## Friday, December 31, 2004

### Happy New Year!

I'm busy with my research on the big trends for the upcoming years. It's taking longer than I thought with the research...so please forgive me for not getting it to you before this year is up. I hope to have the first part of the article posted this Sunday. Kinda open year 2005 with a bang. We'll see.

TraderMike posted his 2005 prediction for the market...here. But, I'm still waiting for his 2005 resolution(s). :)

My prediction? I tend to agree with Michael. How the heck can anybody know what's going to happen in a year? And if they did...would anybody believe them?

I think the best thing one can do in gearing up for a new year is determine what major trends took place in the prior year. Better yet...what major trends have been taking place for the past few years. Trends continue until they don't. The likelyhood of the start of a new year being the end of a major trend is very small. Large trends takes months and sometimes years to unwind. So, identify the major trends and gear yourself towards them.

The next best thing to do for a new year is evaluate what you did right and wrong in the previous year. And of course, do more of what you did right and less of what you did wrong.

Here's the major thing I did wrong in 2004. Second guess my systems. Selling out my system positions, letting my sidebet overcome my entire portfolio was a stroke of idiocy. But, it taught me a lesson. A lesson I've been needing to learn. Trust my systems.

The major thing I did right? Realizing I made a mistake in selling out my system positions and buying all of them back, at higher prices to boot. Did that hurt? Yes! But, it taught me something. Don't compound a mistake you made by sticking with that mistake to the bloody end. Cut your losses and move on.

So, enjoy the New Year everyone. I hope you have a Happy, Safe, and Prosperous One!

See ya in 2005!

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +1.52%;
• 1 QQQQ (Tii100Low) long with current profit of +1.04%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Wednesday, December 29, 2004

Good news! I've purchased the Roady 2 XM Satellite Radio. I'll test it out and let you know the results in the coming weeks.

Stopped by Barnes & Noble...
• Bought the latest copy of Active Trader magazine. Looks like there's an interview with James Altucher. Should be interesting.

• Read the latest issue of Technical Analysis of Stocks & Commodities magazine showcases a mechanical penny stock system. My PennyLag system shares some of the core premises with their system. Especially, the part about volatility being a useful tool for the mechanical systems trader. Funny, how we use different tools to identify the same concepts.

• Running Money looks like a good read. About a hedge fund manager's perils through Wall Street. Might have to add that to my reading wishlist.
Plans for New Year's Eve? Have any New Year's resolutions worthy of mentioning? What trends do you expect to continue or begin in 2005? Let me know.

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +1.60%;
• 1 QQQQ (Tii100Low) long with current profit of +1.11%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Tuesday, December 28, 2004

### The Variant Perception

Another fund manager after Bill Miller's record. I like the fact that Schier operates his fund from Topeka, Kansas. Read here.

The majority of my equity is in my mechanical systems. A small portion (5%) is reserved for what I call "side bets". These side bets are used to satisfy my trader side. Satisfying my trader side allows me to patiently ride my systems ups and downs. Well, at least sometimes. Ha! My current side bet was placed on GSH a few weeks ago.

I've been thinking that in addition to my side bets...further diversification is warranted. Except for the PennyLag system...most of my stock positions are in mid caps and small caps exhibiting the tight-riser effect. Tight-risers are stocks in extremely strong uptrends with low volatility. Part of this idea was obtained from Gary Smith in the book, "How I trade for a living". Granted Smith used mutual funds and I'm using stocks...but the idea is nevertheless the same.

So, the majority of my money is in the same type of stock and strategy. To combat this effect, I've been paying attention to mutual fund managers and newsletter authors with great records and strategies much different from my own. My hope is to allocate a small portion of my equity to a few of these investors...allowing me to participate in other opportunities in the marketplace...and at the same time smoothing out my equity curve a bit.

I'm still in the process of finding great funds and in particular great fund managers. As well, as newsletter authors similar to the post I wrote yesterday.

This is why Jim Schier interests me being from Topeka, Kansas. I like investors who are out of the so-called Wall Street grapevine. As Doug Kass often opines...I'm looking for the variant perception.

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +0.99%;
• 1 QQQQ (Tii100Low) long with current profit of +1.47%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Monday, December 27, 2004

• Ed Yardeni's 2005 predictions. To put it simply, he's bullish on the US Markets. He's a believer in growth stocks and buzzword plays such as RFID and anti-virus companies. Also recommends coal companies...similar to Tobin Smith's mention on Bulls & Bears this past weekend. Check out his 2004 predictions...the recommendation to stay away from pharma was spot on.

