Sunday, November 18, 2012 EST

Trade journals are a great idea to help you review how you made past trades, your thinking when entering the trade, and your results.

This post is about how to use Excel as a trade journal. There is a feature in Excel where you can upload screen shots of your charts.  Excel can be taken one step further by aggregating data to review your equity curve.

In Excel you can add images to a cell as a comment and later mouse over that cell to view the image.  Saving charts in your trade jounal is a very important step in the process of reviewing trades and improving trading performance.

Mouse Over Cell Example

 

1. Inserting an chart into Excel: Right click on a cell in your spread sheet and click Insert Comment

 

2. Click Format comment to prepare for uploading an image 

 

3. Click Fill Effects 

 

4. Select the image you want to upload into Excel

 

End Result

Mouse over the stock symbol and you will see the chart. 

 

2012_Sample_Journal.xlsx (60.56 kb)

Sunday, November 18, 2012 EST

Typically traders look at things such as Stochastic or RSI to determine if a stock or the market is oversold.

RSI can be a good indication but another less widely used method is to use the percentage of stocks over the 50 and 200 day moving average. Currently only 16.4% of stocks are over the 50 day moving average.  Looking back in history we can see that this is typically an area when the markets starts to work it's way back up. 

The period around this time can be fraught with high volatility. This is good news for option traders.

The first chart below compares QQQ vs. the percentage of stocks over the 50 day moving average.  The yellow areas on the chart are considered "reversal zones" and clearly this past year the zones showed extremes in the market.  (interactive versions of the charts below can be viewed online)

 

This second chart compares the percentage of stocks over the 50 and 200 day moving average.  Again, notice where the extremes are on this chart.

 

Taking a longer term view on this 3 year chart it is still clear the yellow bands can indicate extremes in the market and a reversal is soon to come.  This chart also shows that many times these reversals are truly a battle between the bulls and bears and become volatile areas for trading.

 

Saturday, November 17, 2012 EST

The Economic Model and PMI Index charts were updated with October 2012 data.

PMI Data

The index closed at 51.70 which shows the economy is still growing but at a slower pace. Some interesting comments from respondents posted below. You can read the full PMI report at the ISM Website.

  • "Market is still very soft." (Paper Products)
  • "Business is picking up." (Furniture & Related Products)
  • "[Our] 4th quarters usually begin to show a slowdown in demand, and this year is no different; prices are also dropping." (Wood Products)
  • "Demand down slightly due to customers pre-buying ahead of announced material price increases." (Plastics & Rubber Products)
  • "The slowing of capital expenditure in Europe and China has lowered our backlog for Q4." (Computer & Electronic Products)
  • "We see a general softening in the steel and automotive markets in the fourth quarter." (Fabricated Metal Products)
  • "Cuts in healthcare reimbursement rates continue to negatively affect top-line revenue." (Miscellaneous Manufacturing)
  • "Business conditions stable to slightly improving." (Transportation Equipment)
  • "Sales and order intake have slowed." (Primary Metals)
  • "Europe is still very much a concern. Global recovery is still fragile." (Chemical Products)

Click here for an interactive version of the PMI chart shown below.



MTR Economic Model: MTR-EM

The MTR Economic Model (MTR-EM) measures the strength of the consumer and is used as a leading indicator of consumer spending. Consumer spending is the force behind bull markets, and lack of consumer spending brings in the bears.

Real-Wages (green line) is flat year over year. This shows consumer spending will have minimal impact on stock prices.  The trend in real-wages appears to be downward.  Items that will push real-wages lower include inflation and companies freezing any types of pay increases. If this number goes below -2% year over year typically a market downtrend will follow.

Click here for an interactive version of the chart shown below.

 
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