Bill Cara’s Blog for Mar 1, 2013

CTA Trading Desk Morning Report

[7:00am ET] Good morning, Geoff here.

Stocks: The bulls failed to prove that stocks could make new highs yesterday. As seen in the chart below, bears won out which simply means that buyers are drying up and until we see them come back, it is time to remove stock risk. However, the recent rise in volatility has moved sentiment away from extremely bullish (bearish for the market) which is favorable for dip buying knowing that the liquidity pump is turned on. My thesis of a sideways trading range like we had in September and October of last year may work out, we shall see.


Gold: Volume is beginning to dry up on declines. This is a good sign for gold and gold miners to lift. A reliable buy signal is for an uptick in $BPGDM off the lows, but that has not occurred yet.

The shift from equities to gold may be starting but until trend actually changes, it has not.

For those of you receiving the free weekend reports, I will not be producing one this week due to family obligations. However, my Monday morning report will be robust.

Have a great trading day and weekend!

Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,440.80 6:44AM EST Down 25.80 (1.05%) Components, Chart, More
^BFX BEL-20 2,557.00 3:13AM EST Down 1.00 (0.04%) Components, Chart, More
^FCHI CAC 40 3,674.51 6:58AM EST Down 48.49 (1.30%) Components, Chart, More
^GDAXI DAX 7,677.74 6:44AM EST Down 63.96 (0.83%) Components, Chart, More
AEX.AS AEX General 337.48 6:44AM EST Down 3.05 (0.90%) Components, Chart, More
^OSEAX OSE All Share 519.90 6:44AM EST Down 0.63 (0.12%) Components, Chart, More
^OMXSPI Stockholm General 373.69 6:42AM EST Down 1.63 (0.43%) Components, Chart, More
^SSMI Swiss Market 7,572.01 6:43AM EST Down 21.66 (0.29%) Components, Chart, More
^FTSE FTSE 100 6,329.71 6:44AM EST Down 31.10 (0.49%) Components, Chart, More
FPXAA.PR PX Index 1,008.50 6:58AM EST Down 6.07 (0.60%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,486.04 7:59AM EST 0.00 (0.00%) Chart, More
GD.AT Athex Composite Share Price Index 997.31 6:43AM EST Down 10.68 (1.06%) Chart, More

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.

Cara 100 Company research notes from Seeking Alpha

Vad’s Catch of the Day

Kaimu’s Sound Money

Deron’s Daily ETF Analysis

Since February 25, we have been operating on a “sell” signal that was generated by our rule-based market timing system (learn exactly what that means). We have been using that same market timing strategy internally since 2006, and it has always done a pretty good job of keeping us in line with the intermediate-term trend of the broad market, which is where we operate with our short to intermediate-term swing trading system.

Although stocks have actually moved slightly higher since our most recent sell signal was triggered, it’s important to understand the market does not always need to immediately break down in order for the timing model to have value.

Sometimes a sell signal is generated and the market immediately rolls over, but other stock market timing sell signals lead to an initial short-term bounce before the market moves substantially lower.

Obviously, we can never know in advance what will happen immediately following a new sell signal. Still, we always respect a bearish market timing signal by moving to cash and/or tightening up stops on long positions and waiting for conditions to improve before establishing new long positions. A new sell signal also allows us to selectively short sell stocks and ETFs with relative weakness.

To clearly illustrate the different ways a market can behave after receiving a sell signal from our market timing model, the charts below detail the subsequent price action of two different intermediate-term sell signals that were generated by our market timing strategy in 2012:


After a decent rally in early 2012, the distribution days began piling up in late April and early May, forcing us out of several long positions by May 3 and generating a 100% sell signal on the close of May 4 (as annotated on the chart above). In this case, the timing of the signal was perfect, as the market plunged 7% over the next 10 sessions.

Following a very short-lived rally in August/September of 2012, the number of distribution days once again began increasing within a short period of time, and leading individual stocks began falling apart as well. These are two of the main components (along with a few proprietary tweaks) that determine when our market timing model issues a new sell signal.

Given the bearish action described above, our market timing strategy generated a sell signal on the close of October 12, 2012. But although this prompted us to quickly exit our long positions, this time the stock market did not immediately come unglued.

Instead, there was a short-lived bounce that inevitably attracted some “late to the party” Charlies who were not paying attention to the bearish volume patterns in the market. Nevertheless, after one day of stalling on October 18, the market sold off sharply, erasing all of its gains from August and September:


Finally, let’s look at our most recent sell signal that was issued on February 25, 2013 (just four days ago). Much like the price action that followed the most recent sell signal from October of 2012, stocks did not sell off right away. Rather, the broad market bounced higher for a few days:


Because we are not mystical prophets, we don’t know if the market will sell off sharply over the next few weeks. Nevertheless, we have not been willing to establish new long positions over the past few days (though we entered a few new short positions) because experience has shown us exactly what can happen when the volume patterns in the market suddenly turn bearish.