• Big Bonuses on Wall Street? How are the high-end retailers doing?

• Silver is the new white? If so, could this bring more demand to the shiny metal?

• Satellite radio? Yes, I'm seriously thinking about getting one. I live in a rural area and the lack of choice and quality on my commute to and from work is spurring this decision. It seems all the buzz is with Sirius. But, after my product research...it seems XM Satellite has the better product. Plus, it's cheaper. And I believe the XM Satellite Roady 2 is the only one offering customized stocks lists. Hey, after I saw that...I knew I had to have one.

• Top performing newsletters of 2004 and their stock picks. The Turnaround Letter and BI Research are the ones sounding most interesting to me. Read here.

• Interview with Darren Clifford. I like how he treats each trade as an independent business. The trading pairs strategy has given me some interesting system ideas to test.

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +0.03%;
• 1 QQQQ (Tii100Low) long with current profit of +0.51%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

### Weekend Update

I've been taking it easy this weekend. Not much tinkering with the systems. Hope to get back to the normal routine this week.

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +0.45%;
• 1 QQQQ (Tii100Low) long with current profit of +0.94%.

Long system trigger for HAUP at Monday's market open. The system that generated these trades is the same system that generated CARN, EGHT, ZICA, VNWK, SPDE, and AATK trades the previous weeks. So, as you know, system caters to penny-type stocks with high volatility. Holding periods are mid-term in length. This system is one of my riskiest systems. I trade very little size with trades from this system because losses can be extreme.

Current open system positions:
• 1 QQQQ (SimpleUp) long with current profit of +4.77%;
• 1 QQQQ (TurtleTrader) long with current loss of -0.90%;
• SPDE (PennyLag) long with current loss of -10.38%;
• AATK (PennyLag) long with current loss of -17.46%;
• VNWK (PennyLag) long with current loss of -1.16%;
• EGHT (PennyLag) long with current loss of -9.20%;
• ZICA (PennyLag) long with current profit of +45.08%;
• CARN (PennyLag) long with current profit of +9.90%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Friday, December 24, 2004

### Merry Christmas!

Hope everyone is enjoying the holidays. Be careful....between the cold and the crowds...it's dangerous out there. And it's getting weird. I had a friend call from Galveston...informing me that it's snowing. Can you believe that? Galveston?

Sorry for the lack of posts. But, I've been very busy at work. And really don't have time to post now. Just wanted to...

Wish everyone a Merry Christmas and Happy New Year!!!

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +0.45%;
• 1 QQQQ (Tii100Low) long with current profit of +0.94%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Tuesday, December 21, 2004

### Happy Holidays!

Busy day today...haven't had time to continue my seasonality studies. Hope to post one more time this week. If I miss you...have a happy and safe holiday season!

Current open system positions:
• 1 QQQQ (BBLower) long with current profit of +0.25%;
• 1 QQQQ (Tii100Low) long with current profit of +0.74%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Monday, December 20, 2004

### Seasonality of the Market II

Continuing on yesterday's post on best performing months...I figured I would post the worst performing months.

DJ-30:
Worst months of performance were September (14x. -8.91%), October (12x, -8.68%), March (11x, -7.25%), and August (11x, -6.04%).
Data included years 1915 - 2004.

S&P 500:
Worst months of performance were August (8x, -6.45%), October (7x, -7.00%), and February (6x, -4.33%).
Data included years 1962 - 2004.

Nasdaq Composite:
Worst months of performance were March (3x, -5.85%), February (2x, -15.54%), July (2x, -8.32%), and September (2x, -6.08%).
Data included years 1990 - 2004.

Now, we're heading somewhere. There's a slight pattern developing here. February, March, August, September, and October are months to watch out for. The next step is to test the scenario of exiting out of the market during these weak months. Another scenario to test is entering the market only during these months...in essence...buying seasonal weakness.

More tomorrow.

Received another QQQQ long system trigger. This one is for tomorrow's market open. The name of this system is Tii100low. Backtested win ratio is 92.50% and the average profit is 4.03%. The system holds the QQQQ for a max of 8 trading days. The system is based on a new 10 day low, above average volume on the decline, and a strong mid-term uptrend in place. Finally, a trigger from one of my better systems.

Closed 1 QQQQ (Harami) long position with +0.20% profit.

