A Trend is a Trend (9/15)

Allan Trends Weekend Update

Courtesy of Allan Harris of AllanTrends

New Signals

GS Weeky Trend Model————>LONG

*Weekly Trend Models are well-suited for long-term investors who like to trade only a handful of times a year. They are also helpful for intermediate term traders who prefer trading long when the Daily Models line up with the Weekly Models. More active traders should watch the intermediate and short-term trends–the Weekly Models can be discounted entirely.

Weekend Market Commentary

This past week was a very bullish week for stock indices, commodities and most all of our individual stocks. Whether it is the start or continuation of a massive bull market, or a final blowoff from the 2009 lows, is of little concern to us. The trend models will follow whichever direction these various markets decide to go.

The Psychology of Investing, Trading for Exceptional Returns

Sometimes, we just read too much. The magnitude of information available on the Internet is overwhelming. Literate idiots abound. There are enough opinions and predictions out there to spin our ability to reason out of control. Trying to absorb all the information is not the secret to success in the markets.

Trend following is a winning strategy backed by positive results. The biggest difference between trend following and whatever we were doing before trend following is the rejection of picking tops and bottoms and the embracing of taking the middle, the meat, of the longer-term trends. It’s not a perfect system and it does generate losing trades. But in the end, the winners outnumber the losers, both in frequency and magnitude.

“This is the only trading strategy that can be traded on a desert island. As long as price data is available, all else is inconsequential. Media, fundamentals, broker opinions, talking heads, and so on are simply not necessary to profit.” – Michael W. CovelTrend Commandments, FT Press, 2011.

The intermediate Daily Trend Models have been leading the market higher since the first week in June. Despite what appears to be a dire financial and political global backdrop, stock prices continue higher. A year ago, prices seemed so high and the risk of a crash so imminent, no one wanted to buy. Looking back from September, 2012, those that followed the trend models look like seers. But it wasn’t them. It was the algorithms that crunch numbers and identify the direction of stocks, indices and ETFs.

Let us go forward from September, 2012 as though the future is completely unknown to us. We know only that whatever direction the markets go in the next twelve months will be captured, not in its entirety, but mostly.

 

Charts

(click on charts to enlarge)

 

GLD & SLV Daily Trend Models

 

For most of the summer, GLD was Long and SLV was Short on the daily charts. On the chart above, I’ve pointed out where each other’s signals were generated. The take away from this dichotomy, this apparent spilt decision running all summer is that both metals ran sideways the entire time, until SLV finally joined GLD Long in August and from there both started very robust runs higher.

Now the respective Weekly models are split and you can see why the GLD Weekly triggering a Long is so important. Once one model drags he other one along, good things start to happen.

 

GLD & SLV Weekly Trend Models

 

DJIA & SPX

 

Above is an example of how the Daily Trend Models do not capture the absolute top or, in this case, bottom of an intermediate trend. It illustrate how they get the middle, or “meat” of the trend.

 

 

A trend is a trend.

I thought these to trends were very telling. Actually, they are virtually identical. RNF is a fertilizer company that is basically an income play, paying 13% a year in dividends. Nasdaq is basically a high tech play, with AAPL accounting for about 20% of its moves.

 

TLT & TBT Hourly

 

These are Hourly Trend Models of TLT & TBT, essentially, Hourly Trend Models of Bonds & Interest Rates. Note how that with all of the money the Fed is flooding into the bond markets, instead of interest rates going down, they are starting to go up. A counter-trend rally higher within the context of a major trend lower, or, the start of a whole new trend up as confidence in debt of any kind begins to erode? We don’t know the answer to that question; we need only know the dominant trend. As of TLT’s reversal Short on September 12, that dominant trend is for higher rates.

 

Weekend Trend Models

 

Allan’s Trend Following Model is based on his trend-following trading system for buying and selling stocks and ETFs.

Most trades last for weeks to months. Learn more about Allan Trends here. Click this link for a risk-free trial to Allan’s standard service.

For the premium service (for active traders) click here.

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  2. [...] of the bold QE-Infinity move by the Federal Reserve. As noted in this week’s newsletter,  Allan and Springheel Jack are bullish based on their chart analyses, notwithstanding the potential for [...]

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