Although the market pushed higher on February 26 and 27, it did so on lighter volume. This followed three out of four big declines on higher volume. Yesterday (February 28), the market stalled, which reinforced the sell signal generated by our stock market timing model on February 25.

Quite a few “gurus” claim that market timing doesn’t work, but those who believe this are clearly not following the right indicators. Broad market volume patterns, combined with poor performance by leading individual stocks, always play a crucial role in identifying significant market tops and bottoms.,/p>

Many investors make the mistake of focusing purely on price patterns or percentage gains of a broad-based index, while paying little or no attention to the market’s volume patterns. To learn more about why volume is such an important indicator, check out 5 Technical Reasons Stocks May Soon Move Lower, an article we wrote on October 8, 2012 (just four days before our October 12 “sell” signal highlighted above).

When volatility increases, trading can become quite emotional, which can easily lead to bad decisions and a ton of regret. The best way to remove (or at least minimize) emotions from trading is to follow a well-defined and disciplined trading strategy at all times.

Our proven system for market timing allows us to operate with confidence during stressful periods in the market. Are we wrong sometimes? Of course! But successful trading isn’t about being right or wrong (ego); rather, it’s about doing the right thing. When traders consistently do the right thing in trading, the money eventually follows.

Are you are frustrated by recent stock market volatility, but still concerned you might miss critical turning points in the market? Lower your stress by signing up for your 30-day risk-free trial subscription to The Wagner Daily, our swing trading newsletter that always includes access to our market timing strategy that works.

Point and Figure on Canada


Harp’s Roadmap

Cara on the Metalminers

Cara on the International Markets

CTA Trading Desk Mid-Day Report

CTA Trading Desk Post-Close Report

Categorised in: ,

Add Comment →


  1. Quasi(118083 comments)-
    November 6, 2008 at 12:27 am

    First thing is the subject in this reply was not auto filled in by default, so manually re-entered it.

    Search is working better now but still needs to be set to a deeper level on the output side.

    Currently if I search for “Quasi” I only get a link to the two Community Chat forums currently on the site. To be useful I should get a flat collapsed newest first list of all my posts and all posts which contain that word. Each one would be linkable to view and then hit back to return to the list for another post selection.

    PS I just noticed I don’t have the option to save this reply, only preview and then the save button appears.

    • admin(118083 comments)-
      November 6, 2008 at 12:32 am

      I think I might have to do something drastic to make the search provide some reasonable results. So that might be a feature that gets added after release.

      However, for your particular search, a currently-unlinked/undocumented feature might be more useful. Check out (you can add “/comments” after any user’s profile page to see this list for them).

      Oh, and yeah, for some reason I have the forums set to require preview. I’m not sure if there’s a good reason for that, so I may turn it off.

      • Quasi(118083 comments)-
        November 6, 2008 at 2:14 am

        I like the addition of the “Re:” prefix and auto repeating the subject. Also like the fact that the first 40 characters are no longer echoed at the top of the post, that was rather confusing.

        Now with respect to this user comment search I like it, very close to what I’ve been used to on other sites. Now for the deluxe version put the following on the wish list,

        ** 1- When you click on a users name you go to their “account page” with boxes for “view, track, content” could we add a box for recent comments which just echos your link above.

        ** 2- When the page opens the default is: title, summary (first 200 char), view link, post date.

        ** 3- At the top of the default page is a toggle button to switch from summary view to the full body text view as shown in your example. (note if some posts included graphics there would just be an image tag, unless you click view post)

        PS, sometimes I think it might be good to actually talk once in a while, might speed up the communication, especially when brainstorming the pros and cons of things like flat or thread, forum organization and size etc. I’m on Skype “Quasime2”, but don’t have it loaded all the time, just let me know if thats an option and I’ll turn it on at an arranged time. Note we could also do a conference call between all of us at some point.

        Just a thought to try and help in the most efficient manor, I know Bill is probably pushing to get things up and running, but launching with a buggy site might be a disaster.


        • hamilton_9(118083 comments)-
          November 6, 2008 at 5:45 am

          “I like the addition of the “Re:” prefix and auto repeating the subject. Also like the fact that the first 40 characters are no longer echoed at the top of the post, that was rather confusing.”


        • hamilton_9(118083 comments)-
          November 6, 2008 at 5:51 am

          Good comments Gord, I agree with all three — I am on Skype too and can do conference calls if we need to


      • hamilton_9(118083 comments)-
        November 6, 2008 at 5:30 am

        good reason = people should review their posts (at least scan them) before committing them to the real world

        saying this as I know I will catch myself in Preview Stage and go back at least a few times in the future LOL

        • hamilton_9(118083 comments)-
          November 6, 2008 at 5:37 am

          minor formatting note: on the post Preview page below the Preview and Save buttons the original post (you are replying to) appears. It just seemed a little crowded (more to do with beta status I am sure) and a little more space below those buttos would be good. Maybe also a default heading that says something simple like “You are replying to this post:”?

