05-30-2014 Trading Journal

Market continued higher- like seven days in a roll (except for one tiny pause couple of days ago.

SPY_Daily

Wow, that was as bullish as the market can get.  Can the market break its five years cycle of rally and turn 2014 into a six years bullish run for the first time in 21st Century?  Remember, we are the ones who define the rules; whereas market will go where it pleases. Think about it, if you don’t have your money in the market, where else can you put your money?  CD in banks?  Money market?  Real estate?  There is really not much of a choice.  The stock market is the only next best thing to combat inflation. Yes, inflation where our Gov’t tells us there isn’t one. Housing price, gas price, and food prices are all creeping up.  Ok, cost of computer hardware are going down, whoopee doopee; but that is not essential to survival.  All costs related to essential survival are going up and will continue to go up as the population continues to expand in a world where the average lifespan is much longer than our parents and grandparents.

What about the collapse of the momo stocks/Nasdaq for the last two months?  Isn’t that a “forewarning” of what is about to happen to the general market?

Good question.  Sure, there is a “probability” of that happening.  On the other hand, there is also the probability that the correction of the momo stocks are simply the market cleansing itself out so that it can continue its ascent.  Think about it.  Comparing to history, the recent correction of the Nasdaq/momo stocks for TWO MONTHS straight failed to bring down the general market according to the “Nasdaq leading the general market trend” thesis.  Instead, the S&P500 was able to fight the Nasdaq gravity pull and started to head back up to make new high while the Nasdaq is still fighting to head back to the previous high.

Take a look at the daily Nasdaq Composite Index chart below.  I’ve highlighted the consolidation range based on what the immediate pivot highs and lows after Nasdaq made new high on early March.  This is the same formula I used to highlighted the SP500 consolidation range you see above.

COMPQX_daily

Notice how the Nasdaq had collapsed below the consolidation range, bounced off the 79 & 89 “magical” lines, and then broke thru below the 79 & 89 MA lines by mid-April to find support at the previous trend low at beginning of February.  Meanwhile, the SP500 was able to stay inside the consolidation range most of the time with a short-term dip below the consolidation range in mid-April in sympathy to the Nasdaq drop but that was the extent of the Nasdaq pull.  The SP500 bounced back up above the 79 & 89 MA line and into the consolidation range immediately after the dip and began the ascent back to the top of the consolidation range while the Nasdaq continued to be affected by the gravity pull during the same period.

Now, after reviewing both charts (SP500 and Nasdaq), Who is leading who now?

Based on the old “Nasdaq leading the SP500” thesis, the SP500 would not be making new high; it would be making new low.

But that isn’t the case right now, Isn’t it?

Folks, we are entering into a new era where it may be more productive to follow the general market trend instead of making prediction of coming doom and groom ’cause of the five years cycle established in the past.  You really cannot apply the past to current market condition ’cause there were no QEs for such an extended periods in the past.  The whole mechanism of the market has evolved to the point where the past is the past and new rules are being formed per current market environment.

The dynamic of our population increase demands that the market continues to stay healthy.  Otherwise, the consequence of a market crash will be ten-fold worse than the past.  The world knows it and will do everything to prevent a world-wide market collapse for the consequence will be unbearable.   The collapse in 2008 gave the world leaders a glimpse of the monster that could set the human race back in time.

All things considered, I believe we are setting the base here as the next support when the market correct in the future.  In other words, I believe the market will continue to head higher from here and current level is where the base is for the next correction to find support.

Enough of my market philosophical 2 cents…

I added to $BIOS today ’cause price opened higher and moved higher.

BIOS_daily

Now, that is a nice looking bullish pattern there.  I need to hold on to this one for the ride up.

I bought back $AMRN when I found out that the House Fiscal Year 2015 FDA Appropriation Bill & Report includes the following:

Special Protocol Assessment Agreements.—The Committee is concerned about questions that have arisen in connection with the rescission of a Special Protocol Assessment Agreement (SPA), including fundamental questions concerning FDA’s adherence to the statutory and regulatory guidelines that apply to the SPA process as well as to questions concerning fairness to the sponsors. The Committee would like to reiterate that FDA is expected to adhere to the established standard as informed by the Congressional Record and the 1997 PDUFA Goals Letter.

I’m thinking that the FDA may take some action to “save face” that end up benefiting $AMRN. Of course, the FDA may not even care and continue to punish $AMRN for whatever reason. If price could not find support at $1.40; I may have to think about cutting losses once again.

Next, I sold $DNN for breakeven before price fell back down below my entry point.  I bought this for the momentum and I did not want to stick around when momentum died down.

I also bought $KNDI for the bounce but decided to bail by closing bell when price did not perform well for the day.

$LRAD had a very nice gain today which helped my port quite a bit.

LRAD_daily

Price bounce right back above the 79 & 89 MA line and look like it may gun for the nearby resistance soon.

Despite a pullback from $DMRC, $KGJI, and $AMRN, gains from $LRAD and $BIOS more than offset the losses that my port gained 3/4 of a percentage for the day.  YTD gain is now 5.1%.

Current positions:

LRAD, DMRC, KGJI, BIOS, SEED, AMRN and 15% cash.

From my other account:

$NVLX corrected a bit today but I’m still holding. Next week will be telling on this stock.

My 2 cents.

 

 

 



Categories: Daily trading Journal, Uncategorized

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