Volume tends to be the go-to excuse for bears as this market keeps grinding higher.  While I have nothing new to say, I wanted to share two articles that highlight on why volume on the indices should not be a factor in your bull/bear case.  This first article comes from Ryan Detrick who is the Senior Technical Strategist at Schaeffer’s Investment Research.  This article is probably one of the best that I have come across since paying attention to these volume arguments going all the way back to the beginning of this rally in 2009.  The article is titled “Why Low Volume Is Actually Bullish” and brings data that goes a little deeper than just looking at volume on the indices.  I suggest reading for yourself but here are some key highlights:

• Number of stocks above $100 and the average price of shares in the S&P 500 are both near 22-year highs (Michael Santoli of Barron’s)
• Dollar volume, indeed, is up slightly from 2010 (Michael Santoli of Barron’s)
• AAPL, CMG, and GOOG’s of the world are the ones traders play now
•  Costs more to buy these stocks, so people don’t buy as many
• Quantified data shows total-dollar volume is indeed less than during the peak of the financial crisis. However, it’s also still well above the bull market from 2003 to early 2007
• Total options and futures volume made a new high last year, and has been increasing every year for the past three years

Overall this is a good read with statistical data.  Also I like the options and futures argument and believe this holds true as even more retail traders, such as myself, prefer the futures/options market for leverage.

Next article comes from a tweet I saw today from @Attitrade (a suggested follow) that shared research from Bespoke Investment Group (a leading research site IMO).

I suggest clicking on this link to read the full research notes but here is a summary with picture of what I read:

• Currently the 9th longest & strongest bull market (going back to 2009) in history
• S&P 500 is up 108.50% from 2009 low
• Count only days where volume was above its 50-day moving average the S&P 500 return is -30.1%

Below is a picture courtesy of Bespoke Investment Group:

My takeway, despite what you hear on TV about low volume keep in mind they are talking about the indices alone.  There are many stocks that continue to push higher on higher volume and this is what you need to focus on, not index volume.  If you are measuring index volume, then look at if volume exceeds the prior days volume, rules characteristic of how Investors Business Daily measures accumulation/distribution days.  I still believe in the single stock volume surges for institutional participation but also remember overall price is the only thing that matters, everything else are supporting factors.

Previously Rhino had a blog post titled “Lonely“.  I couldn’t help but agree that the recent transition by the men of iBC has a negative affect on my views of blog posts.  I personally can understand the the transition made by iBC crew to the current format.  I personally like it as it filters out nonsense.  I remember back when @chessNwine had a post about the iBC Blogger Network and challenged traders to bring it.  Well what can I say…some brought it.  Unfortunately most of the posts were filled with irrelevant and sometimes stupid posts stating “long this or that”.  All I can say is  who fucking cares!  Now it reciprocates the blog post if you say long this/that BECAUSE of this/that.  Needless to say back up your post with rhyme or reason and just don’t post haphazardly.

I believe the men of iBC were on to something awesome by creating the Blogger Network or formerly the Peanut Gallery.  The Fly and Admin let us in by letting our blog posts be featured on the front page.  Needless to say this is a big deal as it created reader-ship as iBC is highly read by many.  Unfortunately we bloggers (with the exception of few) let the iBC crew down and fed the stream with irrelevant crap.  I personally cannot argue with the stance taken by iBC crew and even respect them as they show that they are serious about content and will not any ill-minded pleb post anything bringing shame to iBC.  I know if I built something and it was littered with crap I would have cut it long before current actions.

If you are posting content, please bring content.  That is all that is asked.  Don’t use the site as a hub for views.  This is a hard business just in trading alone but when trying to convey your thoughts it is even harder.  I have never seen site views like I have since posting to the iBC Blogger Network.  When I see a drop in views I don’t take it personally but see it as a chance that someone didn’t have to read a post and maybe pick something up.  Do I mean this personally…NO!  There are other bloggers such as Rhino, zenhunter, elizamae, Affluenzairus, etc. that post original content and not just unfiltered crap or rehashed news bits.

All I say is that we as pleb bloggers need to prove that we have content.  I am quite certain that the tabbed iBC bloggers just didn’t come into the trading realm and iBC with some posts and expect to be tabbed.  They conveyed their thoughts and analysis that proved to be of content and earned their way into the respected halls of iBC (probably years at that). All I can say is that don’t saturate iBC with bullshit, but bring it.  I know personally I lack at times in content but at the same time I put time into my posts thinking at least one person may be able to pick something up.

