Options - Not an expert. Comments are open for expert options traders who use them frequently since I do not use them often enough.

—

12) “All About Health” asked what my process is for deciding to switch from long to short and vice versa during the day, as well as selecting the right industries/sectors to trade.

a) Switching Sides - Under extreme circumstances, I find myself having to entirely switch sides. This occurred at the March bottom when I was briefly caught short, a mistake that contributed to my worst month in 2009 (+2%). I am not a primary day trader, but the same patterns that apply for swing trading also apply to day trading. Use chart patterns, intra-day moving averages and trailing stops to guide you from one direction to another. It’s all the same thing, just a different time frame.

b) Choosing the Best Industries/Sectors - First, I look at the SPRD sector ETFs for any clues (XLV, XLB, XLK, XLI, XLY, XLP, XLF, XLE, XLU). I then look closer into sub-sectors (e.g. for Health Care, I’d look into biotech, drug manufacturers, healthcare providers, etc.). Then I’d look into individual names. This is a variation of the top-down approach.

—

13) “Nashville Cat” wanted to know about gap strategies at the open.

a) Morning Gaps - When a stock gaps within a range/consolidation/S&R, then it is not very meaningful to me and the gap has a higher chance of fading. However, when a stock gaps outside of the above, it has a higher chance of following through. This is not true for exhaustion gaps (which fade anyway), but they are true for breakaway gaps and continuation gaps.

—

14) “Relaxsome” wanted to know if I used oscillators.

a) Oscillators - I don’t use them. They are unnecessary. Focus on the basics.

Video Summary: The Limits of Power (2 of 3)

2009-05-25T14:31:00.000-05:00

Bacevich The Limits of Power 2 of 3

Market Outlook and Today's Action

2009-05-21T18:41:00.000-05:00

Stopped out of SIGM today w/ a 3 percent trailing stop, and held onto OPXS for a little bit of a loss. The market went lower, and possibly broke down through its most recent up-trend. Once it breaks down through a key level at 885, we'll have confirmation of a better chance of a downturn:

SIGM stopped out, and then jumped back up. It's down 2.5% in after hours:

OXPS is about to get killed. It has not confirmed itself as a good breakout. I'm up, and don't have much more tolerance for downside (especially in this market right now):

In summary, the Market looks like its about to fall over. These stocks probably won't do well if that happens. I'm just holding one small, profitable position, and will probably be getting out of it soon. No need to trade until the market shows its true colors.

Daily Stock Checkup

2009-05-20T17:49:00.000-05:00

The S&P 500 is still in an upward channel. It's important to note, that there has not been a secondary down-trend for some time. I predict the S&P re-touches the recent previous high around 935, and then has a correction. 200 DMA is close overhead as well. We don't have much, if any, time:

OXPS - Hit strong supply after a strong move up today, and gave up most of the gains. This is OK, but unacceptable if it goes below the lower range of its flag:

SIGM has met supply as well, but isn't acting out of the ordinary for a triangle breakout:

The Limits of Power: Video

2009-05-20T11:04:00.000-05:00

The Limits of Power (1 of 3)

Hammy Trade: OPLK

2009-05-19T11:54:00.000-05:00

In at 11.42 on the bull flag. Check image for technical pattern info:

Another 2.8 move will put us at 14.22. If we look at it percentage wise, a 32% move up would put us at 15.04. Chart resistance is at levels shown:

UPDATE 5/19: Sold out of this because it was never really a "breakout". It certainly is a potential future breakout, but I'd rather wait for confirmation before holding it for another full swing down then up.

Hamy Trade: THQI

2009-05-19T09:01:00.000-05:00

Awesome bull flag setup. 3% above buy point, confirming strength with price and volume:

"Mets - Look at RC's PPT blog post with a target. Also, refer to the rule of thumb about flag patterns: "the explosion in price then practically duplicates the original price movement of the “mast” formation." RC puts a target around 6.75, and the rule of thumb would duplicate the move from 3.86 to 5.19, a $1.33 move, to a breakout target of 6.58 "

Here's why i'm going to sell THQI at 6.45:

UPDATE 5/19: SOLD at 6.16. I think this has some room to run, but I don't have a real idea of what to expect for the overall market. I got cold feet and decided to walk away with 8.5%

Hammy Trade: SIGM

2009-05-18T16:39:00.000-05:00

SIGM showed its volume in a run-up by the end of the day. It showed a solid triangle break-out formation, with volume confirmation.

UPDATE 5/21: Got in at 14.54, out at 15.56.

Why I sold: the market is getting a little dicey. I wasn't going to be watching the screen for a while, and decided to put a 3% stop on the stock as an insurance policy. later today i might get back, check it out, and reevaluate.

Possible trade set-ups

2009-05-18T12:18:00.000-05:00

Some Triangles, and some bull flags. My goal this week is to make one disciplined, well thought out trade.

These are some prospects:

FLAGS:

"Usually forms after a rapid and fairly extensive advance which produces a nearly verticle, or at least quite steep price track on the charts. On such moves, volume normally shows a progressive increase until it reaches a high rate. Eventually profit-taking halts the markup. Then follows a series of minor fluctuations, sloping down somewhat, with volume shrinking markedly. and constantly as the pattern develops. The pattern might go on for five days, or three weeks. The explosion in price then practically duplicates the original price movement of the "mast" formation."

Wait until the example is clear - a nearly vertical, almost unbelievable rise, followed by several days of congestion with practically no volume.

Triangles:

Letter between me and one of my plebes

2009-05-17T04:01:00.000-05:00

Sir...Hope everything is going well for you and that you're having fun in the Marines. I can't believe you have been in for a year.

I just wanted to let you know that I'm going to be

bringing the SPEED and INTENSITY come next year because I'm 1st semester Training Sergeant. It's going to be quite strange being a 2/C and if you have any tips about training and what to keep in mind/how it compares to the"real" miliary, I would be very appreciative.

Thanks and talk to you later.

Wells Hamilton

Today at 3:59am

Dear Elle,

Thanks for checking in! Everything has been going very well. I'm almost a year out of the Naval Academy and I'm still waiting around to start flight school. TBS was excellent training, and I'm excited to begin flying whenever they have a spot for me (mid-august is the estimate right now).

WIll you be in Texas anytime soon? I'm on PTAD at UT in Austin, probably until the end of June or so. Perhaps even longer, if they need me.

The "Speed & Intensity" was direction taken from MCDP-1, a Marine Corps publication called "Warfighting". I found it in Nimitz Hall when I was training you guys and decided it had some good stuff to teach during the "grey" time of plebe summer. I later learned that it is foundational to modern Marine Corps tactics, which is referred to as "maneuver warfare."

I also remember reading "Message to Garcia" by Elbert Hubbard to you plebes during the summer time. That was a lesson we were supposed to teach you. In case they forget that this summer, I'd recommend that book for some training. Also, remember myself and Rob Epstein reading you passages from "Starship Troopers"? A few of you guys fell asleep those days. The author, Robert Heinlen, was a Naval Academy grad before WW I and wrote many books. Check that out and take some lessons to pass on to your plebes.

Looking back, I feel as though my experience as a second class was a lesson of trial and error. As a youngster going into my second-class year, I was critical of the leniency of the class of '07 and '06 toward my plebes ('09) and I decided that I'd certainly give my plebes some of the hard time I found beneficial from my firsties, the class of '05.

Choosing to be "hard" on plebes can be a great thing under certain conditions, but destructive under a few misconceptions. The misconception is that being a hard trainer is, in itself, good for their development as officers. The benefit of hard training comes from the confidence they'll gain and the camaraderie which they'll grow into through training.

I considered "easy" second class as simply lazy. Since they didn't rate hard, or ask many questions, I figured they didn't care. This mindset was true to an extent, but became a source of arrogance on my part as a second class. I certainly cared about my plebes and challenged them to become better midshipmen, but my pride and ignorance took me to rate and punish them beyond their benefit. I'm sure you could ask anyone of your soon-to-be Firsties if this was so and they'll agree with me.

Compared to the upperclass who do nothing, the fact is, it's easy to swing to the opposite, and equally irrational side of the spectrum, into being too demanding and challenging. Both sides are equally reprehensible. In the middle ground is the leader who loves his or her plebes and puts in the effort to help them become better people.

First of all, I was "mean". This doesn't equate to irrational abusiveness to plebes, but merely being an asshole. The only real benefit that kind of "leadership" gives is to teach people to learn to deal with asshole leaders. I really doubt that even the sensitive, weak-hearted people who join the military really benefit from experience with assholes. Rather, it is unrelenting insistence on meeting standards, a quality found in few leaders, that actually creates results in their people. You can be encouraging while being unrelenting. Consider your plebes as babies who haven't learned how to walk yet, or have just begun to take a few steps. Would a loving mother berate or abandon her baby for stumbling after trying a few steps? Each of your plebes will have a goal and reason for being at the Naval Academy. Appeal to that goal in them as you show them the correct way to do things. As they're falling short of the standard, make sure they know and acknowledge they're wrong as you correct them. If they don't have a higher purpose and standard they're trying to obtain, they've been failed by their leadership, or they are mistakenly in the wrong place. The latter is a very small minority.

Think about the few things that stand out about the leaders you've had and respected over your *lifetime*, not just at the Naval Academy. You're training plebes to be leaders, not just good, idealistic midshipmen. They need to be taught real skills for leading people. They need to be taught that life will give them NOTHING that they have not earned, even if they've made it to the sparkling Naval Academy (which, by the way, gives literally NO ADDITIONAL BENEFIT WHATSOEVER towards being a good Marine Officer). It is THEIR responsibility, not the Naval Academy's, to develop themselves into leaders and officers.

