It has been a while since I last posted anything thanks to a very busy summer. Therefore, this post will highlight several updates all at once.
The Silver Lining in the Gold (and other precious metals market)
Gold is making a new all-time highs at 1580's with Silver trading around $38 the Gold/Silver ratio is currently between 41-42 up from 32 when Silver was hitting recent highs at $49 before crashing back to $33-34. Gold had been setting up a good base between $1480 and $1550 before this breakout to the upside. I would look for topping action around the Psychological barrier of $1600 but would not be surprised if we see a run up just above $1600 (say to $1610-$1620) before a fall back before we start the annual Fall run in the metals market.
Silver should maintain a 35-45:1 ratio with Gold which would lead us to see Silver remain in a trading range between $35-$45. I would expect Silver will top out just over $40 (maybe as high as $42-$43) before settling back to $36.
HOWEVER, If the US Fed increases it's interventions in the markets and/or the EU Contagion continues to grow then all bets are off as I see Gold running for $2000 and Silver headed for $50.
The Fed will continue to intervene in the markets by rolling over the short term Treasuries it bought during QE1 and QE2 into new Treasuries. They have to as there are no other buyers really in the markets. Thus you could say a pseudo-QE3 is already working. My "HOWEVER" statement above is that the Fed increases it's interventions above and beyond the rolling over of short-term/near-term maturity instruments into new ones.
TOP 10 portfolio replacement
I have been working on replacing the TOP 10 portfolio with another trading portfolio but have not settled on a methodology. The one I was working on is too time consuming and the others that I have looked out have not panned out. As you remember the TOP 10 was the TOP stock in each of the TOP 10 sectors that had increased the most in the past 30 days. This system sorta-kinda worked but at the same time did not offer rewards consisted with the risk involved. While the idea forced me to look outside of my comfort zone and expose me to new investment ideas it did not in my opinion offer any additional benefits over just buying an index ETF.
Currently I am working on/looking at several trading "systems" using Point&Figure charting and Candlesticks but think these will be too cumbersome in time, effort and personal training. The other day I came across some notes I took at an investing conference back in 2001 related to Point & Figure charting. Interesting I had this information tucked away in my notes as presented by Lynn Carpenter.
BULLISH BUYS
| Point & Figure Complex | % of Time profitable | Average Gain | Average Timeframe |
| Double Top | 80.3% | 38.7% | 11.5 months |
| Triple Top | 87.9% | 28.7% | 6.8 months |
| Spread Triple Top | 85.7% | 22.9% | 7.7 months |
| Bullish Triangle | 71.4% | 30.9% | 5.4 months |
| Bearish Signal Reversal | 92% | 23.2% | 2.5 weeks |
BEARISH SELLS
| Point & Figure Complex | % of Time profitable | Average Gain | Average Timeframe |
| Double Bottom | 82.1% | 22.7% | 4.7 month |
| Triple Bottom | 93.5% | 23.0% | 3.4 months |
| Spread Triple Bottom | 86.5% | 24.9% | 4.6 months |
| Bearish Triangle | 87.5% | 21.9% | 2.5 months |
| Bearish Signal Reversal | 88.6% | 22.9% | 4.9 months |
Looking at the above information I am trying to setup a system that takes advantage of the BULLISH BUYS: Bearish Signal Reversal because it is profitable 92% of the time, for an average return of 23.2% in 2.5 weeks. Basically, I would look at this as a Buy the stock and sell in a specific time of 16-18 days or if a SELL Signal developed before that timeframe. The otherside of the coin, I am looking at the BEARISH SELL: Triple Bottom since it is profitable 93.5% of the time with an average gain of 23% in 3.4 months. For this I would look to sell not in 3.4 months but when the gain exceeded 20%. Just using these two entry methods I should have a pretty solid system. At this time I am still working on this to develop a quick means of identifying these events and going from there.
I have found a website that can provide the information needed, the problem is that for the Bearish Signal Reversal there are 30 stocks listed and for the Triple Bottom there are 187 stocks that meet the criteria. That is a few too many stocks to be having to wade through in order to find 10 or so stocks to actually trade. I am looking for a way to watch the list to catch new stocks as they are added, so that maybe we are adding one every couple of days and not having to actually wade through 200+ stocks.
As I refine the system and get closer to an actual try it out trading method I will start posting more information.
Finally I would like to post 16 Golden Rules of Financial Safety as presented by Mr. Harry Browne on August 17, 2001 at the investment conference where I got the above Point and Figure information. However, I found his website and a posting with additional discussion text added. To read Mr. Browne's 16 Golden Rules of Financial Safety just click here. If your wondering who Mr. Browne is from Wikipedia "Harry Browne (June 17, 1933 – March 1, 2006) was an American libertarian writer, politician, and free-market investment analyst. He ran for President of the United States as the nominee of the Libertarian Party in 1996 and 2000."
Thanks for reading and remember Standard Disclaimer applies
EDIT 07/19/2011: Was doing some research on Point & Figure setups and found a .pdf from a company that has the exact same information apparently Mrs. Carpenter got her info from this original source. Original Source was: Profit and Profitability - Technical Analysis of the Price Fluctuations of Common Stocks by Point and Figure Method, by Robert Earl Davis, Associate Professor of Chemistry, Perdue University, copyright 1965.
Standard Disclaimer Applies
Mother
(re-posted from original website 09 27 2011)