Current open system positions:

* 1 QQQQ (BBLower) long with current loss of -0.96%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Sunday, December 19, 2004

### Seasonality of the Market

I had a rather interesting conversation with my wife today about market timing. Specifically, the peculiar way markets tend to surge just a few days/weeks a year. The rest of the time...the market just churns.

We were trying to determine if there would be a way to reduce the number of days to have funds in the market. In a typical year you have approximately 250 trading days. If you could figure out a pattern when most surges occur...take steps to ensure you were 100% invested during that timeframe. And possibly step out of the market during the churn cycle. Similar to the Sell in May, walk away adage.

So, I started testing. Looking for the best months of each year in the DJ-30, S&P 500, and Nasdaq Composite. Here's some results from the study.

DJ-30:
Best months of performance were April (13), July (13), November (12), and October (10).
Data included years 1915 - 2004.

S&P 500:
Best months of performance were October (6), March (6), May (5), and January (5).
Data included years 1962 - 2004.

Nasdaq Composite:
Best months of performance were April (2), March (2), May (2), August (2), and December (2).
Data included years 1990 - 2004.

In the above examples, the DJ-30 April month acheived the best gain of the year 13 times during the years of 1915 - 2004. The S&P 500's best month was split between October and March. And the Nasdaq Composite split its best performing months between Spring months (March - May), a late summer month (August), and a winter month (December).

After just a quick review of this data...it looks like the old adage of Sell in May, walk away might not be as simple as it sounds. But, of course, more studies of the data needs to be done.

More to come in tomorrow's post.

Until then...

Received a close trigger for the QQQQ Harami long system at Monday's market open. But, this weekend received a long system trigger for the QQQQ from a different system (BBLower). As a result of this...I'll continue to hold the QQQQ position until the new BBLower system issues a closing trigger.

The BBLower system is based on the Bollinger Bands. Specifically, a pricebreak below the lower Bollinger Bands. This is not one of my favorite systems. It has an 80.10% win ratio and an average profit of 1.81%. I typically do not like to use such a low average profit on a system. As a result, this system is still under evaluation. There's a good chance this system could cycle into the "Not Ready for Primetime" folder. Unless I can find some way to improve it's performance.
• 1 QQQQ (Harami) long with current loss of -.05%.

Long system trigger for CARN at Monday's market open. The system that generated these trades is the same system that generated EGHT, ZICA, VNWK, SPDE, and AATK trades the previous weeks. So, as you know, system caters to penny-type stocks with high volatility. Holding periods are mid-term in length. This system is one of my riskiest systems. I trade very little size with trades from this system because losses can be extreme.

Current open system positions:
• 1 QQQQ (SimpleUp) long with current profit of +4.03%;
• 1 QQQQ (TurtleTrader) long with current loss of -1.60%;
• SPDE (PennyLag) long with current loss of -13.08%;
• AATK (PennyLag) long with current loss of -18.25%.
• VNWK (PennyLag) long with current profit of +8.12%;
• EGHT (PennyLag) long with current loss of -4.10%;
• ZICA (PennyLag) long with current loss of -1.00%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Thursday, December 16, 2004

Congrats to Kelly for his win on The Apprentice. Kelly's a stiff...but he gets the job done.

Next season's Apprentice looks like a good one. The Book Smarts vs. the Street Smarts. Oh, the drama!

Well, the house deal didn't work out. Everything was great except for the school zone. So, had to cross that one off the list. Heck, after last month's 13.1% plummet in U.S. housing starts...maybe I need to wait.

A really great interview from SmartMoney.com with Ronald Muhlenkamp of The Muhlenkamp Fund (MUHLX). Interesting points made by Mr. Muhlenkamp:
• I've now been through five or six recessions, and what I've learned is that every now and then the public shifts its spending. In the 80s, people were spending their money on BMWs and housing. In the first half of 90s, people bought financial stuff, like stocks. When they change their spending habits, it tends to occur across a recession. Now, it's anything related to the home.

• When you get a shift, it takes a lot for people to change their patterns.

• Back in the 60s and 70s, we expected a recession every three to five years. The first one is traumatic. The second one, you think, I've been through this before. We've only had two recessions in 20 years. We had a generation that had never been through a recession. I compare it to wintertime in Pennsylvania. You know it's going to be cold during certain months. We think of the business cycle the same way as we think of a seasonal cycle.