You're going to have to get up early and miss time with friends because you'll be at blue & gold. Don't let them ever see you look tired or worn out. Let them see a smile on your face when you can, and a look of concern otherwise. Your disappointment will be their greatest fear, because their ultimate goal will be to live up to the standard you set for them. Set it high enough to challenge and transform them, but realistic enough that they can reach it.

Last of all, you have to know yourself. Don't try to fool anyone. Be the leader God made you to be, and strive for THAT fullest potential.

Semper Fidelis

Wells

Non-linear Reading Experiment: 1st Book Finished

2009-05-14T17:03:00.000-05:00

The notes took much longer than I thought they would. It got easier toward the end to take notes, since my PTML was much better as time went on. I think this is definitely a skill to work on, and something that will get better and easier with time.

Definitely learned a ton from this book, and I have a much better memory of the main details from reading it in this method.

Next on my list is "What's so great about America." That should be a little lighter and easier to read.

The Limits of Power - Full Notes

2009-05-14T17:00:00.000-05:00

Notes, Quotes, and Synopsis of Andrew Bacevich’s

The Limits of Power

by J. Wells Hamilton

One sentence summary:

Background information:Bacevich is a retired army Colonel and a current instructor at Boston University. This book is a part of “The American Empire Project”, an effort by authors such as Noam Chomsky to expose the de-facto empire instated around the world by the United States. Bacevich has published books and articles for at least the last ten years on foreign policy and diplomacy.

Notes & Framework:

Economic & Cultural Crisis

The “pursuit of happiness” has become for Americans a personal quest to acquire, consume, to indulge, and to shed whatever constraints might interfere with those endeavors. Efforts to satisfy this consumer demand on a national level have driven the U.S. to a condition of profound dependency. Ultimately, this self-gratification threatens the wellbeing of the United States. (16)

o American success has depended on expansion and abundance since its inception.

o From expansion came abundance. From abundance comes substantive freedom. (22)

§ “Not the Constitution, but free land and an abundance of natural resources open to a fit people” makes American democracy possible. (23)

o The “tradition of freedom” is a farce. Once the US faced a limit on its resources (land, natural resources) did it begin to exert itself in order to “liberate” others. (19)

o The additional freedom created in the 1960s is a result of our emergence from WW2 as the most powerful and rich nation on Earth. More power abroad meant greater abundance at home, which paved the way for greater freedom—gay rights, racial equality, etc.

o Economic success once enhanced and supported military success. Now, it is our military that is being used to keep our economy on life support.

o The shift occurred after the Vietnam War. The costs of the war destabilized the economy. (29)

§ We can see evidence of this in resulting devaluation of the dollar and suspension of its convertibility to gold. (29)

§ This is also evident in increased reliance on imports – goods and resources. Also, the ’73 Oil Shock. (30)

o Americans were faced with a fateful choice: live within their means or start using military force to perpetuate expansion and in turn, abundance. They chose the latter. Addressing the nation, Carter proposed Americans to conserve, and to get off foreign oil. (35) Carter’s message failed, and Reagan took his place.

o Reagan gave moral sanction to the empire of consumption.

§ Drove for more power, more prosperity. “Don’t cut back, fight back”. “We must decide that ‘less’ is not enough.”(37) The Middle East suddenly starts becoming an important region for U.S. economic wellbeing.

§ Government grew under Reagan by 5 percent. Reagan demanded an invulnerable US, and established the mind-set that military power can assure the essential American lifestyle of gaudy excess.

§ The US ceased to be a creditor nation. Federal and individual citizen’s budgets slid into debt.

o The Persian Gulf- The spend-without-limit peacefully ended the cold war, but was also the reason the US got embroiled in the Persian Gulf. Reagan put in efforts to secure US domination over the gulf in order to prevent recurrence of the oil shocks of ’73 and ’79. (49)

§ Military presence is in the Persian Gulf to maintain the flow of oil, mitigating the implications of American energy dependence.

§ Operation Desert Storm was a derivative of Reagan’s policy, and really only led to new complications. One is a permanent, problematic US military presence.

· Few Americans stood up against the military presence, the bombing, and the sanctions.

· Rumsfeld echoes Reagan: “We have two choices. Either we change the way we live, or we must change the way they live. We choose the latter.”

· Bush added a twisted moral base to it our presence there. We were now “fighting evil.”

§ American lifestyle didn’t change during the wars.

· Personal savings rate continued to plummet.

· “Americans subscribed to a limited-liability version of patriotism, one that emphasized the display of bumper stickers in preference to shouldering a rucksack.” (63)

o Conclusion: Iraq came apart at the seams due to a generation of profligacy that had produced strategic insolvency.

o U.S. was running out of soldiers and funds.

o Americans have been complicit so long about the use of their country that they’ve lost command of its destiny. (65)

o The reciprocal relationship between expansionism, abundance, and freedom—each reinforcing the other—no longer exists.

o Rather than confront this reality, Americans since the early 80s have attempted to wish reality away.

Political Crisis:

False ideas on security and freedom lead to a swelling bureaucracy, and confidence misplaced with untrustworthy “wise men”. These problems have led to the Iraq and Afghan wars.

o Successive “emergencies” have swelled federal power and responsibility beyond the scope ever intended by the framers, and beyond usefulness to the nation.

o The Tradition of Freedom is a Myth -“Spreading Freedom” is an ideology that mainly serves to legitimize the exercise of executive power.

§ It in inconsistent- US does nothing in many enslaved countries. “Nothing in this ideology mandates action in support of the ideals it celebrates.” (77)

§ Conviction follows self-interest. This ideology has become hard-wired into the American psyche. It persists not because of its truth, but because it serves the interests of those who created the national security state. (81)

§ This has been used to excuse large military build-ups, government action, and foreign policy.

o The U.S. is plagued with a secret, bloated, and ineffective national security apparatus.

o “Secret” not because its really a matter of national security, but more to hide institutional incompetence and poor performance. The cloak of secrecy helps top brass evade all responsibility. The private on the ground who loses a rifle is punished more than a general who loses a war.

o Institutions are ineffective because of ineptitude and/or disagreement with the president. Example: CIA in the Bay of Pigs – hapless schemes were promoted by the CIA. Joint Chiefs of Staff didn’t offer much help, convincing Kennedy that they were either stupid or untrustworthy. (91)

o Higher-ups are not rewarded for candid thought but for political pandering. Second-guessing superiors is not allowed.

o Tommy Franks to Bush: “Sir, I think exactly what my secretary thinks, what he’s ever thought, whatever he will ever think, or whatever he thought he might think.” (99)

o Tommy Franks acted as the Bush Administration’s compliant enabler, allowing to country to proceed with impaling itself on Iraq.

o George Tenet of the CIA told the president exactly what he wanted to hear.

o Conclusion: we ought to consider dismantling an apparatus that demonstrably serves no useful purpose.

o Wise Men– The president has come to rely upon a small circle of advisors rather than on a leaky, obstreperous bureaucracy. These men have been seduced by the idea that military and economic power will bring security.

o Why wise men at all?– Presidents believe wise men are more likely to make good decisions. Shielded from the public, wise men can be relied upon for their candor instead of political, masses-influenced advice.

o Why wise men aren’t a good thing

§ Example: Forrestal - constantly urged prompt action to forestall disaster. He succumbed to the “garrison” mentality, that military power is the optimum method of resolving international issues.

§ Paul Nitze – Facing Soviet atom bomb and Chinese communists, he faced three options: isolationism, preventative war, or “a more rapid build-up”. The third was chosen, and thus a permanent militarizationof US policy and economy was in effect.

§ Paul Wolfowitz – His phrase: “The risks of inaction outweigh the risks of action.” This man’s action led to the gulf war, and the “anticipatory self-defense” IE preventative war.

o Conclusion– The security of power tempted Forrestal, Nitze, and Wolfowitz. In turn, it enshrined preventative war as core US policy after 9/11. The Iraq war is the result of all their work, along with the ideology of national security. Iraq teaches us the following lessons:

o The ideology of national security poses an insurmountable obstacle to sound policy.

o Americans can’t afford a government that doesn’t work.

o Wise men have repeatedly misconstrued and exaggerated threats, with perverse effects. (123)

The Military Crisis:

America’s military has come up short in both Afghanistan and Iraq. They failed to eliminate the leadership of Al Qaeda and the Taliban movement, and did not provide the quick war expected in Iraq. Why didn’t things go as expected? We believed three false illusions about the US military. We’ve derived the wrong lessons from Iraq.

· False Illusions. Estimates of U.S. military capabilities have been wildly overstated. The global war on terror illustrates this point.

1) The illusion that the U.S. had succeeded in reinventing armed conflict through technology that allows precise, surgical application of extreme force. This illusion led the U.S. to believe it could take the easy way out of targeting a regime, instead of a nation, with full spectrum dominance. Reality: The last twenty years shows that US forces only win decisively if the enemy fights on American terms.

2) The illusion that civilian and military leaders had a common set of principles for application of said dominant force. Namely, we’d fight only when vital interests are at stake and there are clear, attainable objectives. Reality: The restraint learned in Vietnam did not survive the 90s.

3) The illusion that Americans could be counted on to “support our troops.” Reality: 9/11 reaffirmed the popular preference for hiring someone else’s kid to chase terrorists.

4) Conclusion: The gap between what Bush called America’s soldiers to do and what they actually could do defines the military crisis experienced today.

