Collateral Damage -- MrSwing

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Collateral Damage
Mar 14, 2010

All Allan

All Allan
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Collateral damage is damage that is unintended or incidental to the intended outcome.

I sent out my Weekend Update earlier today, delayed by circumstances of a deeply personal nature that I have already detailed to my subscription list. In the Update I set out eight Long recommendations, five of which were inverse ETF's should they reach certain price levels. It is a dangerous game this our chosen vocation of ours and putting out recommended trades is something I take very seriously. Explaining them, especially this weekend's trades, is my attempt to let you into my head, or at least a corner of it since exposure to all of it would be overwhelmingly disorienting, with collateral damage of an appalling catastrophic apocalypse. Nonetheless, for the curious rubberneckers among you, some clarity surrounds the chaos.
That said, let me borrow a theme from Robert Prechter's latest issue of Elliott Wave Theorist, where he discusses his trading philosophy:

".....every decision is a trade-off. No solution fits all people, and there is no perfect strategy. EWT's recommendations express analytical conviction, and each trader or investor probably deals with it in a different way....I think our strategy---buying and selling at perceived price extremes---is the best approach for accumulating a position."

If you have been paying attention, we are into trend following which in effect, does the opposite. We identify direction and go along for the ride without regard to perceived price extremes, tops, bottoms, or wave counts. Except, we do assess such matters in our gray masses and are aware of analysts like Prechter who from time to time identify perceived price extremes with compelling, persuasive and often extraordinary precision.
But he has also been wrong. Which is it this time? The beauty of trend following is we don't really care if he is right or wrong this time. Our Trend Models will abandon a failed trend and latch upon the fresh new trend with their own uncanny precision. The inverse ETF's recommended in the Weekend Update need to reach certain levels to trigger and if they do, that's sufficient cause for both of us to be right, Prechter & Harris, Wavester and Trend Follower, together at last.
The following Indexes are presented in what I consider to be very tradable formats, 240 Minute Trend Models. I've omitted price levels, because some of you are paying for it and I'm not a complete idiot, you do in the end, get what you pay for. There is enough here to get the idea of where we are, where we came from and where we may be going into the nearer term, one way, or another.

On the QQQQ chart directly above, let's take a critical look at the 240m Trend Model and how it navigates through these trends. The first Buy (not shown, way to the left side of the chart) was on February 8th at 43.00. The Exit for this trade (shown) was on February 23rd at 44.56. That 1.56 move on the QQQQ, amounted to 3.6%. Take a look at the option tables, a deep-in-the-money near term option on the QQQQ on a 3.6% move in the index is worth about a 50-75% gain. Using a more conservative QID for the trade was worth in excess of 8%.
That was followed by two whipsaw signals, resulting in small but manageable losses. Then look, another huge gain from 44.55 to 47.35. another huge gain of over 6% in the underlying. Do the math, this stuff does work, not perfect, but in the end a profitable edge, to say the least.

"That's about it for me today. It has been a rough ride over the past 72 hours and I am ready for a break from reality, but, indignation aside, reality is all we have.....so deal with it, Dude," thought Allan, turning his attention across a quiet room, to the sleeping, peaceful, healing, angel, who so blesses a path through his life.