LunaticTrader

Investing with the Moon

Data science for investors. Do you stand a chance?

Posted by Danny on December 18, 2014

Will algorithmic trading take over the market? How much of a chance do you stand against university trained quants and other math goliaths? Are you too old to keep up or catch up? Is there a way to measure yourself before you commit and maybe lose some or all of your savings in the market? That’s some of the questions that are starting to bother more than a few retail investors. I will try to address them in this article.

As you may have seen on this site, I use my own indicators and algos. Where do they come from? The days that you could easily make money by using standard tools like the RSI or simple moving averages are long gone. Using them is like turning up for a Nascar race with a bullock cart, really… But, you can try to catch up, just like I have tried. I am not a trained a mathematician, I call myself a nexpert, a self-taught nexpert. If I can do it, you can do it. But it will take time, motivation, some basic math skills (or coursera) and a computer.

So, how to get started? Well, why not learn from the best? Would your game of golf improve if you could play some rounds alongside Tiger Woods? Probably. Will your game of poker improve if you play with people who are even worse than you are? Probably not much. The good news is that the internet has made it possible to compete alongside some of the best data scientists in the world. You will not win, but you will learn a lot, things that you can then use in your trading. So, here is the first step: head over to kaggle.com and sign up for a free account. That site organises regular data science contests and sometimes there is big prize money to be won. Many of their contests are sponsored by major companies like GE. There are also starter contests that will teach you the basics of data science. In fact, some of the contests are sponsored by hedge funds who are looking for top talents. So, winning may land you a very well-paying job, designing algos for a hedge fund. Of course, you are not likely to win, because you are up against math professors, university teams and nutcases like me. But you will learn a lot and you will find out where you stand against specialists in the field. I joined kaggle a few years ago and participated in two contests before I took my new skills to play with my own indicators and algos for the stocks market. In the first contest I ranked 98th out of 353 teams. Not too bad. On the second occasion I finished 48th out of 355, so almost in the top 10%. I was surprised to leave college teams behind me, and that gave me confidence that maybe I am not all that bad at this. Here you can find links to the contests I did: https://www.kaggle.com/users/71553/ttbo

Right now an interesting new contest is starting with $100000 for the winner, and I might jump in if time permits. The challenge is to classify ocean plankton. Now, you may ask what the hell has classifying plankton to do with the stock market? Well, playing the stock market is also a classification problem. If you can find a better way to classify stock setups in categories like “Bullish”, “Bearish” and “Neutral” you are on your way to profits. The skills you learn to classify plankton better can be used to classify stocks as well. Your computer won’t care whether it is classifying plankton or stocks.

The world is full of people complaining about the economy and no good jobs… But half of the day they are wasting away on facebook or playing angry birds on their smart phone (what “smart” phone?). So, why not waste that time on something that may yield some useful new skills? Times have never been better for people with the motivation to learn something new, because the internet makes it free and fun to pick up skills. If I can do it, you can do it. Are you taking advantage?

Good luck, Danny

 

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Year end trading

Posted by Danny on December 15, 2014

We had some wild swings in the stock market last week. Is it the start of something bigger? Could be, but I think we are already close to a bottom and I expect that we will have rather quiet year end trading next. The S&P 500 is retesting the 2000 levels and the Nasdaq is almost back to 4600, much as I had suggested a few weeks ago.
Let’s have a look at the Nasdaq chart (click image to enlarge it):

Nasdaq

After a 600 point rally it is not abnormal to see a 200 point give-back. We may go down to 4500, but at some point fresh buyers will probably step in pushing the Nasdaq back up.
Technically the Earl2 is now clearly down, but the faster Earl (blue line) is already in bottom territory, and that could set the market up for a little santa rally to start this week. Even though the recent move looks quite similar to the start of the recent October correction, I don’t think that similarity will hold up much longer. Too many investors seem to be looking for another October style drop. A recentism bias rarely pays off in stock markets. We remain in a lunar green period until xmas, and that usually supports stocks as well.
I think we have already seen the highs for the year, and most likely we are now in a sideways period that could stretch well into early next year.

