Thanks Tea (EOM)

Tea - Nice call here on 12-22-06. Touched your OEX box this morning.

Thank you for all your many charts.

http://www.investorshub.com/boards/read_msg.asp?message_id=15756800

Greespan feeling guilty?

http://www.bloomberg.com/apps/news?pid=20670001&refer=worldwide&sid=adHw6ufJ84ao

Greenspan Says U.S. Recession Possible, Not Probable (Update5)

By Jason Clenfield and Kiyori Ueno

March 1 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said a recession in the U.S. is possible, though not probable this year as excess inventory is being reduced quickly, according to people attending a CLSA Japan Forum in Tokyo today.

``By the end of the year, there is the possibility, but not the probability of the U.S. moving into recession,'' Greenspan said, according to notes taken by Bernard Key, a former economics professor at Tama University in Tokyo, who attended the event.

Greenspan's comments may be an attempt to clarify remarks he made on Feb. 26 that some traders say contributed to a global plunge in stocks the following day. He told an audience in Hong Kong three days ago that he couldn't rule out a recession this year in part because slowing growth in profit margins suggests the expansion might be winding down, the Associated Press reported.

His earlier statement was ``probably misinterpreted, that's why we see a clarification today,'' said Glenn Maguire, chief Asia economist for Societe Generale SA in Hong Kong. ``To hint at the possibility of a recession won't make Bernanke's life any easier,'' he added, referring to Greenspan's successor

AJ, That's what I was thinking when I posted these:

http://www.investorshub.com/boards/read_msg.asp?message_id=16025048

http://www.investorshub.com/boards/read_msg.asp?message_id=16026199


Of course I'm data mining as I've been wrong about other stuff.

First technical E.T.F. to launch in March:

http://etf.seekingalpha.com/article/27339

Tom Lydon (ETF Trends) submits: A recent press release states that PowerShares Capital Management will continue to "lead the intelligent ETF revolution". They have received rights from Dorsey, Wright and Associates to use the Dorsey Wright Technical Leaders Index for ETFs in the United States. Anticipated listing date is March 1, 2007, for the PowerShares DWA Technical Leaders Portfolio on the New York Stock Exchange.

The particular index is made up of 100 U.S. listed securities based on a proprietary methodology that incorporates relative strength along with other factors. The large-and mid-cap securities with the most relative strength characteristics will be selected. The standout feature of this index is that it will adapt over time to changes in market leadership.

Edit: Cancel Message

Navellier is ranked high by Hulbert:

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B95DC3533%2DF8DD%2D45A3%2DB489%2DF2FE97D665B...


Louis Navellier has sort of come out of the closet recently. Twenty years ago, he could easily have been accused of being a nerd, devoted to the quintessentially nerdy Modern Portfolio Theory approach, a highly quantitative system of comparing risk to reward in the small-cap area.
Then he became positively flamboyant, changing the name of his letter, from MPT Review to "Louis Navellier's Emerging Growth", and pontificating about exchange rates and inflation and other interesting but (from an MPT point of view) irrelevant issues.
It's easy to be irritated by this sort of thing. But nevertheless, Navellier is the top-performing letter over the past 20 years, according to the Hulbert Financial Digest, with a lifetime annualized gain of 20.6% since 1985 vs. 12.7% for the dividend-reinvested Dow Jones Wilshire 5000. See Dec. 27, 2004 column
On Friday, Navellier (probably understatedly): "Well, I'm sure a lot of you were relieved to see the big market bounce this week. I want to reiterate what is going on. One week ago Thursday was what is officially called "capitulation day" where the market goes down and then reverses suddenly on no news. All that happened this week is that the market tried to retest those lows from the previous week and it actually made new lows."
(This supports other letters' argument that June 8 was a "key reversal day.") See June 12 column)
Navellier's analysis: "This market went down on fears of inflation and fears of rising rates and also somewhat on fears of a weak dollar, which causes foreign investors to flee. Now inflationary pressures have moderated and we know that June 29th will be the last Federal Reserve rate increase. Finally, regarding the dollar continuing to slide, we've had phenomenal trade deficit numbers that show that it will not happen. In fact, the current account deficit is $22 billion better than was expected."
Navellier's conclusion: "The end of the quarter is called "window dressing season" where institutional managers put good stocks in their portfolios, and our stocks should benefit immensely from that. This is why several weeks ago I picked June 20th as the time to get in--it's the start of the last 10 days of the quarter when our stocks benefit from "window dressing." Then, of course, in early July, we'll have earnings pre-announcement season. From mid-July on, we'll actually have earnings season and everything will be fine.
"So we still have a phenomenal buying opportunity despite Thursday's big bounce. I want you to know that I think the coast is clear and that you have to jump back in - you just have to."
Navellier did indeed pick June 20 as a buying opportunity several weeks ago, but he also said then that May 29 would prove to be the market low.
It's also unclear that he actually makes investing decisions based on these sorts of Big Think considerations. He doesn't actually try to time the market. And, as he said in his June letter of the stocks he was selling: "We are only selling these stocks because of deteriorating reward/risk characteristics. That's it - nothing more than that.'