Needless to say, lets we as bloggers prove that we have more to bring than we have in the past.  Bring content with posts and create an exponential respect to iBC that is in motion.

Back on May 1, 2009 I created my Twitter account as I could see how beneficial it could be to follow traders that share information.  I believe Twitter has to be one of the greatest developments to ever sweep the social media and trading space.  Trading can be a lonely endeavor when in your room with just a monitor(s) but it feels like you are part of a network where some of the smartest traders are sharing information for free.

Through they years I am seeing a trend that is becoming annoying.  Friends of mine know that I hate two kinds of people: child molesters/rapists and thieves (not so much retail but the ones that steal other people’s items).  A third person is coming along in my book and that is the social troll as some might call them.

These are the people that really have nothing better to do than go to other people’s blogs and leave comments that only bash the article or they respond to people’s Twitter posts with nothing but stupidity and no material for a valid argument or point of view.  I really don’t understand these people other than they have nothing better to do besides bash others or try to entice a “Twitter fight”.  Luckily most of the traders that I follow that come across these people block them or ignore them.

I suggest something for those that follow popular traders that also run trading services.  Click on that traders tweet timeline to where you can see all messages they respond to.  It amazes me how some of these traders can keep up with running a trading room and responding to people on Twitter because guess what….THEY DON’T HAVE TO!  These traders receive nothing from Twitter conversations (monetarily speaking) but do from their trading rooms and their time could be more suited to their subscribers.

The people/subscribers in those rooms are there because they want to trade and learn, not BS around or leave immaterial responses. Those running services/rooms share on Twitter because they more than likely are passionate about the market and like talking about the market and helping others.  I truly believe that this is on occupation where if you have no passion but just show up to trade, you will not survive.

I started a blog page and interact on Twitter because I like talking about the market.  I could honestly say that I learn something new from education to observation everyday while reading other’s blog posts or other’s posts on Twitter.  I write posts because I know I make mistakes and if one reader can pick up a mistake I made and offer a suggestion, then I just received constructive advice that I can implement in the future.  Also if I have one reader tell me they learned something then that is worth the 20 minutes or 5 hours I may put into a post.

Does this mean that you shouldn’t let another trader know that their information is wrong or tell them you disagree.  No, but there is a way about it.  Be respectful, if you have different information provide a source and be constructive with it.  If you disagree with a trade one took, remember not all traders trade the same.  If their system has been working for them, then let it work.  That trade they took may be a small loss but if that setup presents itself again then they may hit 3 winning trades in a row.  Everyone trades different, just be respectful and remember someone must lose to win and I guarantee you are not winning all the time (I know I’m not anyway).

In conclusion: Don’t be that guy or girl, just move on or get out-of-the-way as you’re ruining an opportunity for others to learn.  Also to those that run services/rooms and interact on Twitter, I commend your dedication, thoughts, and opinions.

Do yourself a favor and listen to Mr. Pink at 1:22 mark:

As I am sitting here bored on Friday night I decided to look through some YouTube videos.  If you have read my bio you know that I was enlisted in the Marine Corps (2000-20004) and I am still proud to say that to this day.  I loved everything about the Marines, from the disciplined regimen to the friends that I made and the goofy shit that we have done.  If anyone has been in the military regardless of branch I am willing to bet that some of the best memories of your life can be traced back to those times in the military.

Anyway I was bored and was looking through some old videos from recruit training to drill to silent drill and I came across one that will forever be in-bedded to my brain.  It goes back to when you arrive at the depot, Parris Island or San Diego, and when you first meet your drill instructors after your 1-2 week reception.  Anyway you are sitting there as a platoon wondering what is coming next and then these guys come through that look extremely sharp and are not wiling to play any games with you.

From what I remember the introduction to your drill instructors for the next 13 weeks has not changed much.   They come through as some of the most disciplined men you have ever seen and continue that stature throughout your time at the recruit depot.  The video below displays a good example of when you receive your drill instructors that will will be assigned to you until you graduate as a Marine.  The beginning offers an introduction, but to skip to some yelling fast forward to the 4:00min mark.

