Monday, June 19, 2006

Watch list for week of 6-19-06

I'm convinced that the long-term market trend is down and that we're experiencing the first bear rally. The naz gained almost 3% on Thursday. That's the kind of stuff you see in bear markets. I'm out of almost all long positions, and will be closing the rest out over the next two to four weeks. I'll be shorting opportunistically, but not aggressively yet. Before I show my computer generated watch list, let me point out the two scariest charts and the two best charts I've seen all week:

Scary:
HANS
NTRI

Best:
LBIX
AERTA

Here's the highlights from my market homework software this weekend:


By the way, if you are a daytrader or an "investor", don't even bother to email me. Also, if you have some pay_for_stock_tips service, don't email me.

Somebody might ask, so I feel like I should explain why I'm not going to hawk daytraders' websites. There are two reasons. Daytraders fight the tide if they are going long, which can be seen on this very simple trading system that buys the QQQQ at the open and sells out at the close:




The starting balance was $100,000, and ending balance is $18,914. Where did all our daytrader's money go? Simple. It went to the traders who bought and sold to the daytraders, ie. the ones who took overnight risk and avoided intra-day movement. It might occur that the daytrader should be shorting and cover at the close, but that is also less than optimal due to the inability of a short position to compound as it moves in your favor.

Anybody who wants to reproduce the spreadsheet above can download the price data into excel from this link at yahoo finance, sort the price data in ascending order by date, and use this formula in column J: =J1*(E2/B2) . Put the starting balance in the header row of column J, and you're set.

I can't wail on the daytraders without wailing on the investors. So how did they do over the same period? By buying and holding over the entire period, the $100,000 account is worth $76,192.37. A lot better than the daytrader, but a sharp stick in the eye for seven years worth of "investing". The investor figures his money would have doubled in seven years. Every seven it doubles, right? It never works out that way.

The point is that you have to have an edge, and if you aren't looking for one then don't come here. If I haven't pissed you off yet, then I probably don't mind if you email me.

To tell the truth, I'm thinking of taking a break from this blog. There are so many reasons why, but to name a few:

1) The market has turned long-term bearish.
2) I got ZERO responses to my writing contest.
3) I keep getting more and more annoying emails from people starting investing or daytrading websites and less email from legitimate traders.
4) There's no point in trying to help people make good strategic choices. The public cannot ever "solve" the market. As I get closer and closer to it, I find I have less and less to say to the public about it.
5) It is tiring to keep up with an exponentially growing community when the quality will never get any better than it was.
6) Almost all the blogs I used to love reading are either posting 12 times a day instead of maybe once or twice, switched to daytrading, moved to a pay site, or they don't post anymore. Maybe I'm the one who's crazy, but either way I just don't feel like there's much left here for me.
7) The "evil scientist hibernation" instinct is starting to become overpowering. I have more clarity now than I've had in about three years. When I'm working on my software, the only conscious thoughts that interrupt my concentration is that none of my other work matters. I've got to start cutting out other things, and this blog is one of them.

I like formulating my discretionary trading plan on here each week, it keeps me organized and disciplined. I haven't missed a weekly strategy plan posted to the blog in well over a year and I think I'm at the point where I don't need the blog anymore to maintain it, sort of like when you're a kid and you're ready to take the training wheels off the bike. I might discontinue the "weekly watch list" postings because it will give me more time to focus on improving my strategy and computer programs, and doing some real writing about trading instead of just snippets to the blog.

15 Comments:

At 7:41 AM, Anonymous Anonymous said...

sorry to see that you are thinking of quitting your postings as I enjoyed reading them.. I trade stocks for a living because I can't find a meaningful job. My stocks to own this week are JSDA-BRLC-BABY. Look at the charts and I think that you would agree that these 3 offer a great opportunity for a 10 percent pop .

 
At 8:46 AM, Blogger jontait said...

That's a real good roster. I figured out why JSDA didn't come up on my scan because it looks like it should have. There are four bigger_than_average_volume down days with no bigger_than_average_volume up days to cancel them out. Regardless, it looks better than any other stock I've seen except maybe LBIX.

Thanks for the comment.

 
At 9:50 AM, Blogger Gordengekko said...

Hang in there Jon as you do good work. GHLT has been a ripper lately. We agree we might be headed for a bear market. We have always been hesitant about posting shorts because of lawsuits from companies. Very fine line on posting shorts.

Gekko and Foxx

 
At 10:22 AM, Anonymous ExEngineer said...

I'm new to your site, but I also hope you keep posting your weekly strategy lists. Best of luck to you in whatever you decide!

 
At 3:53 PM, Anonymous Anonymous said...

Jon

I really appreciate the work that you put into these screens. It is always fun to read the opportunities that others are following. I hope you don't quite, but if you do its understandable.

Thanks again.

 
At 11:21 PM, Anonymous Anonymous said...

"6) Almost all the blogs I used to love reading are either posting 12 times a day instead of maybe once or twice, switched to daytrading, moved to a pay site, or they don't post anymore. Maybe I'm the one who's crazy, but either way I just don't feel like there's much left here for me."

