Engineering Professor
(EngProf6)
Hybrid Timing Model for Analyzing
Stocks and Indices
I am sorry but I have too
much to do. I cannot
update this page today. Good luck to all.
Important Announcement
(Click)
Click Here to Link to ‘My Journey’
You will find some interesting
questions and comments. You may even find something you wrote. The Mailbag is located
near the end of this web page.
On Wednesday (Oct 18) I introduced version 4.0 with a filter. It is
now Dec 5 and I still strongly believe “This is it” (more than ever).
During the month of Oct I
developed a firm hold on the modeling work I am conducting. The results you
will see and which I will use on my journey are looking great. In addition, I
have now successfully adapted the model to an hourly basis. This will make
investing (on a short term basis) so much easier. You should note that there
are 2 modes for a primary direction (i.e. move): 1) red – down, or 2) green –
up. In addition, for each there is also the subsets of 1) turbulence or 2)
clear trend. So there are a total of 4 possibilities. If we are in a primary up
trend, we can be in ‘clear’ mode or ‘turbulence’ mode. The same applies for the
primary down trend. The label turbulence is used to signify the presence of an
opposing force that is trying to suppress the primary trend.
I have reinstated the
countdown. Several wrote to tell me that this feature is important. I agree. I
had only taken it off for maintenance. The countdown can appear at 2 locations.
If the trend is ‘clear’, then it appears on the top line with the primary
trend. If the trend is being influenced by turbulence, then the countdown
refers to the turbulent portion and is shown on the line with the turbulence
label.
If you are new to this site, be patient, scroll down a
couple of pages and you will find what the model is forecasting for the
following 15 issues:
DIA, SPY, QQQQ, OIH, SMH, IWM, OEX, EWJ and XLF {these are based on specific market averages}
and, AAPL, AKAM, ET, GOOG, STX and WMT
There are 2
classes of investors I would like to reach, in particular. If you are involved
with options, you should
consider what I have to say. You are in the first category. If you trade on the
short term (a couple of
weeks on average), then you are in the other category of investor I am
interested in. I would like to hear the ideas and opinions from members of both
categories.
One feature of my analysis is that I have a count down to a
reversal for each entity. Thus, if we consider stock XYZ, my model tells you
the current trend direction of the stock. Moreover, it tells you how many days
remain before the current trend for XYZ reverses. This information can help you
plan upcoming moves.
My Comments on the Markets
My Comments after Monday
(December 4):
Today, I simply
held my 3 long positions in SPY, AKAM and ET. The market did well and so my
account also did well. ET bears watching because at this time it is in a down
cycle and I am long. While perhaps only a technicality it is still important to
make sure nothing unusual happens. Remember, I never refer to the size of a
move. I simply look at trend.
Given that my
account has over $1,000 of uncommitted funds, I am considering going into a
bullish credit spread (with Dec puts) for GOOG. Come back tomorrow to see if I
did.
My Comments after Tuesday
(December 5):
On Tuesday, I
took a big step towards being professional. I pulled the plug on ET. The model
did not like the position I had assumed, so I did not hesitate to liquidate.
That is the way it should be. I took the funds and went long GOOG. I shorted
the Dec 490 put and I bought the Dec 480 put for a credit of $4.60. These are
Dec contracts that only have 8 days left. So now I have SPY Dec puts and GOOG
Dec puts. Don’t let the idea of puts fool you – I am bullish. That’s also a
reason why put/call ratios are no longer significant. My AKAM position is for
Jan. Now mind you I will liquidate whenever the model tells me to.
The markets
continue in up trends. I think it is important that regardless of what you are
doing you should be aware of the markets and their direction. Most typical
issues tend to move with the markets. It is the reason why I do not like to
take positions that are contrary to the market direction. Look at my comments
for STX below.
My Comments after Wednesday
(December 6):
The markets did
little today. There was an upward move by GOOG but then it faded. With regards
to my positions, I liquidated AKAM – no not because of AKAM. In fact, AKAM at
this point looks really good – it is aligned with QQQQ. Given this, I want to
go into QQQQ (Dec). My AKAM position was for Jan. The Dec position in AKAM is
not attractive enough for me given the availability of QQQQ. So tomorrow
(Thursday) I will get a credit put spread (bullish) for Dec QQQQ. Come back to
see what position I have set up.
The markets are
in up trends. Little else can be said. I do have a comment about AAPL. It is
currently under the influence of turbulence. Go to the AAPL section below to
find out how turbulence is defined. In a few days AAPL will revert back to a
clear up trend. I know many of you will be happy when this occurs. Stay tuned.
The target is the middle of next week.
My Comments after Friday
(December 8):
Friday (or
should I say this weekend) was a turning point for me (no not the markets –
they remain in up mode). For the past 5 weeks I have traded a substantial
number of bullish and bearish spreads in a number of different issues. I
survived BUT I have to admit it was not easy. I spread myself much too thin. In
addition, the way the options, especially spreads are traded drained my energy.
Instead of enjoying ‘the game’, I started to ‘dislike’ it. I felt like I was
being taken for a ride. What I concluded was that I cannot continue to trade
option spreads. I refuse to trade naked options – they are a rip-off in my
mind. So I am looking at trading futures on stock indices. I really like what I
see. I’ve spent the last week looking at the possibility. Unless something
unforeseen happens, I want to go that route.
I will continue
with this web site. But if I go into futures, I will focus on producing timing
for the market averages like the S&P, Nasdaq, Dow, and Russell. I certainly
plan to continue My Journey. In fact, when I started Nov 1, I felt that the
odds to achieve my objective were probably 1 out of 3 (i.e. 33%). I now feel
that the odds have increased to 2 out 3 (i.e. 66%). So, as you can see, I am
not disappointed, I am encouraged. What I am looking for is the ‘way’ to
achieve my objective.