http://www.marketwatch.com/News/Story/Story.aspx?guid={81C99643-65EB-4DB7-9AE2-98A70EE3E0F5}

NEW YORK (CBS.MW) -- MPT Review, edited by Louis Navellier, was not the top-performing letter of 2004, but it was number five, up 25.9 percent in a year when the dividend-reinvested Wilshire 5000 gained 8.7 percent.
What's really significant about MPT Review, however, is its consistent performance. Since 1985, according to the Hulbert Financial Digest, it has gained a remarkable 3975.7 percent, or 20.5 percent annualized, vs. the Wilshire 5000's 9.88.3 percent (12.7 percent annualized).
(Read Dec. 20 column on the best-performing newsletters of 2004.)
One measure of this: a comparison between MPT Review and OTC Insight, edited by Jim Collins. The two men were both partners, breaking up amid acrimony in 1987, and their methods are very similar.
Both letters use Modern Portfolio Theory: they favor stocks that combine appreciation with a low "beta" i.e. volatility, which finance professors treat as a proxy for risk. They explicitly eschew market timing. However, in a bear market their approach should theoretically steer them into safer stocks.
At every point, however, OTC's Collins systematically chooses the riskier among these stocks.
This can produce spectacular success: OTC was among the top performers of 2003, up 106.8 percent.
But it can also produce fearsome failure. OTC Insight was among the 10 worst performers this year (a 25.1 percent loss). And it was also among the 10 worst performers in 2002 (a loss of 37.53 percent).
Overall, OTC Insight absorbed its losses remarkably well. Over the past 15 years, it has a total gain of 681.7 percent (14.7 percent annualized) vs. 362.1 percent (10.7 percent) for the Wilshire 5000.
But that puts OTC Insight slightly behind MPT Review, which was up 681.7 percent (10.7 percent annualized) in the same period. And MPT Review's portfolios have been about 26 percent less volatile (= riskier).
Moreover, this gap has widened recently. Over the past five years, which roughly captures the bear market, OTC Insight has lost 54.8 percent (14.7 percent annualized) vs. MPT Review's gain of 10.7 percent (2.1 percent annualized). The Wilshire 5000 was down 3.7 percent (0.7 percent annualized).
And there's reason to suppose this might continue.
Navellier's assessment of the correct risk policy seems to have proved correct over the market cycle. And his recent tendency to shift into larger-cap stocks might be an effective response to the fact that the over-the-counter anomaly, the niche where he and Collins originally found MPT worked well more than 20 years ago, might well be closing as it becomes better known.
Mark Hulbert notes that the difference between Collin's recommended stock prices when the OTC Insight is published, and the prices obtained by the HFD when the letter is received, can be as much as 10 percent -- suggesting a very thin market. Navellier's recommendations generally don't have this problem.
Perhaps significantly, Navellier has just announced he is about to change MPT Review's name to Louis Navellier's Emerging Growth.

AJ - Good point. It seems permabulls and permabears like to data mine so that information fits their views.

Permabull Navellier on doom and gloom:

http://navellier.com/commentary/weekly_marketmail.aspx

Friday, February 02, 2007
The bulls had a lot of fun pushing stock prices higher this week, especially while some economists and media members continued to cast doubt about the economy. Some people just refuse to enjoy a good thing! First they said oil prices would super-spike above $100 and trash the stock market; then they said the Fed would raise interest rates too high, crater the housing market, and cause a hard economic landing; then the elections would be a legal nightmare; then the consumer would tap out; then earnings would peak. Oh yeah, what about commodity inflation, wage inflation - and did we hear someone say stagflation? Don't forget the inverted yield curve. That thing has never been wrong.
No wonder heart disease is the number one killer. We've surrounded ourselves with doom and gloom. In fact, this is probably a good spot to insert a link to our "The World is Coming to an End - Again!" chart.
OK, enough of that. Let's get positive. We have a beautiful scenario that's unrolling like a red carpet before us. Not only have oil prices dropped about $25 from their highs, but the number one supplier (Saudi Arabia) has a real need to keep prices between $50 and $60. Don't worry about whether or not it's due to the Saudis wanting to cause a regime change in Iran. Instead, just focus on the fact that Saudi Arabia is losing market share rapidly when prices are above $60.
Meanwhile, rogue nations Venezuela, Iran, and Nigeria have no choice but to continue pumping as much oil as possible. Iran's people are already suffering in an economic tailspin, and Venezuela and Nigeria's economies have little diversity outside of oil, neither does Iran's for that matter. In other words, it's pump oil at maximum capacity or bust for them.
In our opinion, the most likely scenario for higher oil prices could come from accelerating U.S. and global economies. Let's face it. An awful lot of people have underestimated economic growth lately. In the U.S., the first estimate for fourth-quarter GDP growth came in at 3.5%, well above the 3.0% consensus. If that's not a Goldilocks growth rate, we don't know what is!
Speaking of Goldilocks, the December core Personal Consumption Expenditures deflator, which is one of the Fed's favorite inflation yardsticks, came in lower than expected, up just 0.1%. And the fourth-quarter Employment Cost Index (ECI) rose 0.8%, well below the 1.0% consensus. Surprising many, the wage and salary component of the ECI actually held the index down. In other words, wage inflation is not a problem for the Fed. "These [ECI] numbers overall support the idea that there is little, if any, inflation pressure arising in the labor market," said Ian Shepherdson at High Frequency Economics.
Apparently the Fed has been impressed by the inflation data lately, too. The statement from the FOMC meeting on Tuesday and Wednesday this week was more dovish than its previous statement. "Readings on core inflation have improved modestly in recent months and inflation pressures seem likely to moderate over time," said the Fed on January 31.
The Fed left short-term interest rates unchanged at 5.25%, and even calmed fears about the housing market unraveling further when it said, "some tentative signs of stabilization have appeared in the housing market."
See what we mean about Goldilocks? Even the 49.3 January reading for the ISM Index (anything below 50 indicates contraction) has a good side. The ever so slight contraction in manufacturing is putting more downward pressure on commodity prices, which have already fallen significantly in 2007. The Fed likes that.
Still not convinced? Take a look at the consumer data, which were supposed to get really weak, according to many bears. The Conference Board's Consumer Confidence Index is at a solid 110.3, and the University of Michigan's Consumer Sentiment Index is at a healthy 96.9, up 5.2 points from December's level. And consumer spending rose 0.7% in December, the most in five months.
Looking forward, the consumer is likely to continue to feel confident, thanks largely to ample gasoline inventories, which rose by 3.8 million barrels this week. Total inventories are 2.3% above year ago levels.
Consumers are also pleased with the job market. The Fed probably is, too. January payrolls rose 111K, below the 150K consensus, and the unemployment rate nudged up a tenth to 4.6%. In other words, the labor market is showing no signs of worrisome inflation. As a result, the possibility for rate cuts from the Fed this year is still on the table.
What about earnings? Aren't they peaking? That's a possibility. The year-over-year comparisons are getting more difficult, and corporate earnings guidance hasn't been all that strong lately. Nonetheless, corporations have been conservative with estimates for quite some time, even though the S&P 500 has achieved double digit earnings growth for 18 straight quarters, and appears to be on track to do it for the 19th.
Moreover, analysts have low-balled estimates since Sarbanes-Oxley. This has caused stock valuations to be attractive, since earnings have grown more than stock prices. And now that GDP growth is much stronger than everyone expected, earnings estimates should move higher.
But the bottom line is even if earnings have peaked near term, it does not mean that stock prices will not continue to climb higher. In fact, historically that's exactly what has happened.
Since 1950, the S&P 500 has averaged a 10.2% return one year after margin peaks, 18.7% two years after, and 30.1% three years after, according to BCA Research.
CONCLUSION
We have a lot to be thankful for. Without a doubt, this is a great climate for stocks, which is why some indexes are continuing to hit all-time highs, and others are hitting multi-year highs.
In January, the S&P 500 increased by 1.4%, slightly higher than its 1.3% average during the past 60 years, according to economist Ed Yardeni. Eight of ten sectors and 87 of 130 industries are up so far in 2007.
We will continue to enjoy institutional buying pressure until April 15, and we should get an extra boost from the Presidential Cycle later this year. If you haven't looked at the Presidential Cycle data, you may look at them here.
Again, we expect earnings estimates to increase in the weeks ahead now that GDP growth is stronger than expected.
Have a great weekend!

New Sector Profunds:

http://etf.seekingalpha.com/article/25869

ProShares will continue the expansion of its line-up of leveraged and inverse exchange-traded funds Wednesday morning, with the simultaneous launch of 22 new sector ETFs. In a twist, however, the group will only be launching two sets of funds for each index: leveraged (200 percent exposure) and inverse leveraged (-200 percent exposure). In previous launches, ProShares had also included a straight short (-100 percent exposure) version of the funds.

It’s not immediately clear if ProShares will launch the straight short funds later; the group has already filed for these funds . Those have always been the least interesting products in the ProShares line-up, as investors can short traditional ETFs and earn the same exposure. The short funds seemed to be a legacy of ProShares’ days selling traditional mutual funds, where being able to go short was a big innovation.