Current open system positions:

* 1 QQQQ long with current profit of +1.14%. - forgot to update this last night.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Wednesday, December 15, 2004

### Survivorship Bias

Survivorship Bias comes in all forms.

This time it came with a buy-out. One of my newest stock trading systems received a long trigger for MTCH at Thursday's market open. But, this little devil is getting acquired from AMAT.

Thus, the ticker symbol MTCH will soon cease to exist. And that's why I cannot take this trade. Because my system was built and backtested on stocks that are currently active. Any stocks it might have traded in the past that were bought out do not show up in my backtest.

So, you have a frustrating situation. A system trigger for a type of trade not tested by the system.

Trading just a few of these exceptions to the rule can really impact the expected outcome of your trading systems. That's why I do not automate my systems 100%. Human intervention is still needed from time to time.

Current open system positions:

* 1 QQQQ long with current profit of +2.10%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

Sorry, for missing the post last night. Looks like blogger is having problems posting to domain names. So, I've had to use the backdoor so to speak.

Excellent post by Roger Nusbaum on covered call index funds. I can't get over the dividend yields on the two funds he mentions. Will be nice to see these funds after a few years of historical data. Might offer some added bonus to an index market timing system.

Neal Berger interview post. Insight into running a hedge fund. Nice missive on capital raising: "I have seen many a successful trader not be able to get off the ground and not be able to make any head-way simply because they are not really good marketing people." A great marketer trumps talent any day. An ugly but truthful fact of life.

Current open system positions:

* 1 QQQQ long with current profit of +2.48%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Tuesday, December 14, 2004

Took an early lunch to meet with the real estate broker today. Might have found a house. Not 100% sure...but the house has potential. Wouldn't be a big upgrade from our current house...but would get us closer to civilization...and more room for the little curtain-crawler.

Now, on to business. Some interesting articles today that run the gamut:
• Blockbuster removing the late fee? Finally, they realize how hard it is to stop watching TV, get off the couch, and take a dang movie back.

• Interesting chart from Infectious Greed on holidays and deaths. Paul's speculation that people would rather die than mess up their holidays is probably more true than we think. My mother died a day after Christmas in 2001 after a long battle with Leukemia. She decided being home with the family during the holidays was a much much better choice than being stuck in a hospital.

• Raymond Mason honored as CEO of the Year by CBSMarketWatch.com.

• Not finished Holiday shopping? Send someone a FAT bastard.

• Chuck Jaffe's Lump of Coal Awards. My favorite winners are Chris Lahiji and Doug Fabian. But, let's admit...kudos must go to Fabian. Promising a 100% return in 365 days? Now, that's moxie!

• The Bunny Portfolio? Check out Tesoro's rocket-like comeback from oblivion. Tesoro's stock plummeted below $2.00/share back in 2002 when the crack spread was at its narrowest. Now, the stock trades above$30.00/share. Wow! Maybe I need to watch the new low list more often.

• Interesting little history lesson on the German mark and hyperinflation by Jonathan Hoenig. Read here.
Why is it when we look at a home to buy...we automatically fly into Mr. House inspector? Noting every nook and cranny that is wrong with the house. Yet, when evaluating a stock...we only see the positives?

## Monday, December 13, 2004

While everyone is focusing on Orasoft...I'm wondering what SAP AG is thinking right now? SAP could perceive this as a huge win or a death blow.

Huge win?
• The troublesome merger between Hewlett-Packard and Compaq marked the end of their dominance in the PC market. And opened the gates wide open for a strong and focused player like Dell.
• While Orasoft is struggling to combine the two companies and their product offerings...will a strong and focused player like SAP AG step in like Dell? Already 50% of the world's GDP flow through SAP systems.
Death Blow?
• 70% of SAP applications run on Oracle databases.
• How uneasy will the relationship between Orasoft and SAP AG become over the next few years?
• Will the marketing efforts on SAP AG's / MYSQL's MaxDB increase? MaxDB is a SAP-certified open source database.
• Will this open up the market for newcomers in the ERP field? Newcomers and existing players in the database field?
• Are CIO's feeling uneasy about their administrative IT systems being in the sole hands of a vendor? Could we see a resurgence in homegrown IT systems? If so, will companies like EDS and Perot Systems see a boost?

1 QQQQ (Harami) long with current profit of +1.97%.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Sunday, December 12, 2004

### Survivor Winner

Congrats to Chris for winning Survivor! I thought he played the game extremely well. The odds were stacked against him. And thanks to his great talent in telling people what they want to hear (the BS factor) ...he now has a million dollars to spend. What would you do with a million dollar landfall?

