top-O-the pre-market mornin' To Ya.
- Here's the link to the Global Macro Relative Strength Trend cheat sheet.
- Here's where you'll find the US Sector Relative Strength Trend cheat sheet
- And the Sub-Sector/Industry Group cheat sheet
For those of you who've been disappointed by my failure commit the "How To" part to writing, I'm finally making the effort. Sorry I'm two years late! I'd argue that insights gleaned over time via our trading meeting videos and in response to changing market conditions are the best way to fully incorporate the consolidated data available at your fingertips. I review some of our basic entry rules below. The version of the cheat sheet for subscribers comes with full functionality and the ability to sort and filter. Today's free version is admittedly just screenshots.
All three reports are delivered daily to a subscriber's inbox as a Google Doc ahead of EVERY US market trading day. It's an end-of-day trading cheat sheet, incorporating the closing mark price for every covered security (Global Macro, US Sector, US Industry Group). All three are available for less than $2 a week all in, as an annual subscription for $99. No auto-renewals. I hate seeing my card get charged because I forgot a subscription was ending. Why would I do that to you? Just drop me a line at email@example.com. I'll open to a new group of subscribers starting the first week in April.
Coming Soon: Mike O's Daily Bullish Entry Signals Cheat Sheet.
- Link to a beta version here.
- Includes 10/40 Moving Average Cross signals
- Includes Market Forecast Entry Signals - Buy the Dip and Intermediate Trend Confirmation.
- Includes Price cross above the 21 EMA signal.
- All entry signals filtered for an uptrend within the appropriate underlying time frame, money flow and positive relative strength.
- While we will not include any Chaikin Analytics data, the cheat sheet meant to be used as companion to that app's proprietary 20-factor stock modeling.
- I hope to be fully debugged and up and running by April. I will not sell this separately, I'll roll it into our Relative Strength Daily Cheat Sheet as an added subscriber bonus, free to existing subscribers.
The Global RS Trend
US INDUSTRY GROUPS (Sub-sectors)
How to Read These charts
We use Exchange Traded Funds (ETFs) as our proxy for tracking various macro-economic slices of the global economic pie. Imagine sitting in a space station monitoring worldwide economic activity, and adjusting the lense aperture to narrow focus to observe in increasingly fine detail. This is a first, but critical step in top down analysis, where the goal is to identify how capital is flowing and then follow better-resourced institutions into trades (or take their cue and get out when the risk equation is less favorable). The investing climate is least risky when markets across the globe are firing on all cylinders. But the vast majority of the time, some markets are great, while others simply stagnate. Picking individual stocks from rising industry groups among the most favored sectors increases the odds of trading success immensely.
While I don't always cover them comprehensively in my weekly trading videos, I've shared all three cheat sheets here this week for free. You can contact me at firstname.lastname@example.org if you are interested in my daily, comprehensive Global Relative Strength and Trend Analysis. It's less than a couple bucks a week for a year's subscription, available for a one time payment of $99. We'll open to new subscribers starting in April, and are processing orders now. Every trading day, there are three reports available:
- Global View: We cover twenty key index ETFs: Gold, the Dollar, US Treasuries and global sovereign and corporate bonds. As far as equities go, we track China, Japan and the US (large & small caps - plus the Nasdaq 100) . Our coverage also includes the Eurozone, Latin America, Emerging Markets, Developed Country Economies Outside the US). Please note that the Bitcoin fund I'm tracking has only been in existence for a few months. That's why you are seeing error messages on the Relative Strength cheat sheets.
- Key US Economic Sectors. We compare track all eleven S&P US sector ETF's in addition to three market index ETF's for comparison purposes (SPY, TLT and the All Country World Index).
- Key US Industry Group Sub-Sectors. S&P's twenty-two industry group-level ETF's. It's surprising how often a US sector ETF can be under heavy institutional distribution while one of its sub-sector industry groups is enjoying near parabolic price appreciation. At the time I'm writing this, we're seeing that with Industrial (XLI) sector ETF and its constituent Aerospace ETF (it's the Defense contractor group that's rapidly increasing in price despite Industrials struggling overall).