The new funds are tied to Dow Jones indexes, and will list on the American Stock Exchange. The names and tickers are:


Ultra Sector ProShares (200 percent exposure)
Ultra Basic Materials (UYM)
Ultra Consumer Goods (UGE)
Ultra Consumer Services (UCC)
Ultra Financials (UYG)
Ultra Health Care (RXL)
Ultra Industrials (UXI)
Ultra Oil & Gas (DIG)
Ultra Real Estate (URE)
Ultra Semiconductors (USD)
Ultra Technology (ROM)
Ultra Utilities (UPW)

UltraShort Sector ProShares (-200 percent exposure)

UltraShort Basic Materials (SMN)

UltraShort Consumer Goods (SZK)

UltraShort Consumer Services (SCC)

UltraShort Financials (SKF)

UltraShort Health Care (RXD)

UltraShort Industrials (SIJ)

UltraShort Oil & Gas (DUG)

UltraShort Real Estate (SRS)

UltraShort Semiconductors (SSG)

UltraShort Technology (REW)
UltraShort Utilities (SDP)

The prospectus is available here.

The ProShares ETFs have been a huge hit with traders, racking up over $2 billion in assets in the first few months on the market. The sector funds will likely be successful as well, as the sector market is popular with traders and momentum folks, who will look to the leveraged ETFs to get the most bang for their trading buck.

Last week, ProShares rolled out six ETFs offering leveraged, short and inverse leveraged exposure to the S&P 600 SmallCap and Russell 2000 Indexes.

China ETF outside 2 standard deviations:

http://china.seekingalpha.com/article/25164

China: Probably a Bubble, Definitely Short-Term Overbought
Posted on Jan 25th, 2007 with stocks: FXI

Richard Shaw submits: Wall Street analysts are putting up warning flags. The Chinese government is taking measures to moderate their economic growth rate. Ordinary people in China are investing in melt-up panic in a 1929 fashion. Transparency is low and fundamental data is hard to obtain or compare to US fundamental stock data, but price action data is accurate and tells a disturbing story.

Generally, stocks can only go up so rapidly, after which they must rest or decline. That’s what Rate of Change [ROC] indicators are all about. Standard Deviation is an effective indicator of circumstances being “normal” or “abnormal”. Abnormal circumstances tend to revert back into the normal range.

ROC for the China proxy (FXI) is way out of line in abnormal territory. The chart below shows that the 13-week rolling ROC has been outside of 2 Standard Deviations from its 2 year average ROC for several weeks. Any stock parameter that is 2 Standard Deviations away from its central tendency is destined to revert.

FXI has been outside of its 1 Standard Deviation envelop on 5 prior occasions in its 2 years of existence. Each instance was followed by a strong reversal and reversion that overcorrected to the other side. We don’t know when, but FXI must correct. The correction will probably be dramatic and painful.

Newly - New Profunds are out:

http://etf.seekingalpha.com/article/25357

Tom Lydon submits: ProShares launched six new ETFs, bringing their total number of funds to 18. More sector-focused ETFs are set to launch this week. The six new funds are tied to small-cap indexes from the Russell 2000 and the S&P SmallCap 600.

The new ProShares ETFs allow investors to magnify their returns through leverage, or profit when small-cap stocks fall, according to John Spence of John Spence of MarketWatch.com.

There is an original twist on these funds, with three "flavors" of ETFs based on each index. The "ultra" seeks to double the daily return of the index, regardless if it rises or falls. The leveraged strategy can provide a 4% return if the market rises 2% , and will lose 4% if the market falls 2%. The "short" gives the inverse daily return of the index. The "ultra short" gives double the opposite of the market return. These are "bearish" ETFs and be aware losses would be magnified if the market rose.

* ProShares Ultra SmallCap 600 (SAA)
* ProShares Ultra Russell 2000 (UWM)
* ProShares Short SmallCap600 (SBB)
* ProShares Short Russell 2000 (RWM)
* ProShares Ultra Short SmallCap 600 (SDD)
* ProShares Ultra Short Russell 2000 (TWM)

These funds are meant for institutional investors, sophisticated individuals and hedge or pension funds.

Russian E.T.F. on the way:

http://etf.seekingalpha.com/article/25563

Matt Hougan (IndexUniverse.com) submits: Van Eck laid plans to expand its fledgling ETF empire last week, filing papers with the SEC for two new funds:

The Market Vectors – Global Alternative Energy ETF
The Market Vectors – Russia ETF

The Alternative Energy ETF will track the Ardour Global Alternative Energy Index, a 30-component index of global companies engaged in the production of alternative fuels. Compared to competing alternative energy ETFs, such as the PowerShares WilderHill Clean Energy ETF (PBW), the Van Eck fund will have more global exposure: one-third of its current components, representing more than half of the total fund, are headquartered outside the U.S.

The Russian ETF, meanwhile, will track the Deutsche Borse Russia Index, a modified market-cap weighted index of globally available Russian equities. The fund will be the first Russia ETF to hit the market, and is likely to be a hit with investors when it arrives, as folks have been calling for a Russia fund for some time. Currently, investors looking for Russian exposure can either buy very pricey mutual funds, or gain blended exposure through a BRIC ETF.

