I hope to publish three or four posts per week to record my thoughts about the market. I will use broad brush strokes to describe my activities, but nothing I write should be construed as a recommendation. I will highlight my fears and uncertainties because that is what stockmarket trading is about. Comments are invited to help me and readers better understand what is happening.
Tuesday, 7 May 2013
The Holy Grail
I am not a
happy bunny. I had written more than half this post online in Blogger and then
without warning it vanished. I detest going over old ground. I hope that my bad
mood does not intrude on my rewriting.
How do you predict changes in market direction?
I am deeply
disappointed. You know that I am a big fan of Vector Vest. Their tools for
stock picking are second to none. They are too good and they hide the
weaknesses that I have found in their timing systems. If you buy the right
shares and your timing is right you can make shedloads of money and can afford
to get your timing wrong some of the time.
soon as I bought the Vector Vest system
I tested the “confirmed up and confirmed down” signals and found that if I had
used them to time my entry and exit from the market I would have lost money. I
have now tested their latest timing systems and found they too are wanting.
tools and the backtesting facilities offered by the program more than make up
for the timing failings and I am sure that, as in the past, I will go on making
lots of money using those wonderful tools. But market timing is also important. And I
will have to look elsewhere to find how best to pick my moments for piling in
and pulling out of the market.
there are two road that I plan to follow in my quest for the holy grail: a
system that will guide me to choosing the best times to buy and sell:
and resistance lines
promising except that I am at a loss about how to develop a method to
backtesting their performance and to be sure that they are the goods.
In the case
of volume spikes I can show that they indicate a change of direction more often
than not. But I cannot show whether that will be a pause on a reversal of
direction and I cannot say how big the move they predict will be. Nor I cannot
show how quickly it will happen.
demonstrate I use and old chart from January last year which shows a series of
volume spikes each of which signaled a change in direction. It ended with a
spike which had just occurred. What happened next was that the rising market
flattened for a number of days, then resumed its upward course. It paused
again, then there was another larger volume spike and then finally the market
fell. Tricky to know exactly how to play the signal.
Support and resistance
support and resistance I can show you today’s gold chart which provides a
beautiful example of how well support and resistance lines work. If we sold out
at the end of the day on the 12th April when the market broke
support we would have saved ourselves the 7% fall that occurred the next day.
If we had gone back into the market to make money from the recovery selling on
the 26th April we could have made a nice little 8% in 8 days. It
would have avoided the downturn which was accurately predicted when the market
hit the old support line which had become
a resistance line.
Is the subjectivity in drawing these lines. Again I don’t see clearly how I
could backtest the system. But I feel convinced that the holy grail lies nearby.
I shall continue my search.
The market today
As for the
market today, it continues its upward climb having broken through short term
resistance. Every day sees a new all-time high in the US market.
This is another
recipe I picked up from a Montalbano book. I did a fair bit of adaptation
because the original calls for rabbit and my wife is not keen. Also rabbit is
not that easy to come by round here unless you go out and shoot it yourself.
I’ve never in my life handled a gun so that’s not going to happen. What I did
instead was substituted chicken breast. I picked out what looked best from a
number of recipes I found trawling the internet, both in English and Italian.
(it’s amazing how good those internet translating machines are these days).
I took two plump chicken breasts sliced them lengthwise and marinaded
them in 125 ml red wine vinegar for 4 hours along
with 2 bay leaves
I then prepared the
rest of the ingredients. One sliced onion, three chopped
sticks of celery, two chopped carrots, 35 gms of capers, 35 gms of sultanas, 35
gms of pine nuts, 150 gms of green pitted olives, and 2 tbs of honey.
I heated the oven
to 180 degrees.
I drained the
vinegar from the chicken into a jug and kept it with its bay leaves.
I coated the
chicken slices liberally in flour and fried them
gently in olive oil for some ten minutes. I put
them in an ovenproof dish. I added more oil and fried the onion, celery and
carrots gently for ten minutes adding a bit more flour towards the end. In the
mean time I dissolved the honey in the vinegar marinade. I tipped the onion mix
over the chicken and poured over the vinegar and honey and added 750 ml of chicken stock. I stirred in the sultanas and
The whole lot went
into the oven for just over one hour. About ten minutes before the end of
cooking I stirred in the olives and capers.
I served the
casserole with new potatoes and beans.
Judging by her
enthusiasm my wife gave it 5 stars.