rather than pick out individual stocks to trade, it can often be worthwhile to trade the indices themselves, especially in times of high volatility.

for those so inclined, i attach below charts for FTSE and FTSE 250, though one might equally be tempted to trade Dow or S&P, which is significantly broader in its coverage, or even NASDAQ

for ease of reading, i have attached 1 year and 3 month charts in each instance

Washing? Im short ULVR. A sign.?

The Big Picture
Should You Be Buying The Dips?
February 5, 2013 @ 7:53 AM EST
by Jerry Wagner
1 In the cold Midwest in January, the only talk of dips tends to be at Super Bowl parties or during the annual Polar Bear Club celebrations when a few hardy, scantily clad individuals jump into the frigid winter waters.

Of course, in the summer those dips are much more inviting, following which a double “dipped” cone from the ice cream parlor has plenty to recommend it.

But tune in to any financial news program or pick up your favorite financial read and you’ll see that dips are all the rage. In this case, the reference is to “buying on dips.” Buying on dips has a long and much praised history. Although it is a contrarian strategy of sorts, it is often paired with momentum strategies.

The idea is that you buy into the market whenever the market index moves counter to the prevailing trend. If stocks are moving higher, you wait for a “dip” and then you buy.

The key to such a strategy is that one must know whether the market is in an uptrend, when the dip is a deep enough dip, and when the dip is a dip worth buying and not the beginning of a bear market. Answering those questions puts you well on the way to developing a quantitative strategy for trading stocks.

Once quantified, this approach is probably a pretty good market strategy. What I don’t like is how it is being used today.

It seems like most of the commentators shouting the loudest to “buy the dips” have done little quantitative research to answer the questions posed above. They see the market moving higher and so they advise, “Wait for a dip then buy.”

The other common characteristic of these market gurus is that they missed the beginning of the current rally, having been overwhelmed by the negative news media chatter. Now they seem to be trying to save face and get on board the train before the market hits new all-time highs. Then, everyone will be asking them whether they are “in” the market. When the market hits new heights, these commentators have to be “in.” But where were they when the market was at a low point in the Fall?

The market began the current rally from a low point hit on November 15, 2012. If you check back in your old emails, you’ll see that just three days before we were pointing out that “A number of factors are lining up to support the rally probabilities.” The next week I was pointing out that the expected market turkey had not arrived.

Then in the post seasonal rallies and fiscal cliffs, I suggested a real “buy on dip” approach. I said that “…this could be a last year-end buying opportunity…”, and that “… a runaway year-end rally is a real possibility.”

Now, anyone can be wrong (or right) with a market call, and I must admit that I had some concerns when we were flat to down during the holidays. I only mention the record to point out that following the quantitative signals on a short-term, active basis can be rewarding, and that those commentators suggesting that we buy the dips are relative latecomers.

Still, what about the substance of the advice to “buy the dip”? I strongly suspect some of my readers don’t have 100% of their money invested with Flexible Plan Investments.:>) So should they heed the advice to be invested in stocks today, like the equity portion of their Flexible Plan accounts is?

Let’s find an answer by looking at the questions posed above. Are we in an up-trending market? All the tried and true indicators applied to the popular market indexes tell us that we are. The 50-day moving average exceeds the 200-day, the weekly closing price exceeds the 34-week moving average, and prices have moved higher for four straight weeks and for eight straight days.

Will we have a tradable dip? Probably, and soon. An eight-day run higher usually ends in a few down days, and more than 90% of the stocks in the S&P 500 are trading above their 50-day moving average. Over 75% of these companies’ shares are now classified as overbought, few are oversold. Such a wide spread has in the past has led to a market correction.


Source: Bespoke Investment Group

If there is a “dip,” how do we know it’s a buying opportunity and not just the first down leg of a bear market? First, because we are in that uptrend – the odds are in our favor. Of course, we all know that the odds have two sides. Even when they are 70% in our favor, they are still 30% against us, so it’s important to look beyond just one indicator, just as it is important to own more than just one strategy.

Secondly, when we examine past periods when the indicators are positioned as they are today, it seems that the dip has typically been limited to 3% on a weekly basis, and on a monthly basis it has peaked at about 10% (one out of seven occurrences by one measure).

