Wednesday, June 17, 2009

Watch Lists

As mentioned in my Trade #3 post, I make a list of the top ETF's, here's more on that:

Every weekend I make four lists, three longs and a short list.
For stocks, I always like to have a list of good fundamentals and a list of high short interest.
For ETF's, I need top long performers and top short performers.

The Yahoo screener finds me the top performing ETF's of the quarter. I divide this out into the long and inverse (short) lists. These get culled for volume and then for redundancy. Sheesh, about four of the top 10 were silver. Chili and copper are pretty much the same thing, but then, different enough to keep both.

Stock lists come from an IBD screen (which I further screen) and a short interest screen from Yahoo.

Now, armed with my lists, which do I pull from on any given trade day? That depends on several things, but mostly the broad market index, the SPY. Sadly, the daily SPY rite now gives little clue about market direction. Fortunately, the 60 minute version sends a strong (if not preliminary) message.

Click for larger, browser back.

The last several days of trading have broken the consolidation pattern. (yay!)
We definitely do have a lower highs and lows thing going on but it is still too early to get fully invested. All of that left-side-of-the-chart action could provide powerful support and stall or even reverse the trend.

With that going on, someone would not be interested in covering a short, therefore, the short interest list is passed over. Great fundamentals and high performance ETF's also require bull markets so they are also left to gather dust. This leaves the list of inverse ETF's which are the only way for me to trade a bear market.

Yes, I have tried to go long in a bear market before... it doesn't work very well.

I am holding a small position in SIJ (my top high performing short ETF). Notice that I said small. There are times where the SPY moves up in a bear market. When my SIJ transitions from green to red, I don't get concerned. I know that the overall market is going down so my investment will pay. Since my investment is small, the red numbers are small and do not cause heart failure.

Eventually the market will recover. When the 60 minute chart shows signs of uptrending, I'll look to the fundamentals stocks and performance ETF's. When new highs are experienced, I get to use the Short Interest list and really watch the fireworks!

Have fun with that!

No comments:

Post a Comment