· The lessons currently drawn from America’s post-9/11 experience are the wrong ones. They seek to reconfigure the armed forces to fight “small wars”, to give more power to the generals, and to reconnect soldiering to citizenship:

o Small Wars

§ First wrong “lesson”: Sustained presence will now be the norm. Frequent, protracted, and perpetual presence is reality now. Hard Power and soft power will merge. The officer corps now sees more Iraqs and Afghanistan in the future. Pursuit of global dominance needs both advanced weaponry AND boots on the ground.The facts are:

§ Small Wars always have an imperial context.

§ It is a fallacy that the present foretells the future. This is true from Vietnam, Desert Storm, and probably for GWOT.

§ Solution: Why not pursue more realistic and affordable objectives, abandoning plans to “liberate” the Islamic world, and then configure US forces accordingly? We need to devise a non-imperial foreign policy.

o Giving Power back to the Generals. Second wrong “lesson” is: that civilian meddling back in Washington is the problem, not military performance. We need to tilt balance back to the generals and untie the hands of senior commanders. The facts are:

§ Franks’ American Soldier makes it quite clear that General Franks was in complete control of US involvement in Iraq and Afghanistan, from start to finish.

§ Civilian meddling wasn’t a problem because Franks wouldn’t allow civilians to meddle. Unless American Soldier is a lie, the Wise Men like Rumsfeld aren’t to blame.

§ The quality of American generalship since the end of the cold war has seldom risen above mediocre. It has been consistently disappointing. Civilian meddling, however objectionable, cannot fully explain the disappointing results achieved by U.S. forces since the cold war ended.

· Desert Storm – Schwarzkopf left the Repulican Guard standing and the cease-fire he made assured Saddam’s continued power. (148)

· Somalia – Commanders ignored basic principles of security, and the requirement for unity of command. (148)

· Operation Allied Force – Wesley Clark made idle threats, and Milosevik called his bluffs. His concept of “using fores, not force” didn’t work. (149)

o Why The Draft is a bad, unrealistic Idea. Third wrong “lesson” is: There is a poor relationship between army and society in America. People are removed from the conduct of war. People have little say in its use. Reliance on professional soldiers eviscerates the concept of civic duty. We ought to reinstate the draft, to get people out of the mall and into the streets. It would restore the governmental system of checks and balances. The facts are:

§ A large draftee army is unaffordable. To train, equip, and sustain a military twice as large would cost much more money. (153)

§ The military doesn’t want draftees. Generals and admirals view citizen-soldiers as more trouble than they’re worth. (153)

§ Being against the draft is the easiest stance to take politically. (154)

§ Parents, realistically, will not support this. They are not going to put their kids in danger to support some political ideal. (154)

§ The law would be unenforceable.

§ To anyone with a conscience, sending soldiers back to Iraq or Afghanistan for multiple tours while the rest of the country chills out can hardly seem an acceptable arrangement. It is unfair, unjust, and morally corrosive.(155)

· The Right Lessons from the wars. What is the point of using this superb army of ours if the result is Iraq and Afghanistan? Why has post-cold-war military supremacy not enhanced security, but produced the prospect of open-ended conflict?

1) The Nature of War is fixed: Any notion that innovative techniques and new technologies will subject war to definitive human direction is simply whimsical.

§ The IED and homemade bombs proves that no matter what your amount of technology, war’s nature is fixed as ugly and grindingly tough.

§ The pentagon had believed that technologically enhanced speed yielding both operational and political certainty was a formula for ultimate success. The IED ruined this view.

§ The IED had strategic as well as tactical implications. The US could not attend to other looming threats while tied down to IED-equipped insurgents.

2) The Utility of Force Remains finite:

§ Whether the US has been attempting to liberate or dominate, events in Iraq and Afghanistan suggest that the effort is not working. (161)

§ After four years, Iraqi electrical generation still met barely half of the nation’s requirements. Oil production still has not returned to pre-invasion levels. Fraud, waste, etc are rapant.

§ Afghan drug trade is appalling. (162)

§ Conclusion: As a problem solver, war leaves much to be desired. (162)

3) The Folly of Preventative War

§ Bush thought that 9/11 discredited the cold war concepts of containment and deterrence. The result, preventative war, failed both normatively and pragmatically.

§ So long as war has not broken out, we still have the possibility of avoiding it.

§ A military operation expected to demonstrate the efficacy of preventative war accomplished just the reverse. WMDs proved to be non-existent.

§ Conclusion: Preemptive war is irrational. The country should conform to the Just War tradition.

4) Military officers confuse Strategy with Operations

§ Tommy Franks’ template for victory did not even remotely approximate a strategy. It paid no attention to the aftermath. It had no moral dimension.

§ This naivete leads generals and civilians to assume that quick battlefied victories will make everything else fall into place.

· Conclusion on the Military Crisis: Events have exposed as illusory American pretensions to having mastered war.

o Even more money, technology, or smart leadership will not change the fact that war is out of our control.

o US military performance has been unimpressive.

o America doesn’t need a bigger army. It needs a smaller and more modest foreign policy, that assigns soldiers missions that are consistent with their capabilities.

Conclusion: We must acknowledge the limits of American power. We must accept our limits and work within them.

United States will cease to lead the west if it abuses the privileges of leadership.

An open-ended global war is not a strategy. We should instead pursue a strategy of containment. The goal of containment could be to prevent the sponsors of radical Islam from extending their influence.

We must allow the inadequacies of Islamic extremism to manifest itself.

Reduce dependency on fossil fuels.

Abolishing nuclear weapons should be an urgent national security policy.

- They are unusable.
- They do not play a legitimate role in international politics.

People for whom freedom has become synonymous with consumption and self-actualization will have to sacrifice.

End Synopsis

Key Terms & Concepts

· Ideology of national security

· Niebuhr

· National Security & state, and the apparatus thereof

o The "system"

o Unweildy

o build-up of institutions

President choice of who to rely upon

Civil-military mistrust

Members of the national security elite

o Presidential reliance upon them

Soviet union

o Containment

o Nuclear weapons

Nitze doctrine

NSC 68

Wise Men

Paul Wolfowitz

Forrestal

The Bush doctrine

Weinberger-Powell doctrine

“Doctrine of the Big Enchillada”

Volunteer military and draft

Small wars

Douglas Feith

Office of Special Planning

Degrading quality of generalship after the cold war.

Great illusions

Donald Rumsfeld

Tommy Franks

Nature of War

IEDs

Afghanistan

Preemptive war

Tommy Franks’ American Soldier

Performance & size of the military

Freedom, abundance, and dependence.

Hammy Trade: FSIN

2009-05-12T19:22:00.000-05:00

Need to research this position a little more.

UPDATE: out at 7.07

I put down an arbitrary stop before leaving the house, and behold- it stopped out at a low open then jumped back up.

I would like to get back into this stock, as it's set to run up, but I'm tired of chasing stocks right now. It feels like I'm chasing my own tail.

No.. some money is going to sit on the sidelines for now. I'm going to cool the jets for the time being.

Update: FSIN about a week later:

The lesson learned on triangle breakouts is to allow them to move back down to their previous uptrend. Don't get jerked around by volatility. If need be, scale back a little bit.

Hammy Trade: PLLL

2009-05-12T12:04:00.000-05:00

Bought PLLL at 2.21. It's currently at 2.08, down 6%:

It's not a horrible pattern, but also just not a great one. It's just about failed, and I'll probably sell soon for a 8% loss.

Update: Out at 2.05 due to stopping out.

Update 5/18:

I don't really think this was ever a "triangle pattern." Also, notice the price action around the 100 DMA

Hammy Trade: ELN

2009-05-12T12:03:00.000-05:00

ELN: in at 7.31

Insert pictures here.

Sloppy chart work driven by impatience. This is pretty disappointing.

Update: OUT at 6.67. The stock got stopped out, but the pattern is broken, anyway:

Hammy Trade: NFP

2009-05-12T12:02:00.000-05:00

NFP had a nice triangle, breakout, and bull flag. Trying to anticipate the break-out, I chomped on the bait:

Dumbass moves:

1) Didn't wait for an actual breakout.

2) Didn't put in a stop.

Now, had I actually done a little bit of journalling and planning with this stock, I might have realized that I should have put a safety net in place. My impatience and greed got the best of me, and I'm out big time on this stock. I got in @ 9.13, and out at 6.95 for about -35%.

Alpha Quote

2009-05-09T10:39:00.000-05:00

"It may be stating the obvious, but it doesn’t pay to be a super smart bear in a dumb, stupid garbagio stock rally."

Hammy Trade: ABK

2009-05-08T12:57:00.000-05:00

This is another penny-stock breakout, pointed out by Chart Addict.

Again, I would classify this as a "price breakout", one that busts up through prior highs after some consolidation. This also might be considered a bull flag, based on the recent run-up. I expect it to repeat the last move.

I will sell for a loss at 3% below the breakout point (breakout-1.56, -3% - 1.513)

I will sell for a gain at 1.70. I would like to be out, regardless, at the end of the day.

UPDATE: sold at 1.54 at the end of day. This is classified as a "dumbass" trade.

Hammy Trade: SPRD

2009-05-08T12:52:00.000-05:00

Bought SPRD at 1.919...

This is a little bit extended from the breakout point around 1.80, but still not a bad intra-day trade. This is a pure breakout play on a penny stock, and I don't intend to hold it too long:

My assumption is that we're seeing another typical penny stock breakout. This will be proven wrong if the stock goes down below the break-out price.

I will sell for a loss at that point. I will sell for profit at a 7% gain.