Expenses and tickers are not yet available for the Van Eck funds.

You can view the prospectus here.

Van Eck currently offers three ETFs, with a combined $478 million in assets:

- The Market Vectors Gold Miners ETF (GDX) provides exposure to gold shares, and currently has $494 million in assets.

- The Market Vectors Environmental Services ETF (EVX) provides exposure to companies involved in the trash and recycling industries, and has $40 million in assets.

- The Market Vectors Steel ETF (SLX) provides exposure to the steel market, and currently has $44 million in assets.

David - Here's a bunch of scanners (in the board header).

http://www.investorshub.com/boards/board.asp?board_id=7954

Newly - I ran across this and thought you might find it interesting.

http://www.thekirkreport.com/2006/11/learning_techni.html

Burk - I sent this to Newly in December, the money managers may be causing distortions.

http://www.investorshub.com/boards/read_msg.asp?message_id=15889760

Newly - Ask and you shall receive.

http://biz.yahoo.com/ap/070116/instant_netflix.html?.v=4

Netflix to Be Delivered on the Internet

Tuesday January 16, 7:30 am ET

By Michael Liedtke, AP Business Writer

Coming to a Computer Near You: Netflix Delivered on the Internet

Interesting correlation tracker:

http://www.spdrindex.com/correlation/

Here's how to post charts (if that was what you were attempting)

http://www.investorshub.com/boards/board.asp?board_id=1277

A trader that has been interviewed on Bloomberg has said that if the Vix can get 3 consecutive closes about 12 - the stockmkt. will be at the start of a correction. The chart shows higher lows from the Dec. bottom. We haven't had the 3 closes above 12 since Sept.


>

Here's a chart on I.B.M. from Claud:

http://www.patmedia.net/claudb/IBM.GIF


http://www.patmedia.net/claudb/

Uncle Chubbie - I should have specified short term, I'm thinking that as China raised reserve requirement after their mkt. was closed the e.t.f. went down 5.7%. With the hugh up move in Dec. China looks most vulnerable. Sometimes we get a falling domino effect that starts somewhere and keeps circulating, like the Tia Baut selloff in 1997 or was it 1998?

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070105:MTFH36993_2...

I wonder if China will be the key to global markets direction?

Newly - Thank you. You're very kind to share your knowledge.

Newly - Would you mind giving me your opinion on moving averages? I don't recall you using them much. AJ posted this study (I don't know the source) that shows them as not being of much use.

Thank you for your time.
---------------------- ----------------------------
http://www.investorshub.com/boards/read_msg.asp?Message_id=14019517&txt2find=aj

AJ once posted a link to a study on moving average crossovers. The best one was basically no cross at all. If today is up, go long tomorrow. If today is down, go short tomorrow. It is a moving average of 1. I'll see if I can find it.

Edit: Here it is:

MOVING AVERAGE TRADING

There's been a lot of press recently concerning the fact that the S&P500 has
closed above its 200-day moving average, which sounds a lot more impressive
than it really is. We've done extensive research on moving averages, and as
far as the mAJor stock market averages are concerned, a close above the 200-
day moving average is absolutely meaningless. In fact, simple moving averages
in general, except for the very short-term ones, should be disregarded in my
opinion. Our studies clearly show that the best performing moving average (the
1-day average) isn't an average at all - it's simply today's close. If it's
higher than yesterday's, the trend is up. If it's lower, the trend is down.
This most basic of 'strategies' blew away all longer-term moving average
strategies by a mile, as you'll see by the results of the studies below. And
you can bet these results won't make it to the mainstream media anytime soon.
No one would believe it.

We're going to review three typical strategies for employing moving averages -
the 'penetration', the 'crossover' and the 'slope' - beginning with a brief
explanation of each strategy, and followed by a short list of the moving
averages that produced the best returns in terms of buying and selling the
S&P500. In every case, simple moving averages were used, and performance
figures are based on the daily S&P500 close beginning in 1970 and finishing at
the present.

Moving Average Penetration
This strategy goes long the market when the S&P500 closes above its X-period
moving average (upside penetration), and goes short the market when the S&P
closes below its X-period moving average (downside penetration).

Best performing moving averages:
2-day moving average: +54,859%
3-day moving average: +46,038%
4-day moving average: +10,371%

Other "popular" moving averages:
10-day moving average: +974%
200-day moving average: +601%
50-day moving average: +370%

Clearly, the shorter the moving average, the more effective the 'penetration'
strategy. Using a 2-day average would have returned nearly 55,000% since 1970,
meaning $10,000 would have turned into a cool $5.5 million. Approximately 40%
of the trades were winners, and the average winner was 1 1/2 times the average
loser. Of course, with nearly 4,000 trades in 33 years, you'd be establishing
a new position roughly every other day, making you very popular with your
broker. The oft-mentioned 200-day moving average penetration, that gets more
press than any other moving average setup, underperformed buy & hold
significantly. Why does it still warrant such attention?

