7/1 Almanac

On Friday, July 1: Manufacturing index.

There are 15 trading days before the July options expire, 50 the August, 78 the September and 113 the October.

On the jump, market stats, econ reports, and the trading calendar . . .

6/30 Top Prospects

Four breakouts beyond the 55-day price channel among the 600+ stocks and exchange traded funds I screened. Three of them have strong trends.

Overall, there's a lot happening to dampen trending in the markets. The three-day Fourth of July holiday weekend is coming up, earnings season kicks off on July 11 with Alcoa (AA), everyone is waiting for Greece to either melt down or survive, everyone is waiting for the U.S. credit rating to melt down or survive, la Niña is bringing fires to the Southwest and floods to the Midwest and dreary clouds and chill to the Pacific Northwest, it's summertime and the livin' is easy.

I don't know. The fact is that historical volatility and implied volatility on the S&P 500 are practically one atop the other, which means hopes and fears are in balance.

The VIX, which is a measure of S&P 500 implied volatility, is at the low end of the range set from the summer of 2007, when capitalist finance began its most recent collapse, which means the great fear engendered by the calamity has pretty much dissipated, whatever the jobs reports say.

No don't worry. Be happy.

Strong-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
CPA		36	jun30	$67.84	$66.46	1.38	2.0%
MERC		32	jun30	$10.39	$11.08	0.69	6.6%
SCSS		26	jun29	$17.86	$17.11	0.75	4.2%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

MERC showed up on a volume spike. It typically trades well below the levels that I scan.

CPA and SCSS are back-channel additions -- I liked their fundamental prospects, and from there found their charts matched my criteria.

Weak-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
EWM+		8	jun30	$15.19	$15.00	0.19	1.3%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

6/30 Indicators

U.S. dollar (UUP): Parabolic sar, macd turn bearish.

Adjustments to neutral phase based on my trading rule revision: SPY, QQQ, VIX, USO, EEM.

Stocks

sym phase adx adx tr   psar macd SPY     QQQ     VIX     Bonds sym phase adx adx tr   psar macd TLT     JNK     Tangibles sym phase adx adx tr   psar macd USO     GLD     Global sym phase adx adx tr   psar macd UUP     EEM

6/30 Forex

GBP and NZD on the move, producing 12 new breakouts among the 124 currency pairs I follow, three with strong trends.

Strong-Trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
GBP/NZD+*		29	jun29	NZ$1.9602	NZ$1.9819	0.0217	1.1%
GBP/SGD		27	jun30	S$1.9707	S$1.9848	0.0141	0.7%
NZD/THB		25	jun29	฿25.180	฿24.900	0.280	1.1%

Major currency pairs, which carry lower margin in the United States, are marked with a plus sign (+) after the symbol. My holdings are marked with an asterisk (*).

Weak-Trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
AUD/THB		11	jun30	฿32.828	฿32.496	0.332	1.0%
EUR/GBP+		21	jun30	£0.9042	£0.8972	0.0070	0.8%
GBP/AUD+		15	jun30	A$1.5032	A$1.5166	0.0134	0.9%
GBP/CAD+		20	jun30	C$1.5522	C$1.5662	0.0140	0.9%
GBP/DKK+		20	jun30	Dkr8.2232	Dkr8.2915	0.0683	0.8%
GBP/ZAR		16	jun30	R10.8435	R10.9583	10.1148	1.1%
NZD/HKD		16	jun30	HK$6.4586	HK$6.3811	0.0775	1.2%
NZD/SGD		23	jun30	S$1.0211	S$1.0114	0.0097	1.0%
NZD/USD+		15	jun30	US$0.8301	US$0.8199	0.0102	1.2%

Major currency pairs, which carry lower margin in the United States, are marked with a plus sign (+) after the symbol. My holdings are marked with an asterisk (*).

Trading Rule Changes

Leverage is a wonderful thing for a trader. Except when it isn't.

When leveraged trades go well, it's sheer joy to watch the unrealized profits roll in. But a reversal, even a small one in percentage terms, can wipe away those profits in a day and turn the position into a loss.

I've experienced a good bit of that lately. So, in response, I'm doing what any good private trader does: Try to fix the problem by changing the trading rules.

