Posts Tagged ‘market timing’

Phil Davis’ Mircowave Oven Theory of Behavior

I mentioned my Microwave Oven Theory this morning and I didn't realize it was hard to find so here it is again:

Last Thursday, I mentioned that Jim Rogers said:

I am as confused as anybody else (about the level of bearishness on the Euro).  Usually that indicates a rally… Once a technical rally starts, who knows where it can go from that. 

Don't you wish other people would be that honest with us?  It's very hard for people who give opinions for a living to stand in front of an audience and say: "I don't know."   Somehow they seem to feel that they HAVE to know and, what's worse, once they force themselves to make a decision, they somehow feel obligated to defend it, even if new evidence comes out to the contrary.

This is exactly what's wrong with financial reporters and analysts, especially the clowns on TV (as well as pretty much anyone who makes a living giving you their opinion).   My Members are familiar with something I'm going to share with you now.  It is a Nobel Prize-worthy theory that I feel helps make me a better trader and I thought this would be a good time to share it with you:

People love to make random decisions and stick to them like they were directly given it as a commandment!

How does this relate to microwaves? Well, aside from the fact that our brains are constantly being fried by the things every day (ever drive on the highway and see one of those dishes aimed right at you?  Do you know birds die if they fly too close to them?), this is what I observe:

You put something in the microwave, say pizza, and you put in a time, say 3:33 (or maybe you are a whole number person and do 3 or 4 minutes). Now, unless you are a chain store pizza buyer your pizza slice is probably not always the same size or maybe it has different toppings etc., but you probably put in the same number every time.

Theory number 1:  People tend to repeat behavior, especially if it was successful in the past.

So the light goes on and the little thing spins…
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Basic Technical Patterns: The Foundation of Common Pattern Identification

Pharmboy’s latest chapter in his TA eBook – Chapter 7! - Ilene 

Links for previous chapters:

1. Understanding Market Cycles: The Art of Market Timing (Chp. 1),

2. Dow’s Theory of Markets (Chp. 2),

3 & 4. Fundamental vs. Technical Analysis and Types of Technical Trading (Chps. 3 & 4).

5. Stock Charting Basics: How to Read & Understand Stock Charts (Chp. 5 here.) 

6. Using Moving Averages for Long and Short Trades (Chp. 6)

Basic Technical Patterns: The Foundation of Common Pattern Identification

Courtesy of Pharmboy of Phil’s Stock World 

History tends to repeat itself, and trend lines, triangles, and other patterns do work in TA.  Charts show the collective opinions of all market participants for that day, month, or whatever timeframe that is used.  Charts are direct evidence of the trader’s beliefs and feelings, and each movement reflects a bit of human emotion (or at least it did before speed trading – HAL9000).  So, it should be no surprise that patterns repeat themselves over and over.

In Figure 1 below, typical up trends and down trends are shown.  These zigzag patterns are seen all the time, but why do they form?  Let’s say someone bought a stock at a certain point.  If that stock went up, but pulled back to the original purchase price, they will often think that it’s an opportunity to buy more at their original price, thus adding to their position.  This is also the same for shorts when they are able to short a stock at the same price they shorted previously. Then why do peaks form? People sell (or cover) to take profits.  Obviously, any increase in selling will pull the stock back.  Those who bought at a lower level may start buying again.  This repeats and repeats until 1) there is no more stock left for people to buy, or 2) there is too much supply and not enough buyers.  On a larger scale, this is how bull and bear markets begin and end.

Figure 1  Typical up and down trends.

The following basic chart…
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Kimble Charting Solutions

Small Caps attempting 20-year breakout, says Joe Friday

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The Russell 2000 trend remains solidly higher, as it has created a series of higher lows and higher highs inside of rising channel (1) over the past 25-years.

Small caps have been an upside leader in 2018, as they are very near all-time highs.

We applied Fibonacci extension levels to the 2007 highs and 2009 lows at each (2).

Joe Friday Just The Facts Ma’am- Small caps are attempting a dual breakout at (3). 

This is a price point that small-cap bulls would LOVE to see strength and a breakout take place, as monthly momentum is lofty.

...

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Zero Hedge

"I Was Not On Weed": In Tearful Interview, Musk Admits Nobody Reviewed Going Private Tweets

Courtesy of ZeroHedge. View original post here.

In a rare, hour-long interview with the New York Times, in which the increasingly unstable Tesla CEO "alternated between laughter and tears", Elon Musk provided a unique glimpse into his mind, confirming just how fragile and combustible everything inside of it is right now.

"This past year has been the most difficult and painful year of my career. It was excruciating" a tearful M...



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Phil's Favorites

Trump craves good press from the 'fake news' media - just look at his White House newsletter

 

Trump craves good press from the 'fake news' media – just look at his White House newsletter

Courtesy of Joseph Graf, American University School of Communication

Mainstream press coverage of President Trump has been unfavorable. Thomas Patterson found that 80 percent of stories in the first 100 days of the administration were negative in tone.

The president has attacked the media as “fake news” and journalists as “the enemy of the American people.”

The president’s anti-press assaults are so...



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ValueWalk

Many Roads Lead To The United States

By Joe Quinlan. Originally published at ValueWalk.

The threat of a U.S.-led global trade war has exposed the earnings vulnerability of many global equity indexes. Bank of America, U.S. Trust analyzed 18 different international indexes in a new report and the results are quite telling. The U.S. ranked in the top three markets in terms of total revenue generation per each index — underscoring America’s commanding presence when it comes to global top-line growth. The region most dependent on the U.S. for revenue growth: Europe.

Q2 hedge fund letters, conference, scoops etc

Understanding the g...



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Biotech

Nanomedicine could revolutionise the way we treat TB. Here's how

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Nanomedicine could revolutionise the way we treat TB. Here's how

Nanomedicine could scupper the need for TB patients to take multiple daily tablets with toxic side effects. Daniel Irungu/EPA

Courtesy of Sarah D'Souza, University of the Western Cape and Admire Dube, University of the Western Cape

Tuberculosis is one of the world’s ...



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Insider Scoop

Argus Upgrades Lululemon On Multiple Growth Levers

Courtesy of Benzinga.

Related LULU Benzinga's Top Upgrades, Downgrades For August 16, 2018 3 Retailers Jim Cramer Says Are Winners In A Volatile Sector...

http://www.insidercow.com/ more from Insider

Chart School

Bitcoin Update - 6000 is support

Courtesy of Read the Ticker.

Demand shows it hand at support levels, well it obvious that $6000 BTCUSD is support so far.

More from RTT Tv , Ref: Brazil bitcoin currency , Brazil New Accounts
 


 

Main Chart in video



 

Sure fundamentals...



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Digital Currencies

What is a blockchain token?

 

What is a blockchain token?

What’s this digital token good for, anyway? knipsdesign/Shutterstock.com

Courtesy of Stephen McKeon, University of Oregon

People are just becoming acquainted with the idea of digital money in the form of cryptocurrencies like bitcoin, where transactions are recorded on a secure distributed database called a blockchain. And now along comes a new concept: the blockchain-based token, which I’ve been following as a blockchain researcher a...



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Members' Corner

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

What do you think?

Thom Hartmann suggests that the "Manchurian Candidate theory" is the least likely explanation for Trump's pro-Russia behavior in "There Are 3 Main Theories That Explain Trump’s Approach to Putin and Russia—Which One Makes the Most Sense?" (below).  disagrees and suggests that Putin probably has "the goods" on Trump in "Trump’s Plot Against America". (To be fair, Hartmann acknowledges that his three theories are not mutually exclusive.) Jonathan Chait argues ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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