UPDATE:

Sold at 1.93 at end of day. This was a pretty stupid trade, now that I think about it.

Second Trip to Texas

2009-05-07T15:24:00.000-05:00

Vodcast Entry:

http://www.youtube.com/watch?v=qcOm2IuNZ0I

Hammy Trade: SDS

2009-05-07T11:18:00.000-05:00

bought at 58.09 on 5/7/09

This is dangerous, I know. However, it's a small position and I'm using it as a slight hedge for the time being. I'm just really not sure what's happening in the market right now, but believe we'll see a little bit of a correction:

This is a leveraged Moving Average buy. The index moved down through the 20 and 50 (10 minute) moving averages. I'm holding this as a hedge in case the market makes a major move down, and my other two positions break down. I haven't made money on this type of trade in the past, and I don't think I'm doing much differently, so it's probably a stupid trade. I'll get back to this later.

Update: sold at 59.37 on 5/7/09

Why I sold: It hit the day high. SPY hit a low. I didn't want to hold SDS for more than intraday, and I had no conviction that we'd see move either way. Since I held a profit, I decided to get out. Minor success (1.85%) on a small move, but not bad for an intraday play.

Why NXG still looks good

2009-05-07T09:56:00.000-05:00

update here

Blogging money made

2009-05-05T22:00:00.000-05:00

I made $10 in april from blogging revenue on ibankcoin.com

WNR Ascending Triangle

2009-05-05T19:44:00.000-05:00

WNR still looking good

2009-05-05T13:08:00.000-05:00

If the market bursts up again after some consolidation, this might just break out:

Intraday Chart Comments

2009-05-05T11:06:00.000-05:00

Some comments on intra-day activity.

Notable: The flat-bottom action in CPE and DELL. The flat period signifies either complete inaction in equilibrium, or continuous selling met with a large limit buy order. Which one will win? It looks like in DELL, the buyers won, exhausting supply (though on light volume). In CPE, however, the results are yet to be seen. Hopefully it takes the DELL route.

Hammy Trade: CPE

2009-05-04T10:05:00.000-05:00

Bought 475 CPE at 2.00.

The limit order was for 750, but it only executed for 475. The rest might come in, or it might not. Here's the chart:

It made about a 60% price move from the base of the last consolidation to the base of this triangle. I see price action going up another 60 percent to about 3.20. Significant supply at 2.40 and 3.50

My assumptions are that CPE just broke out of a bullish triangle/flag continuation pattern and will repeat its prior price movement. This assumption will be proven wrong if it breaks down below the ascending triangle line, currently at about 1.78

UPDATE: Sold at 2.46. Here's the chart and reasoning why:

To measure price implications of triangles, from the text book:

“Draw from the Top of the ﬁrst rally that initiated the pattern (in other words, from its upper left-hand corner) a line parallel to the Bottom boundary. This line will slope up away from the pattern to the right.Prices may be expected to climb until they reach this line. Also, as a rule, they will climb, following their breakout from the pattern, at about the same angle or rate as characterized their trend prior to their entering the pattern. “

Hammy Trade: NXG

2009-05-04T09:59:00.000-05:00

Bought 1000 NXG at 1.52:

This is a decent ascending triangle break-out and a commodity play.

My assumption is that NXG just broke out of a bullish ascending triangle. It made about a 90% up move prior to forming the continuation pattern. I expect it to repeat the move, with a price target of around 3.03. Areas of resistance will be around 1.65, 1.81, and 2.85.

My assumptions will be proven wrong if the stock breaks down below the ascending trend line. Currently this is at about 1.41.

UPDATE 5/7/09:

Chart Addict just sold his NXG, claiming exhaustion. I think he's wrong, at least according to my price-target metrics. I'll hold until it breaks down.

UPDATE 5/12/09:

NXG is still looking pretty good to me!

Considering Buys

2009-05-04T09:54:00.000-05:00

unbelievable picks by Chart Addict and Ragin' Cajun

CPE triangle Breakout:

i put in a limit order to buy on a pullback @ 1.98. Might have executed by now. Decent triangle formation after a run-up. Also, jumped up off 20 day MA

JASO channel breakout:

NXG Gold play. Nice consolidation and breakout of triangle:

Update: put in limit orders for JASO and CPE on pullbacks after the start run-up. CPE @ 2.00, JASO at 3.71.

Update: bought 1000 NXG at 152

moving averages

2009-05-04T07:27:00.000-05:00

from here.

The MA’s for the long-term are the 200-day (primary) and the 100-day (secondary). The intermediate-term MA is the 50-day. Short-term MA’s are the 15 and 20-day, and the most important for swing trading.

The most ideal situation is when the 15 and 20-day both provide underlying support. What’s even better is if the 50 and 100-day MA’s also provide underlying support. Right now, in the majority of stocks, the 200-day acts as an initial price target for exit. The 200-day MA is the strongest MA out of the ones mentioned. It defines the long-term trend.

The MA’s also gets rid of headaches and panic attacks. If you know where one of these significant MA’s are located, then you know there will be a bounce, at a minimum (in most cases). Conversely, if a stock is approaching a major MA, you know there will likely be a pullback or failure. Besides price, volume, and the basic chart patterns, I’ve relied primarily on the moving averages to make my trading decisions. I let the MA’s make the call. Stop panicking and impulse trading for no good reason. Let the charts make the decision for you.

hammy PT

2009-05-03T02:03:00.000-05:00

the last 2 weeks I've done the P90X weight sessions on schedule, and substituted the yoga, plyometrics, and kenpo with running and sprint/hill work.

non-linear reading experiment: Day 6

2009-05-02T18:48:00.000-05:00

Today I did the first section of note-taking from Bacevich's The Limits of Power. It definitely went slow, and it took a while to get to a point where I was able to start building a framework of arguments which accurately reflect those of the book. I spent an hour, and made about one page of notes, getting through 30 pages. I'm hoping this speeds up; I need to get better at figuring out what's important and what's not. As I get better in the second read-through, my note-taking will be made easier as well.

So far, so good!

Untitled

2009-04-19T21:41:00.002-05:00

I'm moving back to blogging on wordpress.

Blogger sucks in overall quality. It's nice to be able to embed flash video, but I don't do that nearly as much as I thought I would be when I switched over from wordpress. Also, the java-script enables built-in analytics, so i can track the one or two weirdos who visits this blog multiple times per hour.

hopefully moving to wordpress will shake them off my trail, for a little while. we'll see!

non-linear reading experiment: day 1

2009-04-19T20:06:00.000-05:00

I've started reading Bacevich's "The Limits of Power" using a non-linear reading method prescribed online. The link to a PDF outlining the reading process is in my previous post.

Today I started the preliminary, "discovery" stage of reading. According to the guide, you ought to read through the book three times, with a different focus each time.

The first of these stages is the "discovery" stage. In this stage, the main focus is to gain an overall grasp of the author's key ideas, points, methodology, and context. In order to do this, I got a stop-watch, a highlighter, and a note-pad and pen.

First I took a look at the cover illustration and the "tagline" underneath the title. I noticed the publishing project of which this book is a contribution. I looked at the back, and noted who gave praise for the book. Often it was an author of another famous book, or someone famous and part of a large institutions. Observing all these details helps to put the book into a frame of context, giving me an idea of who the audience is, what the general concepts may be, and what type of people the author and publishers chose to endorse as "experts" on the topic.

Second, I flipped through the flaps. The book's flaps give an abstract about the author, and a synopsis about the book. What I look for is where the author is coming from, from an intellectual and professional perspective. I start to identify key words and phrases which aren't commonplace or every-day things, and may give clues to key concepts the author discusses inside the book.

Next, I note the book's copyright date for context. I look through the table of contents, and begin highlighting any key phrases or titles of chapters which sound like something the author is using to organize a thought or argument. After this is the index: any entries which have a substantial amount of references, I'll highlight. Because they're mentioned more times than other things in the book, they're important things to note and keep in mind.

I do the same, going through the sources, to see any works that are commonly referenced.

The dedication page and acknowledgements give a glimpse of who the author is, and where his motivation/passion comes from.

Next, I start going through the book, almost glancing, and not reading in detail. I look for repeated phrases, titles, and concepts. Any time the author mentions something like, "this lesson teaches us..." or "that ideology led Mr. so-and-so to..." I highlight the part that says "this lesson" or "that ideology". The point is, anything I highlight is a key to a point the author is trying to make, and a reference for me to focus upon in my second read. What lesson is he talking about? What ideology is he referring to? Words like "paradoxically" or "Conversely" are highlighted, because it's clear that the author is drawing a line and comparing two things. What are those two things? I write down main repeated phrases and words. In this case, it was words like, "preemptive war", "freedom, abundance, and dependence", "ideology of national security". When I read more thoroughly the second time, I'll see these highlighted phrases and seek to see what, exactly, the author is trying to say with them.

Afterwards, I type up the phrases. The first read through is done.

I set a goal to read the whole book in 6 hours. By the professor's metric, the first read should then take about 35-40 minutes. I took 69 minutes, a little over an hour. I will definitely get better and faster at this--this was the first time I ever attempted to do it, and I eventually got into a faster groove as time went on and I honed my practice.

Results:

I noticed the author's methodical introduction of an idea/argument , and subsequent support and conclusion. I did not quite discover how he transitions from one major argument into another.

I highlighted the start of each argument, the starting sentence of each supporting idea, and the concluding statement or paragraph.

I have a good feeling for what the author is trying to say. There is a framework of ideas I'm excited to read through and identify.

This was fun, and I could probably have a conversation about the whole book, even based off this preliminary, short read.