Moving Average Crossover
This strategy goes long the market when an X-period moving average crosses
above a Y-period moving average, and goes short the market when an X-period
moving average crosses below a Y-period moving average.

Best performing combinations:
60/190 moving averages: +798%
2/200 moving averages: +792%
2/180 moving averages: +690%

Other "popular" combinations:
50/200 moving averages: +648%
60/180 moving averages: +538%
40/200 moving averages: +502%

The best performing crossover signals all occurred using a very long-term
average (180 days or more) and a short-term average (anywhere from 2-60 days).
I've also included some of the more popular crossovers for comparison,
including the 50/200 and 60/180. However, an important point to keep in mind
when it comes to all of the crossover strategies is that every single one
underperformed buy & hold, most by a significant amount. Therefore, we can
safely conclude that the concept of using two moving averages that cross one
another to trigger buy and sell signals does not work.

Moving Average Slope
This strategy goes long the market when an X-period moving average is greater
than the previous day's moving average (slope is positive), and goes short the
market when an X-period moving average is less than the previous day's moving
average (slope is negative).

Best performing moving averages:
1-day moving average: +54,859%
2-day moving average: +20,912%
111-day moving average: +1,250%

Other "popular" moving averages:
200-day moving average: +244%
20-day moving average: +143%
50-day moving average: +47%

All of the popular averages (20-day, 50-day, 200-day) underperformed buy &
hold significantly, which suggests that looking at the slope of these averages
is not beneficial in the slightest. Again, it's the very short-term averages
that performed best, beginning with the 1-day (which isn't really an average
at all), followed by the 2-day and then the 111-day. That last one is
interesting, since there were a number of moving averages in the 110-120 day
range that outperformed buy & hold. If you were thinking of including a
longer-term moving average in your work, one in this range would be more
beneficial than the 200-day average. You might also notice that the 1-day
moving average performance is the same as the 2-day 'penetration' performance,
and that's because they are the same. Think about the concept of the
penetration strategy. If today's close is higher than yesterday's close, it'll
also be higher than the 2-day average of today's close and yesterday's close.
Similarly, if today is lower than yesterday, it'll also be lower than the 2-
day average of today and yesterday. Hence, the 1-day slope and the 2-day
penetration strategy trigger the exact same signals. Both simply take into
account solely what happened today, and use that as the basis for what may
occur tomorrow. Clearly, if you're utilizing moving averages in your trading
methodology, it's most important to see what's occurring right now, as opposed
to what's occurred on average over the past X amount of days. This also tends
to suggest that exponential and/or weighted moving averages, which give more
weight to current data and less weight to past data, would probably be more
effective overall than simple moving averages.

AJ - Thanks for the update. (E.O.M.)

AJ - Nice oil call!

------ -------- -------- --------- -----------

http://www.investorshub.com/boards/read_msg.asp?message_id=15509378

While Boone and I were on the same side on oil for the past year or two, we're on opposite sides right now.

I am looking for oil to drop to $54/bbl in the next month, then move up to $67-$71 by spring, then drop to $36/bbl by fall 2007.

It is quite possible the price could end up close to $30 in 2008.

I've been charting oil for almost 3-years now, and I've been able to anticipate and take advantage of the targeted price highs and lows for our business.

There is a glut of oil on the markets, and Opec hasn't been able to restrict output in years. There's too much cheating. Only the emergence of China caused the supply pinch we saw. However, this is not my methodology. I only follow the charts, and they say $36 by next fall, or a near 50% haircut in oil in less than 6-months.

Trannies + 2.6% WOW! (EOM)

Newly - Thank you for pointing out the usefulness of CCI, I think it will be of help to me.

Happy New Year

http://stockcharts.com/charts/candleglance.php?DDM,QLD,SSO,DXD,QID,SDS|C|D5

http://stockcharts.com/charts/candleglance.php?DDM,QLD,SSO,DXD,QID,SDS|C|B5

AI - Congratulation on the years performance! With the real time(vs.mid day or end of day) execution and with Rydex and Profunds high Money Market expence ratios do you expect to use the new E.T.F.'s more?

P.S. Interest is starting to build so the bid and ask may tighten.

http://etf.seekingalpha.com/article/22187

Newly, I thought you might find this article interesting since your trading QID:

http://etf.seekingalpha.com/article/22594

Are ProShares Ultra ETFs Used As Hedging Devices By Money Managers?
Posted on Dec 18th, 2006 with stocks: DDM, DXD, QID, QLD, SDS, SSO

Brett Steenbarger submits: The ProShares Ultra ETFs enable traders and investors to leverage the movements of the major equity indices. For each 1% that an index moves, these ETFs will move 2%. This provides ETF traders with a degree of leverage normally associated with the trading of futures. Note that a pattern daytrader who qualifies for 4x leverage can reach 8x with the Ultra ETFs.