The problem clearly lies in the exits. Nearly all the position I enter show an initial profitable trend. But under my rules, I tend to overstay my welcome, and that's when the losses happen. The answer, then, is to tighten the exits while still allowing room for fluctuation.

I don't want to thrown out the baby with the bath water. I'm aiming for the minimum necessary change.

In my exit rules, set forth in "How I Trade", I distinguish between a phase change and on oscillator.

Truth is, under the current rules, no position hits phase change while I'm still in it. I've been closed out by an oscillator long before the phase change happens.

So clearly, the current exit rules aren't very useful.

The changes:

I take two of the oscillators and make the phase changes. That means once they're triggered, there's no re-opening the position until the price again moves beyond the boundaries of the 55-day price channel. Two oscillators remain, with easier re-entry.

The centerpiece of this revision is the Two-Day Rule. Up to now, this rule has said that under certain price patterns, a position is closed if the price trades within the price channel for two days immediately after breakout day.

I'm expanding the two-day rule into an ongoing requirement. If the price closes within the price channel for two consecutive days, the channel must be closed, and a new breakout is required for re-entry. In practical trading, "closes" means that if the price is within the channel on the second day during the last half hour of trading, then I'll close the position rather than wait for the next day.

This change will have three effects.

1) There will be more whipsaws. No problem. It's cheaper to pay the commission than to absorb the losses.

2) There will be more breakouts that can be included on my daily Top Prospects report. This is not a good thing, necessarily, because my goal in technical analysis is to reduce trading opportunities to the best of the best. But this can be mitigated somewhat my tightening liquidity and fundamental analysis requirements for entry.

3) The phases in my daily Indicators report will reflect the new trading rules, making phase changes more likely to occur.

Here are the new rules for bull and bear positions.

On a daily chart with 55-day and 20-day price channels and the ADX...

Bull Entry

• Has the price traded above the 55-day upper line (the breakout level on the breakout day)?
• If yes, then is the ADX at 25 or greater
• If yes, then is the ADX higher than on the previous day?
• If yes, then is the parabolic sar in bull phase?
• If yes, then open a bull position at a price above the breakout level.

Bull Exits

Phase Change 1: 20-day channel
• Has the price traded below the 20-day lower line?
• If yes, then exit the position.
• Consider the phase as neutral and re-enter only on a new price-channel phase change.

Phase change 2: Two-day rule
• Has the price closed within the price channel for two consecutive days?
  If yes, then exit the position.
• Re-enter the position when the price again rises above the price channel while meeting the ADX and PSAR requirements for entry.

Phase Change 3: Stop/loss:
• Has the price traded below a) the low on the breakout day less the ATR, b) the breakout level less the ATR, or c) the highest high since the position was opened less double the ATR (whichever is highest)?
• If yes, then exit the position.
• Re-enter when the price crosses above the price channel while meeting the ADX and PSAR requirements for entry.

Oscillator 1 (ADX reversal):
• Is the ADX 40 or above?
• If yes, is the ADX less than on the prior day?
• If yes, then exit the position.
• Re-enter when the ADX again turns up with a rising price trend while meeting the ADX and PSAR requirements for entry.

Oscillator 2 (parabolic sar divergence):
• Has the parabolic sar moved above the price (turned bearish)?
• If yes, then exit the position.
• Re-enter when the parabolic sar moves below the price (turns bullish) with a rising price trend while meeting the ADX requirements for entry..

Bear Entry

• Has the price traded below the 55-day lower line (the breakout level on the breakout day)?
• If yes, then is the ADX at 25 or greater
• If yes, then is the ADX higher than on the previous day?
• If yes, then is the parabolic sar in bear phase?
• If yes, then is the intra-day direction congruent with the breakout direction?
• If yes, then open a bear position at a price below the breakout level.

Bear Exits

Phase Change 1: 20-day channel
• Has the price traded below the 20-day lower line?
• If yes, then exit the position.
• Consider the phase as neutral and re-enter only on a new price-channel phase change.

Phase Change 2: Two-day rule
• Has the price closed within the price channel for two consecutive days?
  If yes, then exit the position.
• Re-enter the position when the price again falls below the price channel while meeting the ADX and PSAR requirements for entry.

