| Ralph Koozer |
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Gold User, Member, Platinum User, TeleChart
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| Unsure |
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| Tuesday, March 1, 2005 |
| Friday, December 12, 2008 2:28:46 AM |
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It depends. The stochastic and MACD are excellent statistical tools. There is no majic number to be put in the filters. They need to be tuned for each stock by backtesting the filter settings so they don't give too many false readings. Of course it's a lot of trouble to reset them all the time so find some you like.
I like to set them just tight enough to take out the false noise. Of course these indicators are just one of many inputs for pulling a trigger. Read the definition of the Stochastic and the MACD indicator so you understand what it is telling you; set your filters how you want them.
In the 12 screens of the telechart pages, there are many pages to set up a variety of stochastic and MACDs with a variety of shorter filter settings to look at, and on other pages pages set up with much longer filter settings to page through for comparison sake. For calling this bear we used the MACD on the DOW and S&P 500.
For the short term filters we use a 7 day for the short and 15 day for the long. For the longer term curves we use 20 days for the short and 50 days for the long- for both the stochastics and the MACD. Of course we know when we look at the short term page what the patterns are tellilng us and we know what the longer term ones mean.
We also set up custom formulas to screen stocks as one of the means for adding to the buy sort list.
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To us a good PUT candidate for a short term trade would be an overvalued stock based upon fundamentals.
Some criteria of the search would be (to me)
High PE ratio (PE>30)+high (and increasing) Debt to equity ratio(DtoE ratio >2)+declining dividends+declining profits+declining market share.
Institutional net sales (net sales > 1%)+insider net sales (ditto).
It short the criteria for picking a good put candidate is just about the polar oppisite in most respects from picking a stock as a buy candidate.
Use due caution about speculating with puts in this stage of the bear with the market well down from its peak; the easy money in puts has mostly been made already.
Of course, buying a Put can also be profitably used to hedge a long position in a time when a downdraft is expected and you want to hold said long position. The married put profit can be used to accumulate to the long position and increase the gain on the recovery. (the stocks you want to hold are those that will recover-right).
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Well how did you like the little rally after Ben's latest short squeeze and the nearly thousand point drop after the election? Have you ever wondered why the elections are so close to Halloween? 
For the market over all, I like to use an alligator chart and a volume chart together. How about an alligator of 200 dma, 100 edma, 50 edma, 20 edma and a 5 edma. That chart will actually show you pretty clearly when a bottom has been made. Of course the bottom will not be seen until after it has been passed. I review this then look at the advance decline moving average on the major indexes. If the trend of the Advance/decline of the major indexes are still negative it is hard to say we have passed a bottom.
Be patient. This bubble we are correcting from is the largest one that has ever existed in the history of the world. It will take some time to come back to reality. Brush up on using puts to hedge long buys if you wnat to buy in before a bottom has been seen.
A lot of the calls that we have seen a bottom have been coming from those without enough bear market experience to have seen this one coming. We saw it coming like we saw the one in the first quarter of 2000. That one was a really small one compared to what this one is going to be.
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Take a look at the brands the large project solar installing contractors are installling. Use the Peter Lynch method. Buy stock in the top three market share ones that have a decent balance sheet. If they try to buy the jobs they won't be around too long. Use the standard due dilligence measures too; although the industry is in a sort out period and a growth burst at the same time. There isn't a GE of solar yet.
A solar ETF might be a safer play than trying to pick a winner if you aren't directly involved in the field and know the winners.
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Yes this bear market rally looks to me like it is getting tired. These rallys since the recent peak have been resultrs of Ben Bernanke's short squeezes. Each rally has digested the liquidity Ben has put into the system to do a little bear market rally and then petered out.
Note each of the bear market rallys has had a lower peak than the preceeding one. We believe the market will test the Feb and March lows. I think the market hasn't fully recognized and discounted the fact that Iran is selling oil in Euros. It will be interesting to see if the rest of the oil exporting countries follow suit.
The inflation is much greater than the FEDs are reporting.
Ben doesn't have very many bullits left in his interest rate cut six shooter. The W pattern much balleyhooed as the bottom seems premature to me.
Good luck and keep your powder dry.
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This FED maestro seems to like to do short sqeeze plays.
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The people who live where the United States used to be have been living by a set of false paradygms.
One is that the USA can borrow itself into permenant prosperity and foist fraud filled "securitized" debt on the rest of the world forever.
One is that house prices would always go up forever everywhere even though the baby boomers are done trading up to more expensive homes.
One is that they will continue to accept the gas guzzler oversized $UV from Detroit to race down all the freeways on $3.00 per gallon gasoline, and then spend themselves silly at Christmas.
One is that they had a right to large balance low interest loans whether or not they could hope to pay them back.
One is that they could mine the equity out of their homes with ever increasing mortgages forever to fund living above their means.
One is that they think it's the FED's job to protect them from the consequences of their foolish borrowing beyond their means.
One is that they think service jobs can replace fundamental industries as the basis of an economy.
The confusion is in the markets is coming from the very natural and overdue collapse of many of these false paradygms.
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Good presentation. The futures on the Dow fonight are also quite negative -227 was what I saw on bloomberg.
Yes, the pattern looks definately bearish. The classic dow jones theory also says we're in a bear market. Trailing sell stops on most of our longs sent us to the sidelines from our longs in the first week of June 07. The strategy for our trailing sell stops was the "may and go away" as triggered by negative MACD on the DJ.
Now, I'm patienly waiting for the bear to go back into hibernation before I come back heavily into long equity positions. With what I see developing, it may be some time. To me this looks lilke a bigger bear than 2000. To me this looks like the end of the Bull market we have been in since the Reagan bull market that was initiated by the tax cuts, ending of most ot the passive tax shelters and the implamentation of the IRA-401K system. It's time to batten down the hatches.
I'm defensive, but I don't sell shorts by personal policy. I do buy puts though.
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Oil inventories were pushed down to avoid some inventory taxes. Note the gasoline inventories were up.
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