Friday, 2 December 2011

Week of 2011 DE 02

SPY rose 6.8% this week, almost returning to its value at the start of the year, while my account fell 2.9%, to its lowest value ever.

Daily % gain
Max % lossResults
Symbol  since Fri   Mon   Tue   Wed   Thu   Fri Beg   End
TZA#1  NO18 13.9  23 -2.1  20 -1.5  20 -19.0  20 -17.4   0 −3.1 −3.1 −0.6%
TZA#2  NO30 -3.6  18 -1.6  18 -2.8  18 −15.2 −11.3
SPY 0.0 2.7 3.0 6.9 6.9 6.8
me 0.0 -2.5 -2.5 -3.0 -2.7 -2.9

World news: On Monday, the central banks of the USA, the UK, the Eurozone, Switzerland, Canada, and Australia decided that they would accept each other’s currency as collateral for swaps, so if you are a bank and all you have is Euros and nobody trusts you enough to loan you US$, the US government will be your lender-of-last-resort.  The stock market surged!  Just like it did the previous times this was tried, in 2008 and 2010.  These intervention surges generally last about a week, so it should be just about over by now.
      An interesting side-note: the decision was made on Monday, but not publically announced until Wednesday, so the crony capitalists of the world could front-run the news at the expense of everyone else.  Increasingly these days, The Powers That Be are not even trying anymore to hide their corruption.
      A broad 7% rise in the market, based solely on an artificial intervention that is only good news for banks and not for industrials, suggests that only the banks matter now; everyone else has stopped trading.

MACD-based swing trades

Buy dateBuy priceSell dateSell priceProfit
TZA#1 NO 17 13:00 NO 18 10:42 $31.56 $31.73 NO 28 11:00 NO 28 13:15 $34.30 $34.61 +3.6% −0.6%
NO 21 11:00 NO 21 11:43 $34.64 $34.71
do not buy NO 25 11:22   $37.80
TNA NO 28 11:00 skipped $38.21   NO 29 15:00 skipped $38.01   −1.0% +0.0%
TZA#2 do not buy NO 30 09:30   $29.97   not yet        
not yet NO 30 15:50   $28.50

TZA#1: Shouldn’t have bought that third tranche.  Too greedy!  Would have been profitable otherwise.

TNA: Skipped this post-intervention swing.  Avoided a loss!

TZA#2: This really isn’t a swing-trade, since I bought it when PPO was giving a strong “sell” signal.  But it might become a swing trade next week!  As of 4pm Friday, IWM's PPO = -0.56, which would be a “buy” except that my model ignores the 4pm and 10am values.

Surfing the oscillations

Elliott Wave Theory usually consists of counting squiggles and grouping them into threes and fives.  One notable exception: the 3-in-1 rule.  The week starting OC 24 was a “setup week”, followed by three ”inside weeks” and then the week starting NO 21 was a “trigger week” showing a downside breakout.  We should normally expect that that prices will continue falling for months.  But that assumes no intervention by the central banks!

On Monday I assumed that the bull-run was surely almost tapped out, because the lower orange bar was so close.  So I put in a limit order to buy TZA if prices got up to roughly $71.50 on this chart.  On Wednesday I found myself the proud owner of TZA shares, bought for much better than my limit price!  Now what?  I used the blue bar to guess what the new can’t-go-any-higher price would be and put in another limit order, which triggered just before Wednesday’s close.  On Thursday and Friday the market continued even higher.

DanEric thinks the market is going down next week, but will just be a short correction and then the Christmas rally will start in earnest.  I think the market will spend the rest of the month oscillating between the NO 28 lows and the DE 02 highs, like it did back in August.  I suppose this will depend on what the Euro leaders come up with at next Friday’s save-the-Eurozone meeting.  Just in case, I have a limit order to sell half the TZA if prices retrace 38% of their recent ramp, which would again be about $71.55 on this chart.  DanEric thinks this could happen as soon as Monday.

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