Stay tuned,
Danny

 

Posted in Market Commentary | Tagged: , | 1 Comment »

Key reversal levels for week of December 15, 2014

Posted by Danny on December 14, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available every day as a premium info on Scutify.com for just a few $. The current version is a 39 page PDF with the latest levels and buy or sell signals. Currently covers over 1000 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

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Paradoxical effects in the economy

Posted by Danny on December 8, 2014

We got a few down days early in the week, but still ended with new record highs on a number of indexes. Even the German DAX is clocking in new records. As I said last week, pullbacks can be very shallow as long as enough investors are looking for a chance to get back in. And December is normally not a month of big corrections. We have a few more days of lunar red period to go and then we will be starting another green period until the final days of the year. So, it seems to be increasingly likely that we will end 2014 at or near the highs. Or not?
Here is the current S&P 500 chart (click image to enlarge it):

S&P 500

The S&P has basically gone sideways for the past two weeks. Will it pull back or will it push higher?
There is room to rise to 2125-2150 before an overhead trend line comes into play. Technically the slower Earl2 (orange line) has clearly peaked, indicating a correction or sideways phase is starting. But the faster Earl (blue line) seems to be etching out a shallow bottom and may turn up again. It is dangerous when the market makes new highs with Earl below zero, because that has given some nasty drops in the past. We saw that as recently as early September. So no, it is not safe and we may see a sudden 5% drop if some rabbit gets pulled from a hat. But, December being December, we may just as well grind higher for the rest of 2014 and then get a pullback in early 2015.
Back to 2000, up to 2150, 2000 before 2150,… all are quite equally possible at this point. I don’t know.

One of the rabbits that many observers expect to see is a new quantitative easing (QE) program announcement by the ECB. We will see if that comes true. But I am wondering, what do they need QE for if just talking about it is already enough to lower the Euro and give the desired boost to exports (presumably)?
The problem is that once an economy is completely messed up by Central Tampering you start getting more and more paradoxical effects. Paradoxical effect is a term mainly used in medicine. A typical example is taking a medicine for pain relief and getting more pain as a result. So, this differs from the so-called unintended consequences, where action on a given point leads to undesirable outcomes elsewhere in the system. A paradoxical effect means we don’t get our intended result but its exact opposite.
And it doesn’t only happen in medicine. Another beautiful example, and one that every student should take a look into, is described in this study. Repeating information for two or three times will help to put it to memory. So, logically we would think that repeating it more often will lead to even better memory. Wrong! At some point more rote rehearsal starts having the paradoxical effect of making our memory worse.

Typically, paradoxical effects start to be seen when a certain saturation point is exceeded. I think we have already reached the point where zero interest rate policy and QE are having paradoxical effects. Instead of creating inflation they may lead to more deflation. How? As we see in Japan, the latest QE program has knocked down the value of the Yen. While this has temporarily pumped up their inflation rate by making exports more expensive, it also has prompted many Japanese to save more because now they figure that they will need more Yen to have a comfortable retirement. As a result of the drop in consumption they have an economic contraction that may eventually lead to even more deflation once the inflationary effect of the lower Yen fades away. And because consumption is down, Japanese businesses may decide to invest less rather than more.
There is also a second way in which zero interest rate policies can become deflationary. Zero interest rates make it cheap to invest in new capacity, easily leading to overcapacity in some sectors. It’s hard to get any real inflation when there are no shortages (and why would we want shortages anyway?). The overcapacity created by cheap money can become a deflationary force. That’s a paradoxical effect.
If they want higher inflation, then interest rates should be raised. That would raise costs for companies, bankrupt some of them, and lead to shortages down the road. Then we would have real inflation after a few years. But would anybody feel any better because of that?
Enough food for thought.

Be well,
Danny

 

Posted in Financial Astrology, Market Commentary | Tagged: , , , | 3 Comments »

Key reversal levels for week of December 8, 2014

Posted by Danny on December 7, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available every day as a premium info on Scutify.com for just a few $. The current version is a 39 page PDF with the latest levels and buy or sell signals. Currently covers over 1000 stocks from Dow Composite, Nasdaq 100, S&P 500, S&P 400 mid caps and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

Posted in Market Commentary | Tagged: | Leave a Comment »

What about a down December?

Posted by Danny on December 1, 2014

Stock markets have continued their quiet march higher. Investors who missed the boat are still waiting for a meaningful pullback. Since the October lows the S&P 500 has seen exactly one day in which it dipped more than 0.5% below the previous days low. That was on November 4th, now almost a month ago. Can we go another month without even a 0.5% pullback? Probably not, but as long as enough investors are looking for a chance to get back in on any “weak” day, so long pullbacks may be very shallow 1 to 2% affairs. Maybe it will take some unexpected news item to knock this market down, that is always possible.

