Posts filed under “Technical Analysis”

Huprich: Wisdom Comes in the Smallest of Packages.

We previously published Art Hurpichs’ Market Truisms and Axioms back in 2011.  Art is a CMT with Day Hagan Asset Management, and he returns with an updated set of Stock Market Rules to Remember.

Enjoy.

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As you are reading this, we are in the process of moving our “youngest” to Virginia, as he prepares for life on his own. One of my parting words was “Experience is gained by learning from your own mistakes; wisdom is gained by learning from the mistakes of others…

Consistent with this and as we move into the last week of 2013 and approach 2014, I am reflecting on the lessons learned over a 30-year time period on Wall Street. While many of the insights shown below are personal experiences, and some insights were gleaned from others, they still bear repeating. I hope you enjoy reading the following insights as much as I did compiling them:

• Technical analysis is a windsock, not a crystal ball. It is a skill that improves with experience and study. Always be a student, there is always someone smarter than you!

• “Thou Shall Not Trade Against the Trend.”

• Let volatility work in your favor, not against you.

• Watch what our “Politicos” do, not say.

• Markets tend to regress to the mean over time.

• Emotions can be the enemy of the trader and investor, as fear and greed play an important part of one’s decision making process.

• Portfolios heavy with underperforming stocks rarely outperform the stock market!

• Even the best looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.

• When trading, if a stock doesn’t perform as expected within a short time period, either close it out or tighten your stop-loss point.

• As long as a stock is acting right and the market is “in-gear,” don’t be in a hurry to take a profit on the whole position, scale out instead.

• Never let a profitable trade turn into a loss and never let an initial trading position turn into a long-term one because it is at a loss.

• It’s not the stocks that you sell that go higher that matters, it’s the stocks you don’t sell which go lower, that do.

• Don’t think you can consistently buy at the bottom nor sell at the top. This can rarely be consistently done.

• Don’t buy a stock simply because it has had a big decline from its high and is now a “better value;” wait for the market to recognize “value” first.

• Don’t average trading losses, meaning don’t put “good money” after “bad.”

• Your odds of success improve when you buy stocks when the technical pattern confirms the fundamental opinion.

• We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us. As I like to say, “Overweight Statistical Probability. Underweight Emotion!”

• Understanding mass psychology is just as important as understanding fundamentals and economics.

• When investing, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in our business … the Paul Tudor Joneses; the Steve Cohens; the Andy Halls; the George Soros’…all have this same trait: the ability to shift on a dime when the shifting time comes.”

• Any dead fish can go with the flow. Yet it takes a strong fish to swim against the flow. In other words, what seems “hard” at the time is usually, over time, right.

• Don’t make investment or trading decisions based on tips. Tips are something you leave for good service.

• Where there is smoke, there is fire – bad news is usually not a one-time event, more usually follows.

• To the best of your ability, try to keep your priorities in-line. Don’t let the “greed factor” that Wall Street can generate outweigh other, and just as important, areas of your life. Balance the physical, mental, spiritual, relational, and financial needs of life.

Finally, I want to offer a heart-felt “thank you” to those who are clients. We value your trust and support. To those who are not clients, we welcome the opportunity to speak with you of how we can be of assistance.

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

Category: Rules, Technical Analysis, Trading

Major Trend Analysis

Major Trend Analysis The 2000-2003 Bear Market The Major Trend Indicator (MTI-black line) is helpful in identifying when the market is vulnerable to an intermediate correction within a bull market, and the onset of a bear market. Ongoing bull markets are confirmed when the MTI climbs above the green line. When a rally fails to…Read More

Category: Markets, Technical Analysis, Think Tank

Advance Decline Line (Market Breadth) Says No Top Yet

Source: Chart courtesy of Carl Swenlin, Decision Point (annotations by Ritholtz)   One of the best ways to identify a market that is exhausted is to look for divergences between Breadth (i.e. the number of advancing equities versus the number of declining ones) and Price (i.e. new highs). That is a concept that Paul Desmond…Read More

Category: Markets, Psychology, Technical Analysis

Merrill’s Secular Road Map Projects S&P 500 2300 in 2017

S&P 2300? Give It Four Years: Ritholtz Chart Source: BAML   It took more than 13 years, but the S&P 500 managed to eclipse its 2007 highs of 1576 earlier this year. This move takes it out of a long term trading range, and according to the Technical Analysts at Bank of America Merrill Lynch,…Read More

Category: Cycles, Technical Analysis

Does Too Few Bears = Correction?

  What do you get when you cross an overbought market with too few bears? Often, that combination of complacency leads to a correction. So far, all it has produced is a lot of frustrated contrarian traders. Stephen Suttmeier, technical strategist at Merrill Lynch, put the situation into broader context in his monthly chart book…Read More

Category: Sentiment, Technical Analysis

What Indices Are At All Time & 2013 Highs?

A hedge fund manager friend had mentioned a research report that had noted the Dow, FTSE and Nikkei were at neither all time nor 2013 highs. Those there indices sounded like it a bit of cherry picking to me. So rather than succumb to the usual confirmation bias, I decided to see what major indexes…Read More

Category: Investing, Markets, Technical Analysis

Shiller: U.S. Stocks Are ‘Highly Priced’

Shiller’s cyclically adjusted price-earnings ratio click for ginormous chart Source: Bloomberg     Robert J. Shiller, a co-winner of this year’s Nobel Prize in Economic Sciences says US stocks are expensive. They are the most expensive relative to earnings they have been in more than five years — since the lows follwoing the great collapse…Read More

Category: Technical Analysis, Valuation

90% Up Days Are Bullish

A 90% up day is bullish & the stats support a year-end rally click for giant table Source Merrill Lynch BA     On Thursday. we had a huge up day, with US markets gaining ~2%. Some folks credited the possibility of a debt ceiling deal, while others called it a low volume short covering…Read More

Category: Markets, Technical Analysis

Bull Market Corrections, 2009-2013

click for ginormous chart Source: Investech     We are almost through September and despite its reputation for volatility, the month has seen strong upside and new bull market highs. The S&P500 lost “only” 4.6% in August, but based on the Sturm und Drang you are forgiven for assuming it was 3X that amount. As…Read More

Category: Cycles, Markets, Technical Analysis

Stock Market Sentiment & Technical Indicators

You know I love these sorts of things: Dr. Ed Yardeni has a nice set of monster sentiment charts posted at his site. The link is Stock Market Indicators: Fundamental, Sentiment,. & Technical and its 20 pages of fun.   courtesy of Yardeni Research, Inc. September 17, 2013.

Category: Sentiment, Technical Analysis