I have 5 more hours to read. I estimate I'll take 3.5 to 4 hours on the actual reading, then 1 to 1.5 hours typing up notes and formulating critique and counter-argument.

This was fun!

Re: Book Reviews linked from HankBrown.org to GoodReads.com

2009-04-19T15:46:00.002-05:00

Sir,

Thanks for the link to goodreads.com. I enjoy looking at your selections and short reviews.

I recently read a short PDF document on how to read more effectively - in terms of time spent, focus, and methodology here . In summary, the professor describes a method of non-linear reading which allows the information-seeker (or, reader) to discover, understand, and remember more effectively from a non-fiction book in the smallest amount of time.

I am going to attempt to use his method on Colonel Bacevich's The Limits of Power . Hopefully the new method works and if so, I'll make it a goal to develop this reading method as a habit in non-fiction for being a more effective reader. I'll let you know how it goes!

Semper Fi,

Lt Hamilton

Hammy Buys: FEED, S

2009-04-17T13:28:00.001-05:00

It's time for me to actually start doing this again. It's very easy to get out of this good habit, at least right now.

Why I think this will go up: This is a channel/resistance buy. The trend has been up, and it also has been bouncing on the bottom level of it's current trend-line. A pure technical play.

When my assumptions will be proven wrong: If the stock price breaks down out of the trend, then the trend I've drawn is no longer viable, and I'm wrong.

At what point will you sell for profit? I will sell for quick profit on the next bounce up to the top of the trend-line. This level will change (go up) as time goes on, but could potentially be around 4.80 or 4.90.

FEED:

Why I think this will go up: FEED just experienced a huge triangle break-out. These breakouts usually go up, then consolidate for a little while before continuing very large up-trends. Through the breakout and consolidation, it started to form a "pennant". A pennant is a continuation pattern which mark a small consolidation before the previous move resumes. They usually mark a mid-point of a move.

When my assumptions will be proven wrong: This will not be a successful pennant if the price of the stock drops below the bottom horizontal line of the pennant, at around 3.30. If I stop out the stock at 3.30, I'll have lost $67. If I complete the move, I'll have made $600 ($1/share first move, consolidate half-way, $1 share second move).

When I will sell for profit: If the overall market shows a confirmed downtrend, or if the stock reaches it's objective around 4.30, I'll sell for profit.

JASO, SWC, GNK,S

2009-04-17T12:27:00.001-05:00

SWC is near a breakout of two different types of bases over two different time frames. This could be explosive!

GNK has had a big rally, but is about to hit another resistance level!

JASO already had one "triangle" formation, but it failed to act and just started making an even bigger one. Watch this for a break out/down:

Sprint in a nice upward channel. Thanks Ragin C for pointing this out.

Usual airshow on my way to work

2009-04-15T08:50:00.001-05:00

Awesome Chart

2009-04-15T00:06:00.001-05:00

My favorite chart of the evening:

google is amazing

2009-04-14T22:12:00.001-05:00

i wonder what this building is

The Important Matter of Balance

2009-04-14T18:13:00.000-05:00

I alluded to the need for balance in this post.

Here, I’ll illustrate my points with aviation.

Balance is essential for beginners. When you learn how to fly, or are an amateur, licensed pilot, you typically fly aircraft that are designed to be balanced, and stable, like this:

A Cessna 152.

What do I mean by “stable”? I mean that it’s designed to revert back to the norm when you input a change. If you pull way back on the stick of this airplane for a few seconds, then let go, what’ll happen? It will take a steep climb, lose airspeed, then dive for a while, gain airspeed, climb, lose airspeed, etc, oscillating up and down, and eventually stabilize itself back to level flight. Your input is damped out, and things return to normal. The plane could, literally, fly itself until the gas ran out.

This is opposed to an “unstable” airplane, like this:

An F-14 Tomcat.

Opposed to the damping input, this kind of aircraft is unstable in that it AMPLIFIES your input. You pull the stick way back, and it will scream upwards. If you let go of it, it’ll go completely out of control, and you die.

Why would they build an inherently unstable aircraft? Because if you know what you’re doing, you can make it do unbelievably nimble, tactical aerobatics. IF you know what you’re doing.

The slow Cessna will be less affected by your piloting, whether they’re horrible or superb. The Tomcat will amplify your skill, or complete lack thereof.

This is where I’ll segue into trading in the stock market.

Living a “balanced” life as a trader means that if you make one error, the inherent stability and balance in your life and trading plan will damp out the error, absorb it, and eventually even things out. The drawback here is that if you’re really good at trading, the balance, (which in my mind means time spent exercising, sleeping, spending time with your family, etc) will also “dampen” your success. Your skill won’t show up quite so much, since trading is a smaller part of your balanced life. Hence, “balance” helps you when you’re new and learning from mistakes, but restricts you when you really know what you’re doing.

The Obsessed Expert versus The Obsessed Imbecile

I notice my life becoming unbalanced when I stay up late, spending way too much time looking at charts, over-trade, and generally become consumed with the stock market. When this happens, even my small errors lead straight to bigger ones, and occasionally, a death spiral.

Have you ever noticed the time-stamp on blog posts or comments made by some of the tabbed bloggers on this site? I wonder how, for example, The Fly gets any sleep at all, when he’s trolling the PPT at 2:30 am on a sunday night. From my perspective, he and others here are very unbalanced. They’re abnormal. But that’s because they’re flying the F-14, and are able to “fly” circles around the idiots, shooting them down and moving on to the next tool. Their abnormality enhances their success. They should be unbalanced, because they’re that good.

Following _____’s Trades

I think it’s amazing, reading comments of a few clearly dimwitted people on this site who like to try and follow on Fly’s trades, or anyone’s trades. That’s potentially like a new private pilot watching the Blue Angels, and then thinking,

“I’m going to get in a supersonic jet and follow that guy, and do all the same aerobatic moves he does! This will be easy!”

If you don’t have the hair on your chest yet, don’t fly with the big swinging dicks! Learn some of the principles they use, then scale it back a little bit. Keeping balance will keep your wits about you, and keep things in perspective. Someone who reads Cramer’s investing books and then starts trading with FAZ and FAS, or TNA for that matter, is probably caught in the bizarre misconception that you can make money without putting in hard work.

I remember a month or so back when THE FLY bought TNA. A bunch of people said that they got in that trade, following him. Did they have any idea of his rationale behind buying it? His timeframe? How that buy worked into his other strategies? Negative. Many of them jumped in the cockpit of a dangerous machine, and were subsequently keelhauled.

I learned this through trial and error, noted it, and moved on. I’m an amateur, and try not to get into deeper water than I’m able to swim out of. I’m learning more with every mistake made, and lately, that it’s important to seek balance.

Follow the Warning Signs

Also important to note is that there are always signs which warn me of pending imbalance. For me, some of them are:

Irregular sleep patterns.

Starting to smoke, out of anxiety & nervousness.

Drinking unreasonably.

Neglecting goals and good habits.

Self-inflicted seclusion.

I notice a few of these , and throttle it back a bit. What level of equilibrium are you comfortable with? Are you in way over your head?

In conclusion, take some risks, and learn from them. Your trading risk can mature as you mature as a trader, speculator, or investor. Think about what a balanced life looks like to you, and what might be warning signs of imbalance. Over time, you’ll be able to catch dropping knives, fly with the pros, and one day, bank some serious coin.

Death Spiral Beginnings

2009-04-14T16:56:00.001-05:00

For a few weeks now, I’ve meant to get around to writing about the extreme importance of having balance in my life in order to be successful. This is still not that post, but such thoughts will be forthcoming.

I’m pretty embarrassed at my conduct today, market-wise, and I blame the stupidity of my actions on the recent self-inflicted imbalance my routine has taken. I’ll work my way backwards, here and now discussing and addressing the stupidly made errors.

I say stupidly made, because a few of them are repeats. An error is acceptable, providing that I learn something from it. A second time, means I didn’t take the time to view that error as a lesson carrying the seeds of success, rather than an affliction, driving me toward failure.

Briefly, here’s the time-line of events:

I cashed out of my stock positions yesterday with the rationale that I had made some good trades, but did not have conviction to hold them beyond a “lucky” day. The stock market was showing mixed signals–breakouts in small stocks, on one hand, but possible reversal signals in the broader market. I figured that I didn’t really have a grip on what was going to happen, and instead of attempting to decipher the code, to get out with some coin. This was a good, soberly made, rational decision.

I stayed up late last night, digging through charts, reading blogs and news, a little “high” from the profits clenched yesterday. I noticed a few charts looking primed for break-outs. I made some notes of break-out points, and went to sleep late. This is still alright, though I did my stock “homework” at the cost of other tasks left undone. Hence, an unbalanced mindset start coming out of the woodwork.

I wake up exhausted and get to work a little late. My boss reminds me to show up on time. He’s right! I was late because I had stopped to get a box of donuts for the office, but that’s no excuse. Why do I include this? I usually show up early, or at the latest, on time. Something was off, and I should have stopped to consider the implications such a “red flag” would have for later in the day.

After logging on to check the market, I see breakouts! Cool. However, a small detail toward which I turned a blind eye: I had $0 in “settled funds” in my trading account, after going “crazy” banking coin yesterday. I was 100% cash, but w/out any “settled” funds. You can buy with unsettled funds, but you can’t sell securities purchased with unsettled funds until they settle, which takes 2-3 days. This was one of my “NEVER GET YOURSELF INTO THIS SITUATION AGAIN” lessons I learned in the past. I did not heed this lesson, and proceeded to buy securities with unsettled funds. I am now not allowed to sell them for a few days. This is potentially disastrous.

