Bill Cara’s Blog for Mar 1, 2013
  • March 01, 2013 12:00 am
  • by admin

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

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Actually I did take my own advice and bought a car from a private party last year. Nice garage and complete books in a ring binder with tabs no less. Even my mechanic was impressed. He let me take it for a mechanical review overnight without a deposit. Just my old junker as collateral. Of course he knew where I worked. Fair’s fair.

np. typo where head fake ‘precludes’ continued respect of the downtrend, should read ‘precedes’. I see follow through on the Oz all ords double top this morning – although support has yet to be breached – and new lows on Chinese exchanges. Fits in with the NYSE breadth indicator that didn’t budge going into Friday close. As always we shall see. As Bill said, global investors are clearly undecided, if not nervous here. —————————- If the Italian old guard don’t like the democratic process, replace it once again with another technocratic government that’ll play ball with the Troika? That’ll be… Read more »
loannetter – I think the car salesman is right. I don’t wear a watch, my shoes…on a good day I wear shoes, and I would be extremely unlikely to actually buy a car from a dealer. Private parties is where its at. You’ll have a better chance to notice they are lying (at least they aren’t professional at it – unless they happen to be in sales) and real people have the good grace to feel guilty when telling an untruth, there’s a decent chance you’ll get a good percentage of the real story behind the sale, and you can… Read more »

thanx Les. This really makes a lot sense to me. I’m just waiting nervously to see which ways $USD will resolve knowing that its on the edge.

Bill Cara

Home early tonight so that’s a good sign.

Met people today from every hemisphere.

Tomorrow the business starts!


Oh my…. he makes the hair stand up on the back of my neck.

A car salesman once told me the key to knowing a buyer from a tire kicker was a quick scan of 3 things: ‘teeth, watch and shoes’.

Grym, Yes the ‘consultant’ title does have it’s perks apparently. Sorry to hear your state of things. We are down to 7.5% unemployment officially in WA. We don’t have state income taxes either…just user pays for goods and services. 8.6% sales tax. Personally I love the small is beautiful concept except when it comes to my equity position. The siren song of real estate like many things is hang on…but only you get to decide when to take your (paper) losses and plunk yourself down near a wild west beach with less stress. I sold my house in Atlanta the… Read more »

Good times roll again…for some: Inside the first Goldman Sachs partners’ dinner in SIX YEARS as lavish parties return for bankers

Prior to the global economic meltdown Goldman Sachs were renowned for it’s lavish gala dinners for it most profitable bankers
Goldman hosted its first event since the crash last month
It was a lavish affair with 450 bankers and their partners flown in from around the world to attend
Earlier this year the investment bank posted a $2.9 billion quarterly profit

Gold rolling over is getting noticed – duh – but the charts that caught my eye are in the currency space. Looking at Schnell pull out the time frames on a number of G12 currencies:… The chart that really got my attention is the 2004 – 2013 downtrend on Uncle Buck that is about to be tested, with the same multi year charts in commodities that are neutral to nearly bearish in the case of gold. Those are monthly bars on this chart.… Uncle Buck about to come roaring back, or has this been the head fake that… Read more »
I learned this phrase here. but in practice learned this in the 90s as i interned while at nyu at one of the largest brokerage firms on wall st. now part of Bank of America. There are many terms and titles, and comp plans have changed since then, some thankfully aligning with longer term client objectives. but the majority of the activity today is still rooted in sales. Most “financial advisors” will and do get required certifications. But if you cannot sell or persuade individuals to part with their money, the business and or new career will never flourish. That… Read more »
Bill Cara
Same old… but more people and more exhibitors. Better organized. Today is a more relaxed day. Monday am gets tough. First thing I noticed is that all the large mining companies are here and visible. Nobody I talked to so far — including any of the newsletter writers — seems to have a clue why gold and silver and the mining stocks have crashed to this extent. Some think the pain will get worse. Most think this is the time to buy, and I agree with that. Already agreed to do a conference in Bahamas in Eleuthera in Feb 2014… Read more »
Hope everyone is well. I had dinner with a few friends, one who sells mortgage products to consumers. He noted that companies like his, and others like quicken loans with wall st banks underwriting, are minting money right now selling fha loans and refinances to folks who only have 3.5% down payment, or are refinancing paid off homes, to fund their retirement because they have no retirement after the dot com crash and 2008 crash. Interesting times…”there is nothing new on wall st” the market seems to be consolidating but past leaders such as apple are done for a while.… Read more »
Vadym Graifer
Thanks goldbug58 I’ve made the worst mistake be being long $ACI and staying long though have stopped out of 1/3. Noticed last week that India is looking to acquire coal assets. But I bet if a move to buy the depressed coal assets arrive, suddenly US coal becomes a strategic asset-as Bill noted a few weeks back-and any deal is scuttled. $WLT is constantly rumored to be sold but trades as bad as $ACI and all other coal names. Hey the gold and currency markets are telling of growth to come? Therefore maybe US steel could be a mover if… Read more »

What do you think of this article? Seems to indicate that patience (rather than patients!?) might be required.

A lot of these companies I’m seeing mentioned have been around since 1990, and they’re trading at a buck, at their current burn rates, about one year away from running out of money.

It does all sound really interesting though.

ACI’s been a hard-luck story for almost two years. I sold my shares at a loss and didn’t look back…Cloud Peak (CLD) is more attractive to me, although I’ve no position in it…resistance to West Coast export ports in the US, particularly in Washington State, is one issue…CLD did export some 4.4 MMT to Asia in 2012…ACI has more of a met coal focus as opposed to thermal, hence it is a bit more susceptible to steel production in a weak global economy…my opinion is that the outlook for sea-borne thermal coal is going to improve, as countries like Japan… Read more »

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