By Jeff Pierce

One thing I’ve noticed in my trading since the summer pullback is that you don’t have to have perfect timing to earn consistent gains. It seems like I always sell too soon and leave plenty of money on the table but my equity curve continues to move higher. Whether timing is referring to individual stocks or indexes it doesn’t make a difference. What is important is that you have a way to identify the trend, when to enter, and when to know when a trade isn’t doing what you thought it would do.

I use a few different methods to identify the major trend. One is my market timing signal. Two is my scans. Three is how my overall portfolio of stocks is performing against the market. Despite my timing signal being negative in the Dow and Nasdaq since August, the markets continue to melt up. My timing signal is comprised of 3 indicators and in both the Nasdaq and Dow 2 out of 3 are bullish, but the stubborn longer term indicator remains bearish. Until that flips the primary signal remains bearish. As you can see in the chart below the Nasdaq is hitting fresh 2013 highs, and when you add in the fact that the TSX is bullish…there is a strong case to selectively buy long stocks and hold off being short.

The clincher for me is how my portfolio of stocks I bought on the dip and held since August highs have been performing has me on the bull’s side. My account has rebounded since the summer rally and each day sees new highs. So until I see my own stocks weakening and the Nasdaq stops making new highs I won’t even consider the bear case as it doesn’t make any sense right now. All I see is a wall of worry ahead for the media to blabber about.

 

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