          Just thinking too about this helping keep posts organized on the site. People can confirm they are replying to the thing they want to which will save admin time later reorganizing/moving posts.

        • Quasi(118083 comments)-
          November 6, 2008 at 4:42 pm

          Geoff you can always use the edit feature, however that is only available until someone replies to you post then its frozen.

          So in the daily Comm Chat you may have virtually zero time but in a sub forum you may have a few minutes or days depending on the frequency of replies.

      • hamilton_9(118083 comments)-
        November 6, 2008 at 5:39 am
        • hamilton_9(118083 comments)-
          November 6, 2008 at 5:43 am

          thread roll up: In my last post I replied to the post. When the post posted, I was returned to the page with my post there but with three posts above it (they were “replies to replies” of the post above). It would be cool if the page loads with those rolled up (or having a way to roll them up)

    • hamilton_9(118083 comments)-
      November 6, 2008 at 5:27 am

      quick note — search is working better – did search for “still needs to be set to a deeper level on the output side.” and this thread was returned.

      The Community Chat was too — above this post in the search results. A minor quibble, but the post above has the exact phrase “still needs to be set to a deeper level on the output side.” and the Com Chat didn’t (from the post list I scrolled down to in the result). Since the above post has the exact phrase, shouldn’t it come up first? More a comment on how the search algorithm is set up then this particular search.

      One other comment: is it possible to have search terms highlighted in results (once you click to that search result link)? It would help when you are scrolling down through the post to easily find where your search term is mentioned. I see this being helpful once launched when we are reviewing prior posts or catching up on specific issues of the moment. (bonus feature: toggle highlight on and off per user input (checkbox or something) so once you locate your term you can turn off highlighting for readabilty)


      PS – I am just going to post as I react to things so take (or leave) posts as you want to — just throwing ideas out there

      • Quasi(118083 comments)-
        November 6, 2008 at 3:20 pm

        Yes Geoff I see the same thing, however I didn’t put the search string in quotes, so I was picking up on the individual words. So yes “on”, “the”, “to” etc were all in Com Chat Oct 9th somewhere in a comment. However it should have picked up just about every folder / forum on the site, it didn’t.

        The second output is the “Search Feature” forum, which contains the whole continuous string and it is second in line because the output is set to oldest first, I think that should be changed to newest first as that’s what you’re normally looking for. Down the road these outputs will be very long and you don’t want to have to scroll all the way to the bottom.

        Now if I put the string in quotes it only returns the “Search Feature” forum.

        I think the big problem is the search output is just the folder/forum and isn’t broken out to the individual post level. Now I can still click on an output folder and then open my FF search, input the same string and then toggle thru the posts with each found string highlighted.

        A little cumbersome when myself and most people are used to much more control over their search and output formats.

        • hamilton_9(118083 comments)-
          November 7, 2008 at 1:59 am

          Ah yes, the quotes. I forgot to put them around the text when I first searched. When I did it again, yes that post was the only one returned.

          You raise a good point about search results sorting. I also think ‘relevance’ should eventually be a sort option along with date newest/oldest since some searches are more for finding certain topics/ideas/phrases.

  2. Quasi(118083 comments)-
    November 28, 2008 at 4:00 pm

    Jeff I see Bill has been saying how great the search feature will be on the new site. We might want to put a note in the intro that its still underdevelopment as the performance right now leaves alot to be desired.

    Big problem is the output which at this point just gives you the forums which contain your criteria, you then have to go to each one and use your browsers search to find the criteria in each forum, way to cumbersome and no one is going to do that.

    I’m thinking maybe we are having the engine search the wrong database, searching forums gives us an output of forums. We need to be searching the individual comment database which will give us the output of all comments containing the criteria.

    Just another idea to look at, hope your Thanksgiving was great.


    • admin(118083 comments)-
      November 29, 2008 at 2:10 am

      Bill sometimes takes things off the wishlist and states them as facts for the new site. Hopefully people won’t have excessively high hopes. All the comments are stored in the comment database, so if that wasn’t being searched you wouldn’t ever get a match for text that was in a comment. The main problem is that in Drupal, comments are “second-class citizens”. There are “nodes” (almost every other kind of content) and there are “comments”, which are not nodes. The search function likes to point you to nodes, and just incidentally searches comments as well. In the next version, they are supposed to make comments “nodes” as well, but until then I’ll have to work something out.

  3. davefairtex(118083 comments)-
    March 1, 2013 at 12:04 pm
  4. [No set time] Motor Vehicle Sales
  5. 8:30 AM ET Personal Income and Outlays
  6. 8:58 AM ET PMI Manufacturing Index
  7. 9:55 AM ET Consumer Sentiment
  8. 10:00 AM ET ISM Mfg Index
  9. 10:00 AM ET Construction Spending