Having backed myself into a corner, I saw the S&P start to make a new intra-day downtrend at around 850. Could I sell ? Nope. My recent gains receded into losses. I couldn’t really hedge against each stock, so I “hedged” by getting short via an inverse, leveraged ETF. This was probably a smart move for my shitty situation, but definitely not ideal. Why? Well, what if the market rallies? That position can’t be sold either, so I lose. I could buy a leveraged long ETF to cancelthat out, but then I’d be stock with my long equities and no further possibility of hedging!

That’s where I lie now. It’ll take a few days to un-fuck my account, and I’ll definitely get a hair-cut on the bottom line, regardless of what happens. Here are some warning signals I should have seen, aside from the “red flag” of showing up 5 minutes late to work. This is starting to get into the issue of maintaining balance in life:

Starting yesterday, I stopped posting trade plans and explanation for each trade. Documenting my trades on my personal blog is a method for future review, but is also a safe-guard against compulsive, thoughtless trading. It forces me to vocalize why a stock is good enough to buy. I usually do some chart-work, giving a visual picture too. Most of the stuff I bought today, I had previously charted, but the fact that I didn’t take the time to follow my habit shows I was lacking patience and discipline. Instead of trading with confidence and caution, I traded with recklessness and compulsion.

A crazy sleep schedule lends to exhaustion and fuzzy thinking. When I’m running on low sleep, it’s easy to lose perspective and forethought.

The unsettled funds trading shows a complete departure from a sober approach to trading. I am not beating myself up for it; the market will take care of that. The stock market is merciless toward the slightest mistakes made. An “efficient” market also means that people who act stupidly will lose their money.

I’m glad I “awoke” from this daze. Sometimes, losing in the stock market helps me to remember to invest in the OTHER parts of my life. I figure that I’ve lost some money, but I can grow richer in other ways: by reading and learning more about the world, by getting in a good workout, by studying my profession of warfighting.

Hopefully this kind of review will prevent future mistakes from being made in the future. Pointing out the mistakes made and the signals missed will make them more noticeable next time. Tomorrow is another day!

Breakouts Poised

2009-04-13T23:03:00.001-05:00

Dogs on Juice

2009-04-13T20:46:00.000-05:00

And i think , the only one worth checking out:

Watchlist 4/14/09

2009-04-13T20:05:00.000-05:00

Some crap I'll be keeping an eye on tomorrow:

XOM:

TXCO:

FEED:

OVTI:

And my favorite for tomorrow, SWC:

hammy pt

2009-04-13T19:07:00.001-05:00

ran 30 miles flat, mix of jog/sprints

Hammy Trades: FEED, SH, LDK, GNK, SWC

2009-04-13T16:10:00.001-05:00

I went crazy today and made a bunch of trades.

FEED: Out at 2.93 from 2.35 (nice)

SH: Out at 72.16 from 78.63 (ouch!)

SWC: In at 4.4, out at 4.75 (nice)

LDK: In at 8.3, out at 8.15

GNK: In at 15.05, out at 15.40

Exhilarating.

At the end of the day I realized I was seeing too many mixed signs about the market. I had been a converted bull for a few hours, buying break-outs like it was 2007, but then realized that after having some fun in the water, I shouldn't forget to watch for lurking sharks. I have a feeling some of the giddy bulls around here are going to get their prairie oysters shucked off unexpectedly and ground into oblivion.

I'm probably wrong. Hopefully I'm wrong--it'd be great to see a confirmation of a new bull market. We'd need two things to set a new trend, at least according to the Dow Theory:

The breakouts I bought today will SOAR if news turns out well in the next few days. I'll catch the late train and bank less dough, paying for my uncertainty.

SWC Breakout

2009-04-12T23:46:00.000-05:00

Read this post by Alpha and I looked up a platinum mining company. Here's my chart idea:

Rounding Bottom/Top

2009-04-12T23:27:00.001-05:00

I recently came across "Rounding Tops" (and bottoms) in Technical Analysis of Stock Trends By Edwards and Magee.

The "Rounding Top" is a gradual, progressive, fairly symmetrical change in the trend direction. They are more commonly found in more exclusive equities, shielded from the daily excitement of the masses. (Note: An index like the SPX may exhibit a similar quality.)

Top formations are completed in a relatively short amount of time. As you can see in the chart above, a whole semicircle has been drawn using a fibonacci ark, and we're currently at its peak.

Other characteristics of a Rounding Top: Volume should ebb to an extreme low at the top of the pattern if its implications are to be trusted. Check out the low volume at the recent highest days.

Disclosure : I'm long SH (short SPX) and long FEED

Quotes from John Hamilton's Newsletter

2009-04-11T21:52:00.001-05:00

Poignant and realistic commentary on the market, from a fundamental perspective:

"ARE WE THERE YET?

We have found that the incessant questions asked by children on a trip are also imitated by adults on CNBC and virtually everywhere else.

We have heard literally thousands of times in the last months “Is it time to buy the financials? Is the market at the bottom? Is it time to get in?” The questions go on and on by many who should know better because, of course, there is no answer.

More than 663,000 jobs disappeared from the economy in March bringing the total in excess of 5 million. Tragically, we seem to be getting used to figures like these. The first three months of 2009 saw the unemployment rate soaring to 8.5% up from 7.6%. This is the highest level in more than a quarter of a century. More than 2 million jobs were lost according to the Labor Department's employment report released on Friday, April 3. Nearly every job category was affected, and Dean Baker, a director of the Center for Economic and Policy Research in Washington said “There is just no way we are anywhere near a bottom. We’ll be really lucky if we stop losing jobs by the end of the year.”

/**********Hammy Note: What would you call a bottom? A)The number of lost jobs per month starts to decline, or b) we actually start gaining employment?***********/

This severe recession/depression was initiated by a crisis in the credit markets. The crisis still exists as no one has yet been able to determine the value of the toxic assets that the banks and the non-banks carry on their books. We believe that AIG still carries approximately $1.6 trillion of toxic assets on its balance sheet. Until an answer can be found that can put a value on the toxic assets held by the banks and “non-banks” the crisis will continue.

Consumer spending appears to have leveled a bit after nose-diving in the last quarter of 2008. Auto sales improved slightly month over month in February versus January, and house sales have been improving in important markets like California and Florida although at substantially reduced prices. These are all most welcome signs, but they hardly negate the overwhelming problems our nation continues to face. Another good sign: Stock and bond markets have been stabilizing when compared to the last five or six months, and there have been rallies in this extremely volatile bear market that have been strong enough to bring risk-takers back into the fray. We are encouraged by these developments, but do not believe they can be sustained until we see concrete improvement with regard to the fundamentals. We repeat that the basic problems, unfortunately, will continue until a workable solution can be found for the all pervasive credit crisis."

Note: all emphasis is mine.

This came from a newsletter issued periodically by John Hamilton at www.hamiltonadvisors.com. As may be apparent, they don't waste resources on a flashy website.

Hamilton Advisors is a investment advisor/management company located in Greenwich, CT, founded by my grandfather and run mainly now by my dad. It's personal service, and you can really get to know the guy who's banking you coin; many of the business relationships turn into lifelong friendships. If you ever consider trusting someone else with your investments, give these guys a call and find out what they're about--you won't regret it!

hammy PT

2009-04-11T21:26:00.001-05:00

yesterday , 4/10 - 30 minute run

today - rest day!

Spy Trends

2009-04-09T16:24:00.001-05:00

anyone else been having a bad week?

Time to make some decisions.

When I traded into SH at 791, I stated the following:

What invalidates your assumptions? Breaking back into the last up-channel would signal another trend-change. There is high possibility of sideways action, fake-outs. We’ve seen one lower high, and have now broken the downside too. To shift this trend, we’d need both a higher high and lower low.

here is a look at my market trends in the S&P when I bought it, then (3/30/09):

Well, based on the assumptions I made when I bought it, this trade has gone kaput. However, I’m tempted to hold on to see it test the prior up-trend from Feb 9, around 870. If it passes this, then that’s a good case that the bull market could end. That would be a higher high, and to confirm the uptrend, we’d see a higher low.

This was, primarily, a channel trend, and the price action has broken out of the channel. I need to look and see how hard I should hold to the trend integrity principle: If it breaks out of the trend, the trend is likely to fail. So I look and see : How much has it broken out by? Has it broken out and re-entered before? Did I draw the channel incorrectly?

I redrew the channel. It actually works nicely and makes me sort of want to keep holding onto the short. This could be the exact pivot point for getting short:

Here is one of my lessons learned.

To restate what I said in the picture, incase the graphic is lost ever:

“The ‘channel’ trade is good as long as the price pattern stays inside the channel. There are a few things I’ve learned to keep in mind from now on: The upper and lower limit of channel trades is dynamic. Prior to each day, or each week, determine what price level invalidates your price range. Today, it was around 830. I mistakenly had 845 in my head as a sell point, but that’s the limit from a few DAYS ago. Had I sold at 835, I would have saved myself from a 23 point short squeeze, as we ended today at 858. “

I’m going to hold onto my position. The downward trend hasn’t been broken yet, and we’re at the top of the upward channel I drew. I think selling right now might possibly be the worst thing I could do.

I’ll review this in a week to see how it went.

On a separate note, keeping charts and blog posts of my trades and market outlooks has pointed out nearly half a dozen serious mistakes I commonly make. Many of them, when they’re pointed out (by myself through reflection, usually) seem obvious and glaring, but they never were until I attempted to explain my thought process. I’m definitely getting better at this. It’s just taking some time!