A unique feature of the Ultra ETFs is that they include separate trading instruments for long and short market exposure. By buying an inverse [short] ETF, a trader makes 2% when the underlying index falls by 1%. The non-inverse [long] Ultra ETF, of course, would rise 2% if the market rises by 1%.

Here are the symbols for the three most liquid Ultra ETFs:

NASDAQ 100: (QLD) [2x long]; (QID) [2x short]
S&P 500: (SSO) [2x long]; (SDS) [2x short]
Dow 30: (DDM) [2x long]; (DXD_ [2x short]

My initial idea was to compare volumes for the long vs. short Ultra ETFs to see if they functioned like call volume and put volume among options. In other words, by tracking participation in the Ultra ETFs, we might have a new sentiment indicator.

I'll save that idea for a later date, however. My first look suggested that something else is up with the Ultra ETFs: total volume. But not just all volume: volume in the inverse [short] ETFs. Check it out:

I went back to 7/13/06, which is when I show trading histories for the three Ultra ETFs above [N = 110 trading days]. I then compared the average volumes for the ETFs for the first half of the sample and for the second half. Here's what I found:

NASDAQ long (QLD) volume: up 51%
NASDAQ short (QID) volume: up 217%

S&P 500 long (SSO) volume: up 15%
S&P 500 short (SDS) volume: up 69%

Dow 30 long (DDM) volume: down 29%
Dow 30 short (DXD) volume: up 88%

Clearly, we're seeing much more interest in the short product than the long one, an interesting finding in a rising market.

What's more is that this interest is correlated across the Ultra ETFs. I went back to November 1st, which is roughly when we first saw a burst of new volume in the short products, and correlated the daily volumes in the inverse Ultras. The correlation between the NASDAQ inverse volume (QID) and the S&P 500 inverse volume (SDS) was .60. The correlation between the NASDAQ inverse volume (QID) and the Dow inverse volume (DXD) was .87. The correlation between the S&P 500 inverse volume (SDS) and the Dow inverse volume (DXD) was .43. All are healthy, positive correlations. This suggests that when there is buying interest in one inverse ETF, there tends to be buying interest in the others.

Correlations in the daily volume of the long ETFs is also positive and significant: around .50-.60.

What are we to make of the growing interest in the inverse ETFs and the correlated volumes of all six of these Ultra ETFs?

My take is that they are being used as hedging devices by money managers. Many managers who have been buying stocks like banshees this fall have been hedging their bets with these Ultra inverse products. They are getting the best of both worlds: they can say that they participated in the rally and they can extend their stock ownership over longer [capital gains] periods, while at the same time hedging their general market risk.

Over the last five days of relative market strength, volume in the inverse NASDAQ product has exceeded volume in the long product by 5:1. Volume in the inverse S&P ETF has exceeded volume in the long product by over 3:1. There have been no dips in the ratios of short:long volumes in the Ultra ETFs as there have been among equity put/call options.

Bottom line: At least among some money managers, their bullishness may be a mile wide and an inch deep. At the same time they're buying stocks for year end gains, they're making sure their tails are covered. Other managers may be more selective in their bullishness, preferring specific issues, but protecting themselves from overall market risk. In any event, in the Ultra ETFs, we have an interesting tool for examining the behavior of these managers. As the market has broken to new highs, they've stepped up their participation in the inverse ETF market.

AJ, Is this what you were trying to show? With Bigcharts you have to put the chart into favorites then its postable.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=spx&freq=5&compidx=aaaaa%3A...

Dow Theory Article:

http://www.marketwatch.com/news/story/second-three-dow-theory-newsletters/story.aspx?guid=%7B8678CA9...