Let’s have a look at the current Nasdaq chart (click image to enlarge it):

Nasdaq

The breakout to the upside is now clearly visible. How far can it go? The 4800 level is likely to offer some overhead resistance, and a quick dip back to 4700 or even 4600 is easily possible. But buyers may step in equally quickly.
Technically the Earl2 is topping out and ready to turn down any day (it has already turned down for S&P 500 and Russell 2000). The faster Earl is going up and likely to paint a bearish divergence. The MoM indicator is starting to show a bearish divergence as well. So, we have several warning signs and we are also in a new lunar red period. This is not the kind of setup I want to buy with both hands.
I think we will finally get some weakness in the next couple of weeks, and it wouldn’t even surprise me if we get a rare down December.

***

On to the LT wave chart for December (click image to enlarge it):

LT wave

For November the LT wave had its lowest value on the only day that got us a bit of a pullback. Expected periods of weakness merely kept the market flat near highs, with the expected strength in the 3rd week giving the S&P another push to record highs.
For December we see weaker and stronger periods alternating. Expected weakness in the first week, followed by a bounce. The lowest LT wave value comes on December 19th, with the days leading into December 25th showing as the main period of strength. Remember, this LT wave is experimental, so use with the necessary care.

Good luck,
Danny

Posted in Financial Astrology, Market Commentary | Tagged: , | 4 Comments »

Key reversal levels for week of December 1, 2014

Posted by Danny on November 30, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available every day as a premium info on Scutify.com for just a few $. You can follow me there to pick them up as a 28 page PDF with the latest levels and buy or sell signals. Currently covers the 65 Dow Composite stocks, Nasdaq 100 stocks, S&P 500 stocks and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

Posted in Market Commentary | Tagged: | Leave a Comment »

Daily key reversal levels for November 28, 2014

Posted by Danny on November 28, 2014

Here is a free copy of my daily key levels for hundreds of stocks and ETF. You can use these key levels to stay on the right side of the market. It also shows you which stocks offer specific opportunities for buying or selling today. The daily key levels for major markets, euro, oil and gold are posted on twitter and scutify for free every day. The daily key levels for hundreds of stocks and ETF are available for $1.99 on scutify each morning. You can follow me there to pick them up before the market opens.

If you have any trouble to see the PDF below, then you can also click here.

Happy trading, Danny

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Pushing higher again

Posted by Danny on November 24, 2014

Stocks refuse to go down. Last week we mentioned the possibility that the market may break out to the upside, and it starts looking as if we are getting just that. Here is my updated chart for the S&P 500 (click image to enlarge it):

S&P 500

After bumping into a ceiling of overhead resistance for almost two weeks, the S&P is surging higher again. We see a clear breakout on the chart, and the road to ~2200 seems to be wide open now. Of course, the market likes to take the path of max confusion. A little drop to ~2000 would have investors wondering whether it is a false breakout or not.
Technically, the Earl2 (orange line) is starting to look very stretched and ready to flatten out and turn down. The faster Earl (blue line) has dropped back below zero during the sideways pause and will probably paint a divergent second peak in the coming days. This is a dangerous setup and I think the market is ready for its first post-ebola dip.
We will be entering a new lunar red period later this week, which may also add to downward pressure.

All in all we have a market that appears very stretched, and any bit of “bad” news could knock 50 points off the S&P 500 within days. Of course, quite a few investors and fund managers who have missed the boat are waiting for such a dip to get back in. So, I would not be surprised to see strong buying as soon as we get any kind of dip. Maybe that will be our topic for next week.

Stay tuned,
Danny

Posted in Financial Astrology, Market Commentary | Tagged: | Leave a Comment »

Key reversal levels for week of November 24, 2014

Posted by Danny on November 23, 2014

Our key tables and comments for this week. Click the “Expand” button (bottom right) to watch in full screen mode.

If you have any trouble to see the presentation below, then you can also click here.

Some people have been asking for my key reversal levels on their favorite stocks and ETFs. They are now available as a premium info on Scutify.com for just a few $. You can follow me there to pick it up as a 13 page PDF with the latest levels and buy or sell signals. Currently covers the 65 Dow Composite stocks, Nasdaq 100 stocks and more than 100 popular ETF. Instructions for use are included. Give it a try.

Happy trading, Danny

 

Posted in Market Commentary | Tagged: | 2 Comments »

 
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