I would take care of the normal things....house, debt, family, etc. But, allocate some travel money for two things:
1. Hawaii - my wife has always wanted to see Hawaii and take the helicopter ride and just have the full experience.
2. Alaska - I've always wanted to fly into a remote log cabin on a mountain lake. Fish for trout, salmon, etc. Just enjoy the scenery.
Have a good week!

• 1 QQQQ (Harami) long with current profit of +0.86%.

Long system triggers for EGHT and ZICA at Monday's market open. The system that generated these trades is the same system that generated VNWK, SPDE, and AATK trades the previous weeks. So, as you know, system caters to penny-type stocks with high volatility. Holding periods are mid-term in length. This system is one of my riskiest systems. I trade very little size with trades from this system because losses can be extreme...as you can see by the current losses in the SPDE and AATK trades.

Current open system positions:
• 1 QQQQ (SimpleUp) long with current profit of +5.22%;
• 1 QQQQ (TurtleTrader) long with current loss of -0.47%;
• SPDE (PennyLag) long with current loss of -11.54%;
• AATK (PennyLag) long with current loss of -17.06%.
• VNWK (PennyLag) long with current profit of +8.70%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Thursday, December 09, 2004

Blade: Trinity did not impress. I was expecting a continuation from the first two movies. This one took off on a different path. Reminded me of the old Bruce Willis action movies...this time Ryan Reynolds played the whiny wise-cracking "tough" guy.

Ryan Reynolds clearly stole the show. The guy was hilarious. You might remember him from the Two Guys, A Girl, and a Pizza Place sitcom. His wisecracks had the entire movie audience rolling in their seats. The "silent but deadly" crack was brilliantly funny.

Jessica Biel looked good...but suffered from lack of dialogue.

Parker Posey played one strange, cool, ugly vampire.

Overall, the movie was okay. But, I missed the old Blade.

Current open system positions:
• 1 QQQQ long with current profit of 1.39%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Wednesday, December 08, 2004

### Daily System Update

Sorry about the oil chart formatting in the previous article. I'll try to fix the problem tomorrow morning.

Received a long system trigger for the QQQQ for Thursday's (12/08/2004) market opening. This system has an 82% win ratio with an average profit of 3.55%. The system holds the QQQQ for a max of 7 days. This system is based on a two-day pattern: a range expansion day followed by a range contraction. A trend filter is thrown into they mix as well.

Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

### Oil Rigs & Prices Update

Posting an updated chart on US Oil Rig Counts versus Crude Oil prices.

Data provided by Baker Hughes, Inc. and inflationdata.com

Mark December 10th & 11th on your calanders or Tivo it. Roger Nusbaum from Random Roger's Big Picture will be on Your World with Neil Cavuto (Friday) and Forbes on Fox (Saturday). Roger is a good guy...wish him luck!

There is a long story to my shoulder situation...but I'll give you the short explanation. They had me down with the wrong shoulder injury. They could have really messed me up...but the surgeon and physical therapist think all is okay. I attended my second therapy session today...and much much better. The pain is finally gone from Monday's torture treatment.

In fact, I might sneak out and see the new Blade: Trinity flick. I'll let you know if its a winner or a stinker.

Thanks for everyone's well wishes and concerns!

## Monday, December 06, 2004

### New Kind of Pain

I started physical therapy on my shoulder today...and found a whole new kind of pain. I was told that beginning physical therapy can be painful...but I truly had no idea.

At first everything seemed fine. Just some minor discomfort in trying to expand the range of motion on my still sore shoulder. Then pop. And then a rush of pain like I've never felt before. The therapist struggled to pop my shoulder back into place. All the while I'm sweating and grumbling with the pain. Not fun.

After an ice pack and electrodes to the shoulder...the therapist tried to work it again. This time an even louder pop...and even stronger pain. I could tell the therapist was truly worried about getting the shoulder back into place. I was just looking for a bucket. After what seemed like an eternity...finally some peace...the shoulder popped back in. Then more ice packs and electrodes...and the therapist sent me home.

Not a fun day. And I'm afraid not much time can be spent on the computer due to the pain.

If anyone has any experience with physical therapy...please let me know if this type of experience is normal. I have another session this Wednesday...and I'm dreading it like the plague.

So, bare with me. I'll try to post a bit here and there. Just can't dive too much into system testing right now. I will tell you that I've been testing a cool little idea that involves US oil rig counts and oil prices to trade oil drillers. The idea seems to have some promise.