Given that this tends to be a positive week seasonality-wise and that the positivity commences again around the 11th of February, the next two weeks may be your best opportunity to get on board the rally. Most of the indicators suggest some short-term weakness (investor sentiment topped the 50% mark I talked about last week, for example), but they also suggest that all-time highs in the stock market are just around the corner.


Source: Bespoke Investment Group

For the record, interest rates have moved higher and are now at the top of their recent trading range, and economic reports registered a net underperformance in last week’s reports (but many more are to be reported this week). At the same time, though, earnings reports have come in much better than expected. It could be one of the best earnings quarters in recent years, and reported revenues are beating expectations by an even wider margin.

The other frequently used phrase in the financial news of late is the debate about whether the glass is “half full or half empty.” My take is that if you’re going to take a dip in the pool, it really doesn’t matter.

still sitting on my (washed) hands

USD ISM Non-Manufacturing PMI 55.2 consensus 55.2 previous 56.1

Nikkei 11,463.75 416.83(3.77%)



BoJ’s Shirakawa to step down early

Asian shares recover on firm euro zone data, yen slips

TOKYO | Wed Feb 6, 2013 4:07am GMT

(Reuters) - Asian shares recovered on Wednesday as solid euro zone data calmed nerves jarred by potential political turmoil in Spain and Italy, while the prospect of a dovish new governor for the Bank of Japan dragged the yen to a new low.

Input from DP of IC:
"Market folk wisdom has it that volatility often features at the highs and lows of moves. If so, the last couple of sessions strengthen the case for a near-term top in equities and possibly in the Euro too. I was on alert for a change-of-trend in FTSE and DAX and to occur yesterday, but my selling-levels were not triggered. True, the German market did give a sell-signal on its swing-chart, but I did not follow it, occurring as it did in isolation.

The subsequent bounceback in equities and the Euro keeps my intraday focus positive for the moment. Given the leadership coming from the US markets, my instinct is that we can push a bit higher still. This will likely create some negative divergences on the daily charts, and heighten the risk of a more significant pullback before long. In the meantime, I am seeking small longs in FTSE and EURGBP especially, and a short in GBPUSD.

I currently see the markets as in a sort of no-man’s land. They have not quite entered short-term downtrends in most cases, but could very soon do so. I know better than to try and call big turns. Instead, I will await developments. If the markets quickly and strongly recover, I will seek further long positions. Renewed selling will turn me into a temporary bear. "

approaching the capital gains tax avoidance selling season.

CAD Ivey PMI 58.9 consensus 53.7 previous 52.8

By Sara Sjolin, MarketWatch LONDON (MarketWatch) -- Worries over the political situation in Italy hurt sentiment across European markets on Wednesday, as the renewed popularity of former Prime Minister Silvio Berlusconi stoked fears of financial chaos in his country. Investors also stayed on the sidelines ahead of the European Central Bank's monetary policy meeting on Thursday. The Stoxx Europe 600 index lost 0.4% to close at 284.52, after putting in the best daily performance since early January on Tuesday. "There are clearly concerns that Berlusconi is going to be a big player in the election and markets are worried that it would be perceived as bad for the Italian economy," said Peter Dixon, strategist at Commerzbank. "There is certainly a risk that he will end austerity measures, and I think the market will view that as a negative. Investors are starting to display that nervousness and it's likely to continue until the election," he added. The FTSE MIB stock index slumped 0.7% to 16,602.85, with shares of UniCredit SpA down 1.7% and Intesa Sanpaolo SpA off 1.6%. On Monday, the Italian benchmark sank 4.5%, after Berlusconi vowed to reduce taxes if his coalition wins the Feb. 24-25 elections, fueling concerns that the country will diverge from its current reformist drive. The former prime minister in recent polls narrowed the gap with front-runner Pier Luigi Bersani to just 3.7 percentage points, Bloomberg News reported, citing a daily tracking poll by Tecne institute for SkyTG24. In early January, Tecne had Bersani leading with 14 percentage points. Other polls, however, showed larger gaps in the range of 5.5 to 8 percentage points. On Thursday, attention turns to the European Central Bank's monthly policy decision. The central bank is widely expected to keep rates on hold and refrain from introducing new measures. Japanese inspiration European stock markets had earlier traded in positive territory, taking inspiration from an upbeat mood in Asia. Japanese stocks surged to a level not seen since September 2008, as the yen sank amid hopes of aggressive easing measures following news of Bank of Japan Gov. Masaaki Shirakawa's early departure. "This opens up the spot for a new governor who will be more committed to implementing the Bank of Japan's new 2% inflation target than Shirakawa seems to be. Market participants are now pricing an even easier monetary policy stance from the Bank of Japan," the Danske Bank analysts said. "The expectation of easier monetary policy in Japan, the U.S. and the U.K. certainly helps sentiment as does general optimism about the state of the global economy," they added. U.S. stocks traded mixed on Wall Street. House Speaker John Boehner threw cold water on President Barack Obama's plan to delay the automatic spending cuts known as the sequester, saying it should be replaced with different spending cuts and must not include tax increases.