So why do I share this video?  I believe a lot of this pertains to traders.  Like these Marines, you have to want to be there.  I personally have found trading to be the hardest challenge to success that I have encountered.  Just when you have encountered multiple losses you have to have that willingness to come back, study failures, and attack.  Trading is purely a mental game in my opinion and you have to find a way to overcome that psychological aspect of taking a loss and studying it and learning.

I always told other people that Marine Corps  boot camp was not so much physically demanding as often portrayed, but it is mentally demanding.  I hated getting dressed while the Drill Instructor is counting down only to find out that someone didn’t make the time limit.  Then we get all undressed and redressed again by the numbers…it was a fucking game.  But then I realized that this was just a test to see if you could keep your head in the game.  Personally it paid as I believed the Marine Corps made me the person that I am today.  I have that mental fortitude to bounce back after a devastation and we as traders need that.  I personally have blown out 3 accounts before becoming consistently profitable, despite some hiccups.  But my advice is to stay in the game, learn from mistakes, and keep going forward despite what is demanded of you.  Never forget your goals or your motivation despite a heavy loss.

***Also if you plan on commenting about the Marines or any branch of service with an aggravated response be advised I don’t play those lure games and your time is wasted as I won’t respond and I believe you to be an idiotic internet troll and nothing else.***

An interesting day today. Lately I find myself not able to monitor the markets as much as I wish due to intraday conflicts but all I can say is that I expect volatility to come.  I believe it is not so much about being bullish or bearish here but ask yourself “can I withstand the volatility or am I able to take profits quickly”.  There is a lot going on from cancelled trades; ie. the Knight Capital debacle highlighted many times by the iBankCoin Financial News @IBC_FN or the last 3 minutes of trading highlighted by @zerohedge on 8/1).  I personally believe that volatility is about to ramp up.

Aside from this news we have seen 4 down days in a row in an up trending market characterized by higher highs and higher lows and staying within a rising channel.  Also it it important to not that the SPX has lost the 10 EMA and it is trending down.  I like to use this EMA to characterize momentum.  But while the SPX ha slost the 10 EMA, it has tested the 20 EMA and is still above a rising 20, 50, 100, 200 EMA…so this may be a buy the dip scenario.  The only thing that I would emphasize is that if you are buying the dip, keep a tight stop as this market is becoming news driven yet again.

With that I ran a scan of stocks making yearly Relative Strength highs as measured by the last 252 days to the Russell 3000.  I have broken them down into all stocks and only optionable stocks.  Also all of these stocks trade  with an average volume above 300,000 on a 50 SMA volume average.  The charts have been uploaded to FINVIZ so that they can be filtered to your personal preference.  This list can be used in two ways.  If you believe this is a buy the dip scenario, then these are stocks that have held throughout these 4 down days.  Or, if you believe we have more down side, these are stocks that are holding but could accelerate to the downside because they haven’t been hit yet.  Either way, fit these stocks into your trading style keeping in mind they have displayed superior Relative Strength to the Russell 3000.

Like the ways of the @RaginCajun, all stocks are sorted by volume

All  stocks

Only optionable stocks

Last I night I wrote a post titled Oversold In An Oversold Sector that listed stocks that were oversold in the Basic Materials sector.  This post was written after reading The Fly’s post and how the proprietary PPT algo was flagging XLB as oversold.  The performance results of this ETF were attractive based on prior results when it flagged oversold.

In my post I listed stocks that were being flagged as oversold within the Basic Materials sector.  With the generous approval from The Fly I will list specific stock results of top performing stocks based on those results within The PPT.   The total list contained 25 stocks of 250 being flagged as oversold.  All results/returns are listed on a 10 day holding period of the stock.

The first list contains stocks that have a greater than 4% return when flagged oversold, sorted by average return:

An example on how to read the data: No. 1 stock CLF has flagged as technically oversold 9 times within the past year and has shown a positive return 78% of those times with the average 10 day return being 9.06%.

The second list contains stocks that have shown a positive return over 80% of the time when flagged as oversold:

This table can be read much in the same as the previous table with the only difference is this one has some different stocks because these are positive 80% or more of the time. 

What I do like about the results are that they have more than a couple data points with the minimum being 6 and the most being 9,10,11.  When you combine these stats along with the charts and other information (ie, short interest, options order flow, etc.) it can set up for a higher probability trade.  Some of my favorites are listed below.  Apologies for the crude annotations as I’m using StockCharts on a free account as I have no access to my charting software.