As a final
point, there were several aspects that I did not like about option spreads. One
was the overcharging on the quotes – the gap between the bid and ask is usually
ridiculous (especially for spreads). The other aspect that I have grown to
really dislike is the fact that with a spread you have one leg of the trade
that loses money. So you make on one side and lose on the other. In itself this
is OK, however, there are times when even with a large move you don’t make that
much because you make the difference. The last thing I don’t like is that if
you hold a spread you are cutting yourself off from ‘relatively large moves’
because the potential profit of the spread is capped.
If you have some
thoughts about what I have said or are planning, please share them with me at engprof6@hotmail.com
Good luck to all.
SPECIAL
SECTION (under construction)
(How To) Grow $5,000 into $1 Million, Quickly
See how my trading is taking
shape – click the link below. Send me your feedback.
Click Here to Link to ‘My
Journey’
Stay Tuned. You
will get the opportunity to follow me as I embark on ‘my journey’ to grow $5
thousand dollars into One Million Dollars – Quickly.
The starting date
was initially set for Oct. 1, 2006. However, given the revised version of the
model (3.5) which I am trying to implement for all 15 issues, a more realistic
starting point is Nov. 1.
I have decided to remove
the next day outlook. It is too much work for me to write. It detracts from the
analysis because you the reader do not see all the data. So, in an effort to
simplify the presentation, I am going back to the way it was – only focused on
the primary trend.
You should note that the tables that follow for some of the issues
will only be updated on weekends. On Dec 2, I updated the tables and there were
changes to DIA, SPY, QQQQ, OIH, OEX, AKAM, and STX.
DIA Primary
Direction: UP
Started on xx
Days Remaining: 11
Starting Price: xx
Current Price: 123.04
Clear Up Trend
Dow
Industrials Fund (DIA) is in a primary UP cycle. Based on what the model is seeing, we could
have another 11 days of up trending markets. Stay tuned.
CLICK HERE --- to view the results for DIA as generated by the model (version 4.0) for 2006 [New Dec 1]
SPY Primary Direction: UP Started on
xx
Days Remaining: xx
Starting Price: xx
Current Price: 141.43
Turbulence Days
Remaining: 2
S&P
500 Fund (SPY) is in a primary UP cycle with a bit of influence by turbulence.
When I checked the sensitivity, I found that the turbulence is very minor. I
would ignore it for now and, in fact, it will dissipate on Monday if SPY closes
at 141.7 or more. IWM is like SPY. Stay tuned.
CLICK HERE --- to view the results for SPY as generated by the model (version 4.0) for 2006
[New Dec 1]
QQQQ Primary Direction: UP
Started on xx Days
Remaining: xx
Starting Price: xx
Current Price: 43.90
Turbulence Days
Remaining: 1
NASDAQ
100 Fund (QQQQ) is in a primary UP cycle with a small amount of turbulence. The
QQQQ should flip back into a clear up trend on Monday.
CLICK HERE --- to view the results for QQQQ as generated by the model (version 4.0) for 2006
[New Dec 1]
OIH Primary Direction: UP
Started on Wednesday, November
15
Days Remaining: xx
Starting Price: 140.82
Current Price: 146.65 Profit:
5.83
Turbulence Days Remaining: 11
Oil Services Holders (OIH) is in a primary UP cycle,
however, OIH is now in turbulence mode. While the up trend remains, the imposition
of turbulence will suppress gains. Keep watching.
CLICK HERE --- to view the results for OIH as generated by the model (version 4.0) for 2006 [New Dec 1]
SMH Primary Direction: UP Started
on xx
Days Remaining: xx
Starting Price: xx
Current Price: 34.17
Turbulence Days Remaining: 3
Semiconductors
Holders (SMH) is in a primary UP cycle with turbulence. In 3 days SMH should go
back into a clear up trend.
IWM Primary Direction: UP
Started on xx Days Remaining: xx
Starting Price: xx
Current Price: 78.80
Turbulence Days Remaining: 2
Russell’s 2000 (IWM) is in a primary UP cycle. IWM
now has 2 days of turbulence which will subsequently be followed by a clear up
trend again. IWM is like SPY. Stay tuned.
OEX Primary
Direction:
UP Started on
xx Days Remaining: 12
Starting
Price: xx Current Price: 652.22
Clear
Up Trend
The S&P 100 Index (OEX) is in a
primary UP cycle for the
next 12 days. OEX now resembles DIA.
CLICK HERE --- to view the results for OEX as generated by the model (version 4.0) for 2006
[New Dec 1]
EWJ Primary
Direction:
UP Started on
xx Days Remaining: xx
Starting
Price: xx Current Price: 14.04
Turbulence Days
Remaining: 13
The Japan Fund (EWJ) is in a primary
UP cycle which is now in turbulence mode. As I’ve stated in the past,
turbulence leads to limited gains in an up trend.
XLF Primary
Direction:
UP Started on
xx Days Remaining: 10
Starting
Price: xx Current Price: 36.21
The Finance Index (XLF) is in a primary up cycle.
The turbulence has dissipated. Stay
tuned.
AAPL Primary Direction: UP Started on xx Days Remaining: xx
Starting
Price: xx Current Price: 88.26
Turbulence Days Remaining: 2
Apple Computer (AAPL) is in a
primary UP cycle and now only has 2 days of turbulence left.
Remember, turbulence is a secondary
force that opposes the primary force. A clear up trend has no opposing force.
However, an up trend with turbulence implies a primary up force with a
secondary down force. The result is instability. Turbulence also implies a
certain level of randomness. These comments apply to all stocks.
CLICK HERE --- to view the results for AAPL as generated by the model (version 4.0) for 2006
AKAM Primary Direction: UP Started on Thursday, Nov 30