Hammy Trade: FEED

2009-04-09T14:37:00.001-05:00

just bought 1000 FEED @ 2.42

Why I think this will be profitable: FEED just broke out of a multi-week bull flag to the top-side on good volume. I believe the break-out signals a new bull run-up.

When my assumptions will be proved wrong: If FEED breaks down from the breakout and passes the bottom trendline of the bull flag, then it clearly hasn't broken out and my assumption that it's going to rise will be severely challenged and most likely, wrong.

New downtrend in the SPY? We're close

2009-04-08T22:51:00.001-05:00

It always helps to keep multiple time frames in perspective.

Here's a look at the long term (multi month) downward market we've had:

That last leg up is the March rally. Notice how it just hit the top of the trend line. It's following the same pattern as all the previous rallies (nov to january, october to november).

Zooming in a bit, here's a view of our recent March rally:

Take a look at that, then take a look at the chart above it to gain some perspective on where the March rally lies in the overall market.

Now, here's a zoom-out with tracing of recent action:

I'm betting with the longest term trend. If the SPY was hitting the lower trend-line of this channel, I'd take a smaller long position. It'd be small since I'd be betting against the longer-term trend, but with good reason and evidence that it's going to oscillate once more. However, we're about to experience a down-trend within a down-trend.

My assumptions are:

The long term down-trend is going to continue.

The downtrend will continue to move within a channel, created by oscillations of lower highs and lower lows.

My assumptions will be shown to be wrong if:

We experience high lows and higher highs in the context of multi-week rallies and corrections. For this, we would have to break out of the current long-term channel drawn.

I haven't been paying much attention to the daily action during the past week, because I'm thinking in a 3-5 week timeframe. Also, so long as my assumptions about this downward market aren't shown to be wrong, my plan (based on those assumptions) is valid.

Follow the trends. If you are patient enough to confirm reversals, you'll only be wrong once, and the one-time loss of a reversal will be surpassed by your wins.

The new possible downtrend in the SPY will be confirmed if we get another small rally that doesn't surpass the last one. Once that turns over, it's time to get short!

writing? Not today

2009-04-08T20:08:00.001-05:00

There are a few things I certainly need to write about, but I'm just going to enjoy myself and forget about the "work" i have to do tonight.

Hammy PT

2009-04-08T18:07:00.001-05:00

Monday : 30 minute run

Tuesday: P90X Back & Biceps, Ab Ripper x

Today: 30 minute rune

stuff to write about

2009-04-08T18:06:00.001-05:00

weekly stock review

weekly habit review

the need and benefit of balance

picture post from this week

SPY double bottom

2009-04-06T19:32:00.001-05:00

I am still bearish, but this makes me a bit less so. Trends have to change somewhere, and usually show their change with a recognizable pattern. One such pattern is the double bottom base. As described in "How to Make Money in Stocks" by Bill O'Neil, a double bottom requires:

A 'W' shaped pattern.

Usually a matched or lower trough in the second part of the W.

The buy point is located on the top right side of the "W" where the stock is coming up after the second leg down, and should be equal in price to the top of the middle peak of the "W"

What do you think out there? Does a double-bottom base need to take place over a longer time period in order to be valid?

Untitled

2009-04-04T00:15:00.001-05:00

S&P facing resistance

2009-04-03T01:03:00.001-05:00

845 is the apex of these three lines. I predict a decent move down in the short term (1-3 days) and in the mid term (3 weeks).

I'll revisit this post within those timeframes and evaluate my trend-line-drawing skills.

If I'm wrong, a 1-2 percent move above 845 will persuade me to get long. Note, as time goes on, the sloping, longer term downtrend gets lower, and the mid-term uptrend gets higher. The S&P is going to have to make a decision. Where does the real strength lie? I put my money with the bears.

disclosure: long SH (short S&P)

Where I'll be flying

2009-04-02T18:06:00.000-05:00

Afghanistan

Trade System

2009-04-02T17:19:00.001-05:00

Trade System by "cuervoslaugh" here.

If the SPY Adjusted Close is more than the 200 Day moving average and you do not have a share, then buy one share and hold it for the next 50 days.

Results:

Average Trade: $1.47

Win Percentage: 73%

Average Win: $3.77

Average Loss: -$4.54

Expectancy: $1.55

spy resistance

2009-04-02T11:45:00.001-05:00

we're breaking out of trends today. Here's another one to test. Breaking this one will be aid in confirmation of a new longer-term uptrend.

SPY outlook

2009-04-02T00:41:00.001-05:00

Contrary to Fly's Recommendations

2009-04-02T00:09:00.000-05:00

putting my feeble opinions in contrary to The Fly, I expect to be summarily bereft.

Charts on the Fly's recommendations via Fly's article:

All commentary beyond here is my own.

YGE: Due for correction. Hasn't shown reversal yet.

CSIQ: 6 months down, 4 flat. Now @ top of channel, will bounce down

I'd wait until it makes another reactive correction.

Here's ANH. This wedge actually goes back to mid 2007:

GLG has become flat, but hasn't shown evidence of reversal:

TIBX is in a 4 year downtrend, thought you can't see it here:

CY is going down:

TLAB: down due to channel, though it's been showing a new uptrend. A breakout would be very significant.

What do you think?

Trading Review: March 25-April 1

2009-04-01T20:59:00.000-05:00

Time to take a look at all the bad decisions I made over the last week or so of stock marketry.

Here's a link to my last trade review. The main thing I learned that week was to bet with the overall trend. Looking back on the steps I formulated for better trading, I realize I basically outlined the Dow Theory without ever having read about it. It's pretty simple stuff, but that shows these trade reviews help me learn how to be smarter in investing. *I know it's the Dow Theory now because I started reading Technical Analysis of Stock Market Trends, which outlines Dow Theory in the first couple chapters.

So here we go. I'll look at both trades and market predictions. I'll decide whether, in hindsight, I should have bought earlier or later, sold earlier or later, and try to catch some things I missed. I'll review if my assumptions were reasonable and if I set prudent points to consider my trade a bad one.

3/25/09

Market Prediction - I called this pretty well. The market bounced upon hitting the bottom of the upward channel. It topped within a few points of where I predicted. +1 point for channel bounce trading. Unfortunately I slept in the next morning instead of executing this idea. Need to work on: acting on my future predictions of this sort.

Trade Plan - Neutral. This was probably not reasonably high enough above resistance. The stock needs to break resistance by a little more than 5 cents above in order to show break-out. Also, on breakouts like this, I shall also use volume as confirmation of a breakout before buying.

SPY Buy - Success. This was a support/resistance trade, and it worked. I bought at 809.3, though the low of the day wasnearly 791. I can see the trend line I traded off of and in hind-sight it wasn't the real line of support. Had I created the correct trend line, It may not have seemed safe. If a stock breaks out of one "channel" you've drawn, try to see if you can find others that it's entering.

3/26/09

Trade Plan - This was another "stop order on breakage through resistance". I was still looking at a short time-frame, instead of the big picture. Here was my pretty chart. I was drawing channels, but not using them yet:

I did make some good assumptions, and "break through resistance" buys are OK as long as it's a confirmed breakout. I just need to confirm a breakout with decent rise above resistance, and good volume. I'll miss some of the first fruits, but it'll be a safer, surer trade. It might not hurt to mix some Dow Theory in there, and look for either the new support to be tested and stand, or to see a decline w/ a low above support to confirm even more. CONFIRM THE BREAKOUT beyond mere price action.

SPY Buy - This was just before I learned to look at the bigger picture, and notice a larger, overall downtrend with the uptrend. I was all excited we'd make another bounce up, and this time through resistance. Little did I know that we were about to hit the ceiling of a several month long downward channel. I am, however, getting good at spotting support and resistance. And channel/trend action. Combine the two, and I'll be a much better trader. Check out this chart to see my resistance spotting skillz:

3/27/09

Game Plan - Interesting situation, with the upward funnel running into resistance:

I decided to trade with the trend, once resistance was breached. Again, I was not looking at the overall, long-term trend. My reasoning was OK, but I need to adjust a few things. This has become trend in myself over the last few days: first, confirm breakouts with decent price breakout, and volume to confirm. Don't just buy once it enters a resistance/support zone. I was trading with the mindset that went like this: "We're still in this upward channel. Chances are, the trend will continue and this resistance will turn into springboard support." This would be a combined channel/price support buy. The perspective of a longer trend was the one caution I was missing.

SSO Buy - This was not so bad from a short-term standpoint, but i needed the perspective of a longer term. There was price resistance as well as big channel resistance to stop the rally dead in it's tracks:

this is when i finally learned my lesson.

3/30/09

Game Plan - I had made some good observations, but still wasn't looking at the long-term trend. This changed later that weekend.

ASIA check up - Success!I said I thought the chinese burritos would bounce down from the top of their current channel. Here's what I predicted:

And here's how things ended up:

Game Plan Second Look - This was where I started seeing things as I do now. Here's where I predictd we'd bounce down from a major, 6 month downward channel:

And the result from there? We're about even, though we've seen an end to that huge rally that lasted nearly all of march. Meeting of price resistance and channel resistance broke the trend, at least for the time being. Since we were still in a strong short-term uptrend, I changed my stance to neutral. Unfortunately, I was already long, and it as too late.

