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Posted by Book Eater

Elo guys, pasensya I haven't been updating this blog for quite awhile. I actually have lots in my head that needs to be put into writing. They're just "kalat-kalat" in so many drafts of mine in different places. Pasensya. Okay. So here's what remained from all the stuff I've been reading from places across sites + books + conversations + whatever.

Just an update for the PSEI indexes and going forward with our portfolios :

Commentary: In case you're just not looking at the markets, we are in for a tremendous breakdown. A MarketWatch news last Friday, which I would like to paste here underscores just how bad this sell-off by the end of the week is going to be like.

Federal Reserve action to stem the credit crunch failed to offset the damage from February job losses seen as the most blatant sign yet of recession. (MarketWatch.com)

I'm not getting too aggressive on the long side just yet. To be sure, stocks are still weak; they could get weaker and still maintain these divergences.

Just so people have some perspective of the current volatilities, I'd like to cite Mr. Juanis Barredo's technical spotlight today for Citisec clients. (You may see the pdf file here.) The important thing for me with the talk is in using the Volatility Index or the VIX (ticker symbol) in trying to quantify a better entry for the bottom pickers. If you want to rely on great traders' analysis on the VIX, please just go to the newly updated relevant voices I posted in the left hand side of my blog. Vixandmore.blogspot.com should do the trick. Reading more makes you learn more:)

Caution Please:
Meanwhile, I actually want to tell everyone that bottom buyers are dead in this market. This is because we are in a downtrend movement. However, for those who are stubborn like me, aggressive and active traders like me, here are a few points I'd like you to take note of:

Reading William O Neill's book "How to Make Money In Stocks" gives us great wisdom in trading the markets. For a short writeup on the author, he is well known to have popularized the use of the CANSLIM method and he's the owner of Investors' Business Daily. Google him up :) Tell me the interesting things you find haha.

I'll talk more about CANSLIM method in my next posts but for now...here's one that struck what's important to me especially at this kind of market.

Trade the LEADERS not the laggards - if you look at the index today, you can see that PCOMP has already broken the previous January low and is now on its way to retest the August low. Mr. Juanis Barredo mentioned protective stops of the trendline. I think it's at 2850? Anyway, the point is...it's not yet over. If you're so itchy to trade, then by all means, forget the property and banking stocks. In fact, I'd recommend you focus on these leaders:


- reason why I like them is mainly because everyone's touching the floor already, and they're still in the 3rd floor. Hope people get my analogy. In any case, if we were riding an elevator, these stocks have been falling quite slower compared to the rest like MEG for example.

-As you can see, I didn't write supports,resistance levels etc because I don't see any reason why you should enter a position. In fact, if you listened to the technical spotlight, everything that they were simply saying was selling in the resistance, lightening position and sell into strength.

Only the most aggressive and disciplined traders should be involved right now. But not even now, maybe give it 2-3 days more.

A timing entry I want to share has to simply expand with Mr. Barredo's talk on the volatility index. Borrowing from Rob Hanna and Dr. Brett's analyses. Here are the things that struck me:

While the market could fall substantially over the next few days, the Capitulation Breadth Indicator (CBI) is suggesting a multi-week low should be made by the end of the week.

- Rob Hanna

In sum, we're seeing levels in the indicators consistent with momentum market lows. Price lows can occur beneath such momentum lows, so it is not at all inconceivable that we could see more downside in the days to come. Indeed, recent activity has been skewed solidly to the downside, making bottom-fishing dangerous. Still, for the first time in this bear market, we're seeing divergences in the data even amidst the selling pressure and bearish sentiment. That has me questioning the longer-term viability of the downside.

- Dr. Brett Steenbarger

Quantifiable edges using historical data shows in his site that there is a possibility that there can be a short rally. Dr. Brett also notes that the viability of the downside is questionable however, bottom fishing at this point is dangerous. The CBI is not yet making its highs to tell us that market fear has finally capitulated. That only means one thing. Put off that buying spree. Don't go picking up stocks. You can buy them later. Don't worry. Prices won't run too fast. Just keep your eye focused daily on the markets. It may happen anytime this week. My guess? Wednesday or Thursday.

Useful Trading Wisdom Quotes:

1.) Your first loss in the market is your smallest loss - Don't worry guys, I can relate. I've been new in this market and I can be as unfortunate as I can get. I entered at exactly the July highs of 2007. Haha. That's coz I don't know technical analysis then. Anyway, past is past. Important is that we learn.
2.) Cutting losses is like an insurance policy from further portfolio wreckage - I actually made this one up but the essence was something I got from reading O Neill's book. In sum, when it hurts that you're following your trading plan of cutting losses and seeing it go higher, don't hate yourself. Trust me, I cursed myself for doing that already. Treat your performance not with the trading outcome but with the trading decision. I can go on and on about this topic...but we'll just reserve this on next posts. Just like an insurance policy, we don't think it's a waste of our money that we bought insurance and didn't have our house burn. Why then do we hate ourselves when we buy insurance policies (cut losses) when a market selldown doesn't happen?
3.)Never have a love affair with any stock. Don't play favorites -I kinda modified the stuff I've been reading but basically, upon post analyses of trades, it turns out my favorite GEO actually cost me the most pain financially. Lesson: Focus on stocks objectively, not the excitement they give.

Quotes from Internet:
"The evolution of man is the evolution of his consciousness, and "consciousness" cannot evolve unconsciously. The evolution of man is the evolution of his will, and "will" cannot evolve involuntarily. The evolution of man is the evolution of his power of doing, and "doing" cannot be the result of things which "happen."

G. I. Gurdjieff

“We fear to know the fearsome and unsavory aspects of ourselves, but we fear even more to know the godlike in ourselves”

Abraham Maslow

There are more in my head...

It's just that it's too late now.

Here are great stuffs I found over the net:

We can talk more about them in next posts

1.) Berkshire Hathaway's 2008 Letter to Stockholders
2.) Tim Sykes' funny blog on our economic ignorance


Those I bottom picked are still in my portfolio except those who were bought in margin, they were lightened down last week pa. Actually, value buyers are dead. I shouldn't have bought them last tiem. If there was any buying, it should have been in this market capitulation.

in any case, we can always learn from our mistakes.
Being broke is the most efficient educational agency - Jesse Livermore



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