ANNANDLE, Va. (MarketWatch) -- For months now, two of the three Dow Theory newsletters I monitor have been bullish.
That changed on Thursday, when one of those two turned officially bearish.
Before discussing why this adviser did so, I should say a few words by way of background -- since you might be wondering why followers of the same theory can be in such disagreement.
The reason: William Peter Hamilton, the original author of the Dow Theory, never codified it into a series of unambiguous rules. He instead introduced it in dribs and drabs in editorials for the Wall Street Journal in the first three decades of the last century.
To be sure, the general outlines of the Dow Theory are clear enough: A bull market is confirmed when the Dow Jones Industrial Average and the Dow Jones Transportation Average ($TRAN : Dow Jones Transportation Average
jointly reach significant new highs, while a bear market is signaled when both averages reach significant new lows. Market turning points occur when the two averages trend in opposite directions --"non confirmations" in Dow Theory parlance.
Richard Russell, editor of Dow Theory Letters, is the Dow Theorist with the greatest tenure, having published his newsletter since 1958, nearly four decades ago. On Russell's interpretation, the Dow Theory turned bearish on the stock market's major trend in 1999. Russell is still bearish today, as Peter Brimelow noted in his column Thursday. ( Read column.)
But the other two Dow Theory newsletters have been bullish for several years now: Dow Theory Forecasts (edited by Richard Moroney), and DowTheory.com (edited by Jack Schannep). On Moroney's interpretation, the Dow Theory turned bullish in June of 2003, while on Schannep's interpretation, it turned bullish a month earlier, in May of 2003.
Both Moroney's and Schannep's interpretations look quite good in retrospect, with the Dow Jones Wilshire 5000 index up between 59% and 76% since then.
Schannep was the Dow Theorist who turned bearish on Thursday -- or, at least, began turning bearish. Schannep's concern for some time has been weakness in the Dow Jones Transportation Average. Since October, this benchmark has not come anywhere close to its previous high, which was set last May at 4,998.95. And it has been particularly weak of late, closing Thursday some 450 points lower than its all-time high.
How long should we wait before deciding that this Average's weakness constitutes an official non-confirmation of the Dow industrials' new highs?
Dow Theorists disagree, needless to say. On the one hand, for example, it can't be that both the Industrials and Transports need to hit their new highs on precisely the same day in order to avert a sell signal. On the other hand, it can't be the case that the weaker of the two indexes has forever to catch up. In between these two extremes is a big grey area for interpretation.
Schannep, however, thinks we have now waited long enough, according to a bulletin he e-mailed to subscribers Thursday afternoon. He had warned subscribers such sell advice might be forthcoming, when in his most recent issue he wrote "If the Transports do not make new highs shortly, I will begin scaling out at or near these highs. First, by selling 10% and then more. I will let you know when I start."
He has now started.
Moroney, for his part, says he is also worried about weakness in the Dow Jones Transportation Average, but, on his reading, the Dow Theory wouldn't officially turn bearish unless the DJIA were to close below its June low of 10,706.14 -- thereby confirming the weakness in the Transportation average. Until that happens, the Dow Theory remains on a buy signal, according to Moroney.
Why care about this debate?
Because research has shown that the Dow Theory has beaten the market over the long term. Consider a study conducted in the mid-1990s by three finance professors -- Stephen J. Brown of New York University, William Goetzmann of Yale University, and Alok Kumar of the University of Texas at Austin.
They fed Hamilton's market-timing editorials from the early decades of the last century into neural networks, a type of artificial intelligence software that can be "trained" to detect patterns. Upon testing this neural network version of the Dow Theory over the nearly 70-year period from 1930 to the end of 1997, they found that it beat a buy-and-hold by an annual average of 4.4 percentage points per year. Their study appeared in the August 1998 Journal of Finance.

Thank you Tea.

Merry Christmas/Happy Holidays

Newly, Thank you for help. Merry Christmas to you and your loved ones.

Newly, About 6 months ago I remember you mentioning to 2Mar$ your preference for CCI vs. RSI. Since your a daytrader and he's a daytrader would I be correct in assuming that this only applies to short time frames? Or have you stopped using RSI for longer periods of times (one month and higher) and find CCI better?

I notice here how it's more sensitive - when used with the VTO system:

http://stockcharts.com/h-sc/ui?s=QQQQ&p=D&yr=0&mn=6&dy=0&id=p80731002943


Thank you for your time.

E.C.R.I. Weekly Leading Index @ 30wk. high

http://investment.suite101.com/discussion.cfm/18

Fri Dec 22, 2006 10:30 AM ET

NEW YORK, Dec 22 (Reuters) - A gauge of future U.S. economic growth fell in the latest week, while annualized growth hit a 30-week high, a report said on Friday.

The Economic Cycle Research Institute, an independent forecasting group, said its Weekly Leading Index fell to 139.7 in the week to Dec. 15 from a downwardly revised 140.7 in the prior week, thanks to higher interest rates and lower commodity prices.

Annualized growth in the week ended Dec. 15 rose to 3.4 percent from 2.8 percent in the prior period.

"With WLI growth at a 30-week high, the U.S. economic growth outlook, while still restrained in the short term, is improving gradually," said Melinda Hubman, research associate at ECRI.

Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average, according to ECRI.

Good morning Tea - Would you mind giving me your opinion on whether you think the large caps will continue to lead in 2007? Your thinking (as I remember it) was that as the market started a correction from its May high it would set up a leadership change, and that's what happened as the small caps fell harder and have not snaped back as fast as the large caps.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=oex&freq=1&compidx=RUT%3A41...

Newly, Thank you for your detailed answer. I didn't think you used market orders as the fills would probably be poor.

Newly, Would you mind sharing your trading method with QID? The reason I ask is that I did some trades on the Profunds DDM (2XDJIA)and it was frustrating dealing with the low volume and wide spreads, so when you mention "fast in/fast out" are you trading at the market price or are you placing multiple bids/asks to get executions?

Thank you for your time.