Tuesday Mid-day

I am trying to make sense of what the Momentum Change indicators are trying to tell me.  The series of indicators that I have been using since late 2010 have had a very successful record of identifying change in the direction of the market with great accuracy, and with in a day or two of the actual top/bottom. The nine signals generated through late October were all profitable.   The indicators in late October were a little premature, as it turns out, as the actual top did not occur until November 13.  The previous Buy indicator occurred Sept,1 and the trading positions that were sold in late October were of course profitable.  But the Short positions entered at the Sell signal were quickly stopped out, and I did not re-enter the short side until the Sell confirmation in November.  The short positions entered were sold with the next Buy signal Dec, 1.

The Long positions entered were all  profitable with the next Sell signal Jan, 19, 2011.  The short positions entered were again quickly stopped out with small losses.  I had a Sell confirmation  Jan 28, but did not enter any short positions.  With a Sell signal confirmation again on 2/22, I entered 7 short positions, 5 of which were nominally profitable and 2 were nominal losses.

The interesting thing for me is that the indicators have not generated a new Buy signal at any point since the last Buy signal on Dec. 1.  In the mean time, indexes have crept higher since Jan 20, but the internal measures of market strength have continued to deteriorate, and several additional indicators (not momentum related) have flashed new warnings.  It is always difficult to ignore Greed or Fear, or let it overcome a disciplined trading strategy, but a review of the results of the past 14 months are overwhelmingly profitable. The losses have been small, the profits have been great, but as always, frustration with the market can be draining.

Today is another key day for the indicators, as they are near again to a Sell confirmation.  Let me be clear, I am not trying to predict market turning points, only to observe the changes that occur with sufficient alacrity to be able enter the market with a potentially profitable trade from the results from the correct observation of that new direction.  Sometimes that new direction does not last long....and absent a new Buy signal, I rely on stop loss orders to protect against an error.

I am watching carefully today for another entry point, and will post around 3:30pm.

Best To Your Trading!

Bill