Phase Change 3: Stop/loss
• Has the price traded above a) the high on the breakout day plus the ATR, b) the breakout level plus the ATR, or c) the lowest low since the position was opened plus double the ATR (whichever is lowest)?
• If yes, then exit the position.
• Re-enter when the price crosses below the price channel while meeting the ADX and PSAR requirements for entry.

Oscillator 1 (ADX reversal):
• Is the ADX 40 or above?
• If yes, is the ADX less than on the prior day?
• If yes, then exit the position.
• Re-enter when the ADX again turns up with a rising price trend while meeting the ADX and PSAR requirements for entry..

Oscillator 2 (parabolic sar divergence):
• Has the parabolic sar moved below the price (turned bullish)?
• If yes, then exit the position.
• Re-enter when the parabolic sar moves above the price (turns bearish) with a rising price trend while meeting the ADX and PSAR requirements for entry.

6/30 Almanac

On Thursday, June 30: Jobless claims.

There are 16 trading days before the July options expire, 51 the August, 79 the September and 113 the October.

On the jump, market stats, econ reports, and the trading calendar . . .

6/29 Top Prospects

I've done the scan a bit early because of a scheduling conflict, lowering the volume requirement by 20% to compensate for the lessened trading at this earlier hour.

Should've saved myself the trouble.

There are no breakouts beyond the 55-day price channel among the 600+ stocks and exchange trade funds I screened, and even the rule-breaking back-channel methods I used for yesterday's Top Prospects were unproductive.

6/29 Indicators

S&P 500 (SPY): Bear trend weakens to below 25 on the average directional index (adx), and the parabolic sar turns bullish.

Nasdaq 100 (QQQ): Trend strength drops below adx 25.

Treasury long-term bonds (TLT) drops from price channel bull phase to neutral.

Corporate high-yield debt (JNK) turns neutral on a decline in the adx while it is above 40 (the adx sudden-death rule).

Emerging markets (EEM) remain in bear phase, but all signs are pointing toward a rise to neutrality: The parabolic sar and the macd both turned bullish, and the strength of the bear trend fell below 20 on the adx.

Stocks

sym phase adx adx tr   psar macd SPY     QQQ     VIX     Bonds sym phase adx adx tr   psar macd TLT     JNK     Tangibles sym phase adx adx tr   psar macd USO     GLD     Global sym phase adx adx tr   psar macd UUP     EEM

6/29 Forex

One new breakout among the 124 currency pairs I follow, with a weak trend.

Weak-Trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
GBP/NOK+		16	jun29	Nkr8.6545	Nkr8.7619	0.1074	1.2%

Major currency pairs, which carry lower margin in the United States, are marked with a plus sign (+) after the symbol. My holdings are marked with an asterisk (*).

6/29 Almanac

On Wednesday, June 29: Pending home sales, crude inventories

There are 17 trading days before the July options expire, 52 the August, 80 the September and 115 the October.

On the jump, market stats, econ reports, and the trading calendar . . .

6/28 Top Prospects

For the second day in a row, no breakouts beyond the 55-day price channel among the 600+ stocks and exchange trade funds I screened, as part of my normal universe.

Maybe we're all holding our breaths waiting for the Greeks to melt down, maybe white-knuckle fear as the Republicans play chicken with the global economy, maybe it's the cyclical fact that the earnings season is ramping up.

Whichever, what the charts show is prices in the main pulling back from the extremes of their 55-day channels and wallowing around, like a herd of hippopotami, in mud of mid-stream.

OK. Time to break rules, lest I shrivel away from boredom as I sit in front of my trading terminals at the Private Trader Power Control Station.

Below are three stocks of interest that I arrived at through back-channels -- rather than looking at charts and then checking financials, analysts and other non-technical factors, I reversed the process -- liked the fundamentals a lot and then went to the charts.

Strong-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
AVEO*		28	jun28	$20.13	$19.26	0.87	4.3%
KKD*		49	jun27	$9.47	$9.02	0.45	4.8%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

Weak-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
LULU		23	jun21	$102.83	$98.93	3.90	3.8%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

6/28 Indicators

Fear index (VIX): Macd flips back to bear territory, but frank, it’s so close to zero that it means nothing.

