Friday, 14 June 2013

Lacking objectivity

A weakness in the methodology I use to create my timing list is that it is subjective. It would be more scientific, more mechanical, more reproducible if the timing signals were based on algorithms that could be programmed into a computer so they were objective. Untouched by human brain. I would prefer a system like that, like the various timing systems offered by Vector Vest.

I assume that Vector Vest has pulled out all the stops to create buy and sell signals, up and down calls, whatever you care to call them which work as well as they can make them. It’s what those guys do best so I assume they have done all they they can. But like all systems that are based on historical data they have a tendency to lag and the calls they the make can be late. I've tested my S&R system against theirs over lengthy periods of time, periods that have been chosen at random to avoid the benefit of hindsight creeping in and my timing list works better. (I do not claim that the tests have been exhaustive so the results must remain provisional).

The S&R system is subjective but signals are given as close to price action as possible. With this caveat in mind it is useful to see how judgement is used in drawing those all-important lines.  Luckily the last couple of days have provided an excellent example.

In the chart you will see my original resistance line coloured in purple. It was drawn joining three highs, two before support was broken on 31st May and one after. That resistance line was broken on 7th June and became a support line on the 11th. Price action following that break was not strong enough to trigger an up signal. Also the break came after just 5 trading days so the “ten day rule" (see earlier posts) would have been triggered.

Subsequent price action has made me  re-draw the resistance line basing its trajectory on a mixture of highs and market close points. At present price action suggests that the market is respecting that resistance. We shall know later today whether it holds. But if it fails it is still only 9 days since the break of support so the “ten day rule” still applies."Stay out of the market, sit on your hands, better safe than sorry" is still the message.

Attractions of the bond market

I can’t stop myself from looking for opportunities. You will recall that I pointed out how interest rates are rising as bond prices fall. "That must present a chance to make money," I say to myself. Have a look at this chart. 

It has risen 10% since the 1st May. It is an ETF that shorts 20Year US Treasury Bonds. Should I jump aboard or have I missed the boat. As Oscar Wilde put it“ I can resist anything except temptation.” And here it is doing a nice little pull back from its high giving me a new chance to climb on. My lips are smacking. 

Better not. I’ll do a bit more research and perhaps have a go text week. Phew! that was close. Keep those hands still.

Why did I not think of this before when I first spotted the rising interest rate? "There’s none so blind as those that will not see".

Rice and peas

This Caribbean recipe is a huge favourite around this house. Dead easy to make. I've adapted it from one I found on the back of a tin of gungo peas, (a sort of bean from Jamaica). You can make it with red kidney
beans or any other bean that’s dark in colour.

Chop one onion and fry gently in oil. The original recipe calls for a deseeded chopped chili to be added  but my wife cannot tolerate chili so I skip that ingredient. It still tastes great. I then throw in 300 gms of basmati rice and let it fry with the onions for a bit. You can add salt and pepper at this stage.  Just keep it on a moderate heat in the same pan. I then add a can of coconut milk and about a pint of vegetable stock. I then allow the rice to absorb the liquid and add water if necessary if the rice needs more before it is fully cooked. As the rice gets close to being cooked I add a tin of gungo peas or any other type of bean and the same quantity of frozen peas. The frozen peas bring down the temperature so the whole lot needs to kept on the heat till it is warmed through.

It’s ready in about 15 minutes and it’s delicious

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