Have a great week!

## Sunday, December 05, 2004

### Weekend Update

In a call-out for trading ideas last week, I received an email from Tony in regard to the following idea: buying NYSE stocks after 4 consecutive down days. Tony states that he's looked at various trading systems and has not found any that work well against the NYSE stock universe.

I agree with him 100%. I have developed over 45 trading systems and only two can trade NYSE stocks successfully. There's just something funky about NYSE stocks. The only tip I've found for trading NYSE stocks is to limit your trading to the NYSE optionable stocks only.

Now, back to Tony's idea of buying after 4 consecutive down days.

I coded the idea first against the QQQQ. There was a surprising amount of trades for this idea with nothing to write home about. So, I filtered the results down to only buying on a drop of over a certain percentage from 5 days ago. I applied various percentages and none really seemed to improve the results. A trend filter did not help either.

Just for kicks, I ran a rough test against NYSE optionable stocks. Results were no better than random entry. Overall, the first wave of testing was frustrating. Does not mean there is not something there. Just means have to dig a little deeper.

My next step is to test volume patterns and possible extending the number of days down. Other ideas could be to test whether it's a brand new 50 day low or if the down days started from a 50 day high. I'll keep you posted on the progress.

Until then...

No open trades at this time.

Long system trigger for VNWK at Monday's market open. The system that generated this trade is the same system that generated SPDE and AATK trades the previous weeks. So, as you know, system caters to penny-type stocks with high volatility. Holding periods are mid-term in length. This system is one of my riskiest systems. I trade very little size with trades from this system because losses can be extreme...as you can see by the current losses in the SPDE and AATK trades.

Also, as I'm sure you know, the QQQ symbol has changed to QQQQ. This symbol change is a result of the ETF now trading on the Nasdaq versus the Amex.

I currently have a weekly long system open on the QQQQ (results below). But, this weekend received a new long system trigger for the QQQQ from a different weekly system. This weekly system is based partly on the original Turtle Trading system. TraderMike has a post containing links to the system. Read TraderMike's post here.

Current open system positions:
• 1 QQQQ long with current profit of 5.74%;
• SPDE long with current loss of -9.23%;
• AATK long with current loss of -13.10%.
Please read the disclaimer on the website. This is not a recommendation to buy, sell, or trade securities. Just a journal of my travels through Wall Street. I can buy, sell, or hold any positions mentioned on this website at anytime. So, be warned.

## Thursday, December 02, 2004

### Motley Fool Millionaire Article

A recent article by Tom Gardner and Rich Smith of The Motley Fool sparked a system idea or two. Read the article titled, "Be the Millionaire Next Door", here.

Tom and Rich propose a system of consistently pumping money into the market each and every month for up to 25 years in order to become a millionaire. Basically, using the dollar-cost averaging techniques of investing your money in good times and bad. But, what if you could supercharge the system? Like Tim Allen in Home Improvement used to say, "I think it needs MORE POWER. Arrh! Arrh! Arrh!"

Instead of investing your money each month into the market...invest your money each month into a money market account/fund. Then only move money from that account into the market based on system triggers.

These system triggers could be as simple as using moving averages, donchian channels, seasonalities, etc. to determine entry points. You could even change the idea of using stocks to choosing mutual funds. Pick a few sound mutual funds with long-term records. The more non-correlated these funds are the better. And then a system could be built to trigger off these funds or their corresponding benchmark index.

Maybe an even better alternative would be to just use ETF's instead of funds.

Again, the basic premise is to contribute every month...but wait to invest in the market when the system deems it appropriate. The extra little tweak you could make is to play with money management techniques. You could allocate the money from your holding area into the market based on simple formulas such as using a percentage based method of allocation. Or drive down further into more complex techniques such as pyramiding, equity curves, etc.

You're probably asking, what's the difference between this system and regular systems used to enter the market? With regular systems you're looking to stay out of the market as much as possible. Only have your money in at opportune times and remove your money during the risky times. With this system you actually want your money in the market as much as possible. In fact, you never pull your money out with this system. Once you get an entry trigger and move your money into the market...that money is gone to the system. See the difference?

Like I said before, I'm just trying to add more power to Tom and Rich's system. Maybe reduce the time to become a millionaire from 25 years to 15.

I plan on working on this idea over the coming weeks. I'll keep you posted on the progress.