That's the way to do it!

Anglo Irish Bank successor 'to be liquidated'

Emergency legislation to liquidate the former Anglo Irish Bank has passed through both houses of the Irish parliament.

It paves the way for a restructuring of Ireland's most controversial bank bailout.

The law was rushed through amid a rowdy late night and early morning sitting.

Under the plan the bank, now the IBRC, will cease to exist. Its debt will be transformed into a long-term bond.

The debt had been costing Irish taxpayers 3.1bn euros each year.


Last rites read for Anglo Irish Bank - - the damned builders' bank

The last rites were effectively read early on Thursday morning for Anglo Irish Bank - - the damned builders' bank - - when the Oireachtas voted for its liquidation. However, the dénouement of the defunct bank that had been rebranded as the Irish Bank Resolution Corporation (IBRC) in recent years, will extend for several decades when the resultant public debt of over €30bn will be repaid.

i have a note of the "codes" somewhere, but not here in AD airport ..... however, the 2 indices of C+M and and HG+HC have served me very well of late, even if scarily volatile at times ...... i think they are both very good sectors to be following at the moment

...again it looks as though I was premature in closing my short - and I am still not back into the market. I dont think I am skillful enough to play this market - have had a couple of lucky runs - but when I am out contemplating a move - I seem to get it wrong - so will continue to sit on my (very clean) hands for time being. Good luck to you professionals - I do read your comments with interest - and indeed learn something new each day.

I've been rather busy playing 5, 10 & 15 minute charts the past week. 28 trades made yesterday on UKX and EUR/GBP. Making nice profits though and I much prefer this volatility than a stay put long or short. I still think utimatly the FTSE is too high but with upside potential still in the market its not worth guessing where to short from. More fun going with the trend and cashing in small profits regularly. Have lost on a few positions mind but overall I've ended each day in profit...

Unfortunalty you can't post these trades for others so explains why the thread has been quite recently.

ANGL. the epic if I remember rightly Skinny? remember trading them a few times and despite the 1% Stamp Duty quite successfully.

Yes that's the epic - Thread and Chart.

I went long earlier @6,237 and got stopped @6,217 almost a trade for the sake of a trade and got the result I deserved I guess.

FTSE @40/42 as I type - hey ho!

FTSE 100 1hr chart, support and resistance, may come in handy if your trading 15min charts today..

Thanks for the chart Shortie.

I've been wearing my shorts from DOW 13990 several times this week, and it's worked well -except that of course I've been taking (small) profits far too early. I'm currently short from 13950, and another set at 13980.

Not sure how far the FTSE will go today. I'll maybe set a short at 6280.

I feel we've seen the top of both for a while - but who knows, I may be entirely wrong.

Seconded Shortie.

Heres a 1hr Wall St also, 13990 short off resistance was a good move and you might get another chance at it. Note support though 13943. It's treading a tight range at the moment and unless it opens up more it's a 50/50 punt at best I think. Worth watching to see if the green upwards support line reads true though...

DAX Daily Chart looking like it might be worth a short future though! Anyone know if the German Trade Balance figure due out today has been announced yet?