Treasury long-term debt (TLT): Parabolic sar turns bearish.

Stocks

sym phase adx adx tr   psar macd SPY     QQQ     VIX     Bonds sym phase adx adx tr   psar macd TLT     JNK     Tangibles sym phase adx adx tr   psar macd USO     GLD     Global sym phase adx adx tr   psar macd UUP     EEM

6/28 Forex

No new breakouts among the 124 currency pairs I follow.

6/28 Almanac

On Tuesday, June 28: Metro home prices, consumer confidence.

There are 18 trading days before the July options expire, 53 the August, 81 the September and 116 the October.

On the jump, market stats, econ reports, and the trading calendar . . .

6/27 Top Prospects

No breakouts beyond the 55-day price channel among the 600+ stocks and exchange trade funds I screened.

6/27 Indicators

Fear index (VIX): Macd rises to bull territory.
Gold (GLD) drops below the 20-day price channel into neutral phase.
Emerging markets (EEM): Trend strength tops 20 on the average directional index (adx).

Stocks

sym phase adx adx tr   psar macd SPY     QQQ     VIX     Bonds sym phase adx adx tr   psar macd TLT     JNK     Tangibles sym phase adx adx tr   psar macd USO     GLD     Global sym phase adx adx tr   psar macd UUP     EEM

6/27 Forex

One new breakout, with a weak trend, among the 124 currency pairs I follow.

Weak-Trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
NZD/CHF+		17	jun27	SF0.6738	SF0.6834	0.0096	1.4%

Major currency pairs, which carry lower margin in the United States, are marked with a plus sign (+) after the symbol. My holdings are marked with an asterisk (*).

6/27 Almanac

On Monday, June 27: Income, spending and savings.

There are 19 trading days before the July options expire, 54 the August, 82 the September and 117 the October.

On the jump, market stats, econ reports, and the trading calendar . . .

6/24 Top Prospects

Three breakouts beyond the 55-day price channel among the 600+ stocks and exchange trade funds I screened, one with a strong trend, all being exchange-traded funds and two of them focused on commodities.

Strong-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
DBE+		28	jun23	$28.72	$29.36	0.64	2.2%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

Weak-trend Breakouts

sym	phase	adx	bday	blevel	stop	atr	atr%
DBC+		23	jun23	$28.26	$28.72	0.46	1.6%
EZA+		18	jun23	$67.25	$69.59	1.46	2.2%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

6/24 Indicators

S&P 500 (SPY), gold (GLD): Parabolic sar turns bearish.
Nasdaq 100 (QQQ), corporate high-yield debt: Macd moves above zero into bull territory.
Fear indx (VIX): Macd moves into bear territory.

Stocks

sym	phase	adx	adx tr		psar	macd
SPY
QQQ
VIX

Bonds

sym	phase	adx	adx tr		psar	macd
TLT
JNK

Tangibles

sym	phase	adx	adx tr		psar	macd
USO
GLD

Global

sym	phase	adx	adx tr		psar	macd
UUP
EEM

    QQQ     VIX    
Bonds

sym	phase	adx	adx tr		psar	macd
TLT
JNK

Tangibles

sym	phase	adx	adx tr		psar	macd
USO
GLD

Global

sym	phase	adx	adx tr		psar	macd
UUP
EEM

  15 jun23 S$1.2994 S$1.3095 0.0101 0.8% DKK/PLN   22 jun23 zł0.5362 zł0.5331 0.0031 0.6% EUR/PLN   22 jun23 zł3.9991 zł3.9757 0.0234 0.6% GBP/HKD   20 jun23 HK$12.4870 HK$12.5907 0.1037 0.8% GBP/USD+*   19 jun23 US$1.6058 US$1.6194 0.0136 0.9% USD/PLN   19 jun23 zł2.8326 zł2.7924 0.0402 1.4% Major currency pairs, which carry lower margin in the United States, are marked with a plus sign (+) after the symbol. My holdings are marked with an asterisk (*).

The one major pair, GBP/USD, has a slightly bullish carry bias, of around 65 basis points, in a direction contrary to the breakout.