The columns to the right of the Relative Strength Trend Rank data are:
- 8 Day Exponential Moving Average (EMA) compared to the 17 Day EMA. When the shorter term moving average is above the longer time-frame moving average, we're bullish in the short term. (a time horizon of a few days to a couple of weeks). If the daily and weekly moving average pairs are also bullish, I'll enter a trade when the 8 crosses above the 17 moving average. And I'll set a trailing stop-loss just under the 17 day moving average. For me, this is a "swing trading" time frame. I use it to trade call and put vertical spreads. Money flow must be positive, preferably over .1. And the parent sector/industry group must be in the top half of the RS ranks for the 60 day and 120 day lookback periods. Remember, these are trading days. So the time frame that I consider the "sweet spot" is 3-6 months.
- When the 20 Day EMA is greater than the 50 Day EMA, we're bullish in the intermediate term (a couple of weeks to a couple of months). I'll use a moving average cross here to enter a trade I hope to hold for multiple months. If the stock is from an industry group and sector that's increasing in strength and it's 50 Day EMA is above the 150 Day EMA, and Chaikin Money Flow is above .1 (labeled CMF on the trading sheet), I enter.
- When the 50 Day EMA is out-pacing the 150 Day EMA, we're bullish in the longest time period I consider to be a "trading" time-frame, a couple of months to a year or more. I use this moving average cross when the market has been bearish for a couple of months to a couple of years. Getting in at the start of an what we hope will be an extended bull market run begins with this moving average cross. As with my intermediate term trading plan, I need strong money flow and rising relative strength. I prefer that the parent sector and industry group be in the top 1/3 of each security's RS rank in the 3 and 6 month time frame.
- The more timeframes that are in agreement, the stronger the trend in either the bullish/bearish direction. When time frames present inconsistently, It's more likely that traders are facing choppy circumstances. That's when whipsaws happen and drawdowns occur.
- Finally, CMF or Chaikin Money Flow is a key trade filter. Here's how to use it if all other bullish trading requirements are met.
- CMF under -.1. AVOID. These stocks are under distribution and a CMF score of -.1 or lower makes the security a candidate for a short trade. Other technical signals need to be there, and that's outside the scope of this post.
- CMF between -.1 to .1. NEUTRAL. This is a stock likely rated "Hold" by institutional traders. While it doesn't make a case for liquidation, it most certainly doesn't make the case for accumulation. We need a stronger institutional commitment for a trend-following strategy.
- CMF between .1 and .2. BULLISH. This is a security under institutional accumulation. A bullish trade likely comes with the wind at your back.
- CMF above .2. VERY BULLISH. A CMF score that high indicates that the stock is under heavy accumulation. These stocks, provided all other bullish parameters are in place, have the greatest potential for significant price appreciation.
- CMF scores as a snapshot in time (which is how they are portrayed on the Mike O Pre-Market Cheat Sheet) get the decision process started. But, this metric is best considered over time. Persistent money flow is as critical as the level of money flow. Stocks that demonstrate a high score on the trading cheat sheet should be confirmed by checking a chart. We'd like to see a minimum of 1 month of persistent positive money flow. Think of it like a steam engine. Enough steam pressure has to build up over time before the pistons start pumping. Institutions try to avoid moving the price of stock by putting only a portion of their overall capital to work on any one trading day. But eventually, they fully fund their intended position. That's usually the point the stock starts moving up in price.
- RSI We'll cover this in a future post. I prefer RSI above 50, and especially before I enter a trade. However, a cross from below to above 30, provided all other bullish parameters are in place has the potential to deliver large returns. However, the level of trade risk increases, and I generally experience more stop-loss triggers when trading an RSI cross above 30.
Finally, nothing on this blog or cheat-sheets is a recommendation. It is imperative that investors do their own due diligence and assess their own financial situation and tolerance for risk before making a trade. Trading involved potential losses. Trading on margin or short selling come with risk that a trader can lose more than his or her original investment. I'm not licensed to dispense financial advice, nor am I broker/dealer. Moreover, I'm not responsible for data errors. Please consult your broker to confirm prices and technical readings before placing a trade. Traders who don't follow a disciplined trading plan are destined to lose money. This may be a cliche, but it's also an irrefutable fact.