1) OII – nice breakout and good volume on the breakout; 10 day hold 80% chance positive with average return 7.72%

2) RRC – breakout above recent swing high with volume, like the volume pattern as its basing, still within uptrending channel; 10 day hold  78% chance positive with average return 7.64%

3) COP – at the bottom within an uptrending channel with a reversal candle, hanging on to support level; 10 day hold  73% chance positive with average return 3.80%

4) EMN – holding gap support  from February at 49 level; 10 day hold 83% chance positive with average return 3.56%

Hopefully the charts can give a clearer picture of the price action.  One reason why I picked these charts is that they are displaying positive short term trends and are flagging as oversold within those trends.  Here is the list again of all charts provided by FinViz. 

The Fly came out with a blog post today that highlighted a liquid ETF that is showing technically oversold.  What I liked about this post as that he mentioned that we are looking for an edge, not the holy grail.  There is no holy grail and if you were to keep out of this market based on news or impending news, when in the hell would you get in?  This is why it is much simpler to use statistics and probabilities in trading rather than objective thoughts.  When going into a trade, try to line up as many factors as possible.  A recent trade I put on in PPO used several supporting factors such as: technicals, July seasonality, mechanical trade system signal, and short squeeze candidate.  Does this guarantee a gain? No, it just adds to reasons to get in a trade while still obeying stop loss rules. 

So with The Fly posting that XLB is oversold, I decided to look at stocks within the Basic Materials sector to see what was also flagging oversold.  While not all stocks that I screened are in the XLB ETF, I still believe it compares sector related stocks as I selected the Basic Materials sector.  I will not go into detail about how oversold these are or what the probabilities are but I will list the criteria needed for the following stocks and the results:

Criteria:

• Basic Materials sector trading above $15 with greater than 500k Avg Volume
• Results within the last year of flagging technically oversold

Results:

• Range from 6 -12 occurrences of being oversold
• Trade higher 73% – 90% of the time within a 10 day period
• Range from 2.18% – 9.06% average return within a 10 day period

I did not want to list the specifics for each stock as I want to stay honest to those traders within The PPT.  Also due to the fact that the overbought/oversold signals are proprietary, it would bring disrespect to the developer without prior approval.  I just wanted to dig a little deeper to specific stocks within a sector that is being flagged as oversold.  Those that subscribe to The PPT may be able to see the screen and results per stock here (I think anyway).  Otherwise here is a link for the charts of the stocks listed below, courtesy of FinViz.

One thing that I noticed and liked about these stocks was that the were near a bottom of an uptrending channel or were showing short term bull flag patterns.  This shows how much more confident you can be going into a trade when your entry rules line up with statistics that historically have shown the forward performance of the stock.  This is one way that I use The PPT.

 Disclaimer: I do not receive compensation or discounts for mention of The PPT, I am merely a subscriber that believes in the product.

Front running the month of June, I wanted to look for ETF’s that average over 500k shares daily trading volume and were seasonally strong during June.  I chose ETF’s as these can represent money flow into safety or risk via bonds or specific sectors/industries that represent growth or defense.  Turning to The PPT Screener http://ppt.ibankcoin.com , the following ETF’s were revealed as seasonally strong I June with a high probability of a positive return:

DXD       ProShares UltraShort Dow30

RWM     ProShares Short Russell2000

SDS        ProShares UltraShort S&P500

SH           ProShares Short S&P500

SKF         ProShares UltraShort Financials

SMN      ProShares UltraShort Basic Materials

SRS         ProShares UltraShort Real Estate

TWM     ProShares UltraShort Russell2000

Below is a snapshot of the following symbols.  Keep in mind that these are all bearish and some levered ETF’s screened within The PPT for the historically best performing ETF’s for the month of June.

Looking at the patterns and without external factors of knowing the symbols or current economic conditions, the reader can determine themselves if the charts look bearish or bullish going into June.

 http://www.finviz.com/screener.ashx?v=212&t=DXD,RWM,SDS,SH,SKF,SMN,SRS,TWM&ta=0

(the link above links to the FINVIZ website)

Blog post from over a week ago but still holding true with notable performer of  UNP off of earnings.

http://tradingsempergumby.blogspot.com/2011/10/railroads-combing-some-factors-for.html