This has happened to a handful of blogs I kept up with as well. I'm not really sure it's a good reason to join them though.

As long as the writing style and subject matter is good, I don't particularly care if there are 10 posts per day or 1 per week. It's the blogs whose authors show this talent and then don't post for weeks or months at a time that are the most frustrating to me. Sometimes I even think it's possible they died and whatever fans they had will never know.

As long as you feel like posting, I'll be sure to enjoy the content. Best of luck to you, regardless.

-a

On the e-mail front: Perhaps remove your e-mail from the site and just read the comments?

 
At 9:47 AM, Anonymous Anonymous said...

Say it ain't so. We all <3 Jon Tait and Fickle Trader! :D

 
At 4:49 PM, Anonymous Anonymous said...

Hey Jon,,

Don't go, there are a lot of people that appreciate your blog and style of trading. I'm starting to lean that way as well.

Sincerly,
Long Term Fickle Trader Fan.

 
At 1:48 AM, Blogger jontait said...

Hey guys thanks for all the responses. I've decided to keep writing the blog about the same as I have been because I didn't know there were so many lurkers who appreciate the content here for a variety of different reasons. Your encouragement is very kind and makes the effort worth it.

 
At 6:36 AM, Blogger Dave Johnson said...

I would concur with the other comments. You blog is one of the best. I always enjoy reading your posts. Thanks for all of your hard work and contributions.

 
At 12:29 PM, Blogger Michael Taylor said...

Hey Jon, hang in there...maintaining a blog is just like the market. Sometimes us bloggers will have lots to write, discuss, and share [equity peaks]. Other times, not much at all [equity drawdowns]. Sadly, the majority of our time will be spent in those drawdowns.

To play devil's advocate...if your test shows the tide is against daytraders and against investors. Is the tide with those brave souls willing to hold overnight and dump their holdings the next day? Hold short-term? Long-term? What criteria are you using to determine the tide is with if you trade like yourself? Are you adjusting your exits depending on certain conditions? Scaling out? If so, possibly daytraders and investors can and most likely are doing the same. Plus, your test is only showing one instrument. What happens if you choose a different one? What happens if you diversify across several instruments. Or diversify across time? I could go on and on. There are so many ways to skin this cat...that it's very hard to discount one methodology over another.

I know a guy who knows squat about the market...buys all his stocks from Tobin's newsletter for crying out loud...never sells and if he does it's for reasons I couldn't possibly understand logically. Yet, the dude has invested in the market for over 15 years and has made an insane amount of money...even after the bubble. Does it make sense? Hell no...he has done everything in my eyes wrong...yet he has come out ahead. Is it luck? Maybe...but I would sure like to have that kind of luck! :)

I know another guy...he has developed precise edges...quantified them...made tons of money from them. Been hired by hedge funds to trade them. Yet, just recently realized all his hard work was for naught. Read acrary's story here. Good stuff!

I seriously hope you keep posting. I always enjoy your posts.

Take care,

MT

 
At 5:13 PM, Anonymous Anonymous said...

hey jon,
while i totally understand why you may want to quit blogging, i just wanted to tell ya that i'm a newbie trader/investor going to college and have learnt a lot from your blog. thanks for all you do,
june
p.s. was wondering if you could guide me towards some other educational and interesting stock market blogs that you trust.

 
At 6:51 PM, Anonymous Anonymous said...

hey jon,
how long do you usually hold your positions.

-best trading

 
At 7:33 PM, Anonymous bruce said...

im the BRLC BABY JSDA anonymous poster --my name is bruce-- BABY popped to 13 intraday monday as it looked like a 50k share buy somebody hit market button- but I didnt have a limit sell posted as I was outside playing with the dogs-labs not bad stocks-BRLC I sold today at 2.45 for a 12 percent gain--JSDA is in a tight range before it's expected pop- and out with BABY 11.16 stop limit loss gone with the bath water--so I figured that I left 3 picks and 66 percent popped 10 percent -- so here are 3 more that I bought today ALY - CAMP - DRL -- A real wierd thing happened on Monday when BABY spiked up, the identical thing happened to CAMP at the same fraction of the minute 12:26:13 can you believe that ??--

 
At 10:12 PM, Blogger jontait said...

June,

Gorden Gekko, Dayve Johnson, and Michael Taylor all have amazing trading blogs. The links are on my blogroll and also in the comments here. I read all the blogs on my blogroll, but some more than others.

For educational sites, my mentor "Piranha" runs a good one. I am a dues paying member and will be for life because I've learned so much from him. His site is Market Stock Watch. Also worth checking out is Ed Seykota's Trading Systems Project. I've got a few other good links on the sidebar of the blog if you want more.

----

Best trading,

I carry positions for as little as a few minutes or as long as many months. When I'm losing, my turnover is very high because I'm cutting losers quick. When I'm doing well I add to my strongest positions and let them ride until the chart goes sour. It looks a lot like the intro on Dan Zanger's website.


-Jon

 

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