Tech Analysis of YGE - I noted that YGE has an ascending wedge. I said it was a buy, if the S&P broke out on Monday 3/31, but to ignore it otherwise:

Here's how it ended up:

Trade Prediction: RNT - Didn't lose money, at least. This stock broke out regardless of S&P action:

S&P outlook - Getting rid of this asap was a prudent move. It moved out of the channel, and into the lower one. I didn't have any idea there was another channel support below. I should have gotten out in after hours on friday, though.

3/30/2009

SH Buy - This is a long term (3 weeks) buy based on a 6 month channel movement. I'm trying not to worry about price fluctuation in the mean time.

VFH Prediction - Said to get short when VFH was at 20. Now it's at around 19.14:

That's about it for now. I'm still short SH, due to convictions discussed in this post.

I'm definitely learning a lot. Here's a summary of the lessons learned over the last two weeks (at a decent price, too):

Trade with the trend.

Gain perspective of trends to trade in, in different perspectives of time. Trade in the short term only while knowing what the long term is also doing.

GDX breakout: Imminent or impossible?

2009-04-01T19:19:00.001-05:00

I predict it'll bounce down from the top side of the channel and resistance. It'll move sideways, bounce off the bottom of the channel, and then retest resistance. Volume and price action

Hammy PT

2009-04-01T17:57:00.001-05:00

standard 30 minute run, along the road. (it's flat in florida, unlike west austin)

Bear Flag

2009-04-01T13:46:00.000-05:00

do you think it is a bit of a stretch to call this a bear flag?

perspective

2009-04-01T13:05:00.000-05:00

This may be my shorts talking. I'm not getting squeezed until we break out of the big channel:

disclosure: long SH

Nasdaq Head and Shoulders: Revisited

2009-04-01T10:44:00.001-05:00

Here's a new picture of the nasdaq price action:

The head and shoulders pattern was thwarted and left incomplete. The neckline stood as support--that level has been taking a beating, though.

Yes, the pattern didn't complete, but this is still a bearish signal. I quote the textbook:

"There is one thing that can be said and is worth noting about Head-and- Shoulders Formations that fail completion or produce false conﬁrmations. Such developments almost never occur in the early stages of a Primary Advance. A Head-and-Shoulders that does not “work” is a warning that, even though there is still some life in the situation, a genuine turn is near. The next time something in the nature of a Reversal Pattern begins to appearon the charts it is apt to be ﬁnal." Page 62.

This will be especially true if today's action rolls over. A nice, sloping downtrend is starting to form on the most recent peaks in the 'daq and in the S&P:

King of the Peanut Gallery

2009-04-01T02:42:00.003-05:00

I just got appointed "king of the peanut gallery" on ibankcoin.com for the month of april.

here's a link to my soon-to-be main blog.

I'm going to let ZMoose's farewell stand up there for a little while, until people have had a chance to read it.

Then, I will reign over all the peanut gallery for ever, or until the month of april ends. (which ever comes first).

Nasdaq Head and Shoulders

2009-03-31T23:51:00.001-05:00

QQQQ trend lines:

For the reversal pattern: Volume is inconclusive, but the formation looks pretty solid:

refer to this post for rules on what forms an actual bearish head and shoulders pattern.

Head and Shoulders?

2009-03-31T21:45:00.027-05:00

Rules on head n shoulders pattern:

A. A strong rally, climaxing a more or less extensive advance, on which trading volume becomes very heavy, followed by a Minor Recession on which volume runs considerably less than it did during the days of rise and at the Top. This is the “left shoulder.”

B. Another high-volume advance which reaches a higher level than the top of the left shoulder, and then another reaction on less volume which takes prices down to somewhere near the bottom level of the preceding recession, somewhat lower perhaps or somewhat higher, but, in any case, below the top of the left shoulder. This is the “Head.”

C. A third rally, but this time on decidedly less volume than accompanied the formation of either the left shoulder or the head, which fails to reach the height of the head before another decline sets in. This is the “right shoulder.”

D. Finally, decline of prices in this third recession down through a line (the “neckline”) drawn across the Bottoms of the reactions between the left shoulder and head, and the head and right shoulder, respectively, and a close below that line by an amount approximately equivalent to 3% of the stock’s market price. This is the “conﬁrmation” or “breakout.

The only thing I'm not really sure about is the volume. Anyone out there have any thoughts on the possibility of this being a head and shoulders? Perhaps it's a bit of a stretch.

UPDATE: Check out Nasdaq's head and shoulders here.

Do You Really Thnk We're At a Reversal?

2009-03-31T19:07:00.005-05:00

First off, know that I am writing from a short bias since I own SH.

Recently the S&P has shown several amazingly regular, straight trends:

A trend is an overall direction over a given time. Notice also that within those trends, there have been reactions which oscillate up and down mostly within the channel. The series of highs and lows move incrementally and uniformly over time.

From a classic text, Technical Analysis of Stock Trends, I present support for this premise:

“Stock prices move in trends. Some of those trends are straight, some are curved; some are brief and some are long-continued; some are irregular or poorly deﬁned and others are amazingly regular or “normal,” produced in a series of action and reaction waves of great uniformity.” pg 56.

The text goes on to present an important point to consider now:

“Sooner or later, these trends change direction… when a price trend is in the process of Reversal, either from up to down or from down to up, a characteristic area or “pattern” takesshape on the chart, becomes recognizable as a Reversal Formation.” pg 56

(I would also add that breaking through key resistance (a ceiling which keeps a stock down) or support (keeps the stock above a certain price) is another tool in spotting and confirming reversals.)

Something which has helped me start becoming a more confident, disciplined investor is learning to spot reversal patterns and support/resistance levels. They will never be perfect indicators, but will shed light on what the market is doing, and where it is going.

Take a look at this chart again, and tell me : Do you think we’re reversing upward, or are we due for another leg lower in the current downward channel? If you do see a reversal pattern, let us know!

———————————————————————————————————————–

Shifting to a consideration about institutional buyers with respect to these market trends:

Sometimes I suspect that “smart money”, (aka Institutional buyer/seller, like mutual funds and hedgefunds) knows what to expect in this upcoming earnings season. If “they” do actually really “control the market”, here’s what I suspect has been going on:

Take all that as HIGHLY speculative, and probably ignorant.

Note: “Smart Money” keeps it’s focus on the longer-term trend, as it holds huge amounts of stock and cannot nimbly get in and out of the daily or even weekly action. They take advantage of reactions in the larger trends, making money all along as the stock market goes down:

Huge gaps up and down in the market could be a sign of manipulation by institutional buyers/sellers. If “they” do expect an up-side reversal here, they’re hiding that fact pretty darn well in market price action.

Please rate this post and leave some feedback! Thanks for reading.

iPhone photo

2009-03-31T14:35:00.002-05:00

The street I live on

VFH

2009-03-31T00:09:00.001-05:00

Financial outlook:

Short Term:

Long Term:

My opinion: Get short financials, via SEF (proshares short financials).

The Light Volume Pullback Myth

2009-03-30T22:42:00.003-05:00

A widespread belief is that a light-volume pull back after a recent run-up is bullish, or at least, isn't something to worry about. I got this belief by reading IBD, and a major premise of Technical Analysis of Stock Trends is that "volume goes with the trends".

Thanks to Danny for pointing out this study: "Myth Busted: Light Volume on Pullback a Good Thing"

If you're not interested in reading, the basic idea was to backtest S&P performance after light volume pullbacks. Things actually, on average, got worse over the next few days.

Now that I reconsider my belief on volume, I looked at our current situation and realized Friday 3/27 was a light volume pullback:

First, Know that aside from Friday and today, volume in the S&P has been averaging around 8 trillion shares since March 18th.

Friday (3/27) volume was 5.6 trillion shares, with a 2% loss. This was a "low volume pullback", and I took that as a bullish sign. (Here's a short term chart showing what I'm talking about). This action then led to today:

Today's (3/30) volume was 5.9 trillion shares traded with a 3.48% loss.

I'm tempted to say, "Well, today was a low volume pullback. The market's probably catching it's breath to rebound."

Well, it very well may be. However, it appears the "light volume pullback" is not as telling or reliable an indicator as I once believed.

What do you think?

Thanks for reading! Please rate the post and leave me some feedback

On a side note, here's my take on the market from this post:

Volume taken from yahoo finance.

Disclosure : Long SH

Hammy PT

2009-03-30T19:36:00.001-05:00

P90X Chest, Shoulder, and Triceps, and Ab Ripper X

really tough, good workout!

off to Sam's to buy beer and meat.

SPY Resistance at 784

2009-03-30T13:12:00.000-05:00

I'm short from 791. Look to crack 784 as support, but you might want to wait until 780 (as indicated by matt trivisonno, is the level of support whose break led to the 666 plunge. )

Hammy Trade: SH

2009-03-30T10:07:00.000-05:00

Bought 90 SH @ 78.63:

Your assumptions: This is the next intermediate leg down in the bear market. I could keep this until a)the bear market signals a shift in trend to Bull, using the dow theory, or b)until it reaches the bottom of the channel again, at which point I could take a small long position.

Time Range: The down-leg will probably last for about 3 weeks, about how long each prior downleg in this channel has taken. The recent intermediate reaction took 22 calendar days. I'm looking at the same time-frame.

What invalidates your assumptions? Breaking back into the last up-channel would signal another trend-change. There is high possibility of sideways action, fake-outs. We've seen one lower high, and have now broken the downside too. To shift this trend, we'd need both a higher high and lower low.

Target Price: $85+

Stop? I expect some volatility and upswings. As long as my assumptions are still valid, i'm not going to put in a stop. S&P 820 is currently where I'd clearly be wrong.

Morning formation

2009-03-30T08:44:00.002-05:00