Wednesday, April 20, 2005

Keep It Simple Stupid!

Listen to the what the market is saying about others, not what others are saying about the market. - Richard Wyckoff

Sorry everyone for the lateness in posting. Some big things have been going on here at the TaylorTree. One, my 34th birthday was this weekend and my wife and daughter gave me a wonderful birthday. Just wonderful.

Secondly, some real interesting and a bit troubling news came this weekend. I have briefly mentioned my recent evolution in systems trading and promised I would share. So, here's the deal...

After you develop and trade a few systems, pop your cherry so to speak, you then begin to experience the battle to keep up with the market. You think developing more systems will do the trick but in some ways only worsens the problem. Why? Because many of the systems you trade share similar characteristics and begin to overlap with each other. That leaves a whole world out there in the market that you can't trade or have yet to capture in system logic.

For some system traders that is okay. They did not come from trading backgrounds. Their love is in finding logic to the market and exploiting it via their systems. Then you have rascals like myself that evolved from daytrading into system trading. It's very very hard to turn off the trader in me and sit back and let my systems do the work. Luckily, I have fought the battle and won for the past 4 years. But, these past few months have been extremely hard.

My systems continue to do well (some have had their problems like the Penny Weekly system) but for the most part they have performed very well. In fact, I've even had a revelation or two with the Penny Weekly system and some of my older private systems that have made them even better than ever. But, as I mentioned above, the trader in me yearns to trade.

So, I've embarked on a journey recently in my trading. Instead of using the sheer audacity of intuition/gut to trade the market like my President Election fiasco...I have decided to combine my intution/gut, analysis, and programming experience together and you have followed the transformation in the recent blog postings. I have to admit, it sounded great! Heck, I go back and read the posts and I'm like, man...that's good. You're a smart cookie. And you do not even know the half of it. The amount of data crunching, chart analysis, correllation analysis, historical studies, etc. performed was mind boggling. All to hit the big trade. And when it all fell into place in my Moment of Clarity...I felt good. Relieved! I knew I hit the mark and just had to take action and I did. After that...wait.

Waiting is what I've been doing. No doubt the market has been like a bucking bronco ever since I initiated my position. Well, let's be honest...a dying horse is more like it. But, I've been holding strong...proud of the fact I'm trading a portion of the market that I have yet to capture in 100% system logic. A bit of my gut...a bit of my mind...is in this trade. Something to be really proud of. And then low and behold what happens this past weekend?

A damn system trigger to go long the Nasdaq! Can you believe it? All that work, struggle, keeping up with everything and anything. Using every last ounce of myself and one of my systems not only picks up the trade but actually enters at a much much better price. Damnitt! And you wanna know the most frustrating part? This system truly follows the KISS dogma...

Keep It Simple Stupid. Let me say that again so I won't forget. Keep It Simple Stupid!

Yes, it's true. I'm not afraid to admit it. A very simple system that I created almost 3 years ago most likely in a few days time has beat me. So, after a defeat of this magnitude, what did I do?

I quietly took the Nasdaq trade with my tail between my legs. Yes, I'm massively long the market. Both in the Dow and now the Nasdaq. And I have no doubt the Nasdaq system trade will indeed perform better than my Dow trade. Heck, it already has.

Just wanted to give you the spill. Let you know what's going on. And let you know that even more changes are brewing down at the TaylorTree. I'll share more with you in coming posts.

Later Trades,

MT

Friday, April 15, 2005

If it feels good, don't do it.

"Dennis used to say, somewhat fecetiously, "If it feels good, don't do it." In fact, one rule we taught the Turtles was: When all the criteria are in balance, do the thing you least want to do. You have to decide early on whether you're playing for the fun or for the success." -- William Eckhardt

Maybe I was right after all about the oil plays hitting a soft spot. This is good. Means we still have more room to go with these guys. Unless of course our economy falls off a cliff. In the mean time, I'm feeling the pain, baby.

The Dow call? Oh, yes, I'm feeling the pain with that one as well. Hurting bad. So, with that hurt I'm going to go out on a limb even more. Tomorrow we rally. The Dow will experience a move up of 1% or more. Next week? A +2% up move.

What crystal ball am I looking at? The 70's correllation. And according to my studies the Dow rallies from here. If I'm wrong...then I'm afraid I'll have to look into liquidating my positions. I still have a little leg room on the downside...but not much. If the Dow moves down more than 2% from here...I'm out. Then papa will have to find a brand new bag. Ha!

Everyone have a great weekend!

MT

Tuesday, April 12, 2005

Dow Teaser

Wanted to post a link to a chart I've created comparing the 1970's on the Dow versus our current timeframe. So, please check it out here. I'll post my explanations later this week in another post.

Please note, the chart is a very rough comparison. Let me say that again...a very rough comparison. :-)

Oh, and pay special attention to how the Dow flirted with the 1,000 level back in the late 60's and 70's and how we are flirting with the 11,000 level now.

Later Trades,

MT

Monday, April 11, 2005

Echo Bubbles?

I have a great little treat for everyone coming this week. I have been performing further studies on the 1969 - 1975 market versus the current market we are in. I'll post a great chart possibly Monday of my research.

To give you a brief hint of what my study is pointing to...I'll leave you with this: We should see an explosive move occurring within the next few weeks. In fact, my bet is on this week or the very next week of this move occurring.

Also, someone posted an anonymous comment on the A Moment of Clarity post. I wanted to thank that person for pointing out the errors in my article. I was blending the business cycle dates and stock market cycle dates together. The person also made a great comment in regard to echo bubbles. And provided some great examples. So, thank you for your comments!

The first time I ever heard the echo bubble term was back in the early 90's. The news was all a buzz in regard to Japan and how several economists believed Japan was experiencing an echo bubble. I was just a young pup back then so girls were my focus instead of the market ..thus I have no idea why I remember that discussion...but I did. In fact, I haven't heard that term written or spoken since...until the anonymous poster brought the term back to my attention.

So, are we in an echo bubble? I believe so. Stay tuned for the chart I'll post this week to explain why I believe we're in an echo bubble.

Later Trades,

MT

Monday, April 04, 2005

Brief Update

Between a sick daughter, taxes, and daylight savings time...I haven't had time to write a post this week.

Just wanted to share a few thoughts on the markets. In my previous post, I discussed my bet on oil/gas stocks being soft and going long the Dow. Funny how oil/gas stocks surged and the Dow dropped even further. But, that's what the market does...makes it tough on ya.

This week will prove to be a key week in my Dow trade. I have placed a line in the sand and if the market doesn't live up to my plan...I'll have to adjust the plan. Meaning, by my plan the Dow should begin a turn and reverse very soon. In fact, if I do not see the Dow begin an advance this week...I'll get worried. Not until then.

In fact, based on the data I'm seeing...oil/gas stocks are where my worries are. I wanted...no I needed to see a continued soft spot for these stocks. The Goldman Sachs call....all that changed. I'm seeing new equity highs due to that call. Something I didn't think would come until the first quarter numbers begin to come out. If we continue to see strength in these stocks heading into earnings...the earnings announcements may prove to be an intermediate top in this sector. And I really hate to say that considering the long-term fundamentals of the sector. So, watch out...if you're not in this sector...it may pay to wait several months before stepping a toe in.

Pay attention out there. Things could get interesting.

Later Trades,

MT