There’s definitely something to be said about the success in buying breakouts in strong sectors. I bought NE for my wife’s 401k portfolio earlier this year when it broke to new 52 week highs. Since then I sold half, it split 2:1, and is just below its all time high. How did I find NE? I found it in a Yahoo stock scan using fundamental criteria that was selected by a Rapidminer Genetic Algorithm.
The S&P500 Volatility Indicator is holding steady below 1.0 which isn't all that great since the rate cuts, I was hoping for it to keep going lower but it hasn't. I was also expecting the previous market highs to be taken out but they haven't either. Economic developments should be watched closely now and we could easily see another sell off happen if the news is bad. On top of all that, we have October looming in front of us! I'll be posting intraweek snapshots of the Volatility Indicator to monitor its progress. It might be time to take some profits off the top. :)
I closed out my AUDUSD yesterday for an average gain of 40 pips. That translates to roughly a 0.9R which isn’t what I want but the market internals were changing and I rather take a profit than loss. Typically I like to sell half when I’m at breakeven and then let the other half ride till I’m either stopped out (using a trailing stop) or the market internals change. This is what happened to my AUDUSD position.
In other news, I’m still long in my EURUSD position but currently down 20 pips or so. I expect some movement to the upside when today’s economic news comes out, both big events. As a result, I have a fairly wide stop loss of 70 pips total which translates into a small position size. In these markets, volatility position sizing is key and these methods of position sizing have rebuilt my portfolio.
Coming out today is:
Jeff, a long time reader, emailed me at my old dbreakfast account a few weeks ago. I rarely check that account anymore so I almost deleted all the spam and his email along with it when I saw it. Jeff wanted to know what my take was on Gold and Real Estate market. I gave my forecast for Gold this week in my members section so I won’t go into details here but I will comment on the RE market.
My take on the RE market is that we’ll see some stability by Spring 2008 only if the Fed cuts another 25 bps. My models indicate that the magic yield threshold on the 10 Year is 4.5%, anything higher than that and we’ll risk further RE market deterioration and recession. Anything below that yield and we should see stability. Of course the Fed doesn’t want to repeat the “bubble years” again so any future rate cut will be the equivalent of a drawn out root canal for the Fed. I’m expecting a RE bottom by the end of next year only if the economic stars align just right! :)
Alright!!! The newsletter section is live! If you’ve been following my newsletter for a while then you’d know that its migrating to a set of protected postings that only members can see. Getting this newsletter is FREE for the time being and I will be feature market timing signals from my numerous neural net models. I’ll be featuring my 1 week forward Forex signals, my S&P500 Volatility Timing Model, my Gold and Oil models, and some new ones I haven’t posted about on this site.
If you’re interested in seeing this content, please signup here.  I’ve already moved a revised Forex Forecast to the membership area! See you there!
This week’s forecast price direction for the following currencies is as follows:
These forecasts are hot of a new and improved “one week forward” forecast neural net model.
Last week’s rally created a nice volatility spike based on positive bias. Goes to show you, we’re now in a higher state of volatility than we were in the past few years.
The patterns we are seeing today are very similar to the patterns exhibited at the beginning of the 93/94 bull market run.
I’m almost done with the backend configuration for my newsletter but its been going slow because of time constraints. I’ve decided to migrate to a password protected blog post system for my weekly newsletter so I’ll be abandoning the PDF email newsletter all together. Starting this weekend I’ll be posting the newsletter in multiple posts over the weekends. Why? It’s a lot easier for me to manage because my time is incredibly short these days. So here goes…
This week we saw a great rally because of a 50 bps interest rate cut by the Fed, all thanks to the RE bubble and subprime mess. My S&P500 Volatility Timing model has been preforming very well as you can see by the returns based on the BUY signals.
I expect my indicator will keep going lower but its hard to tell since we are in September and entering October after all! I’ll be posting more information over the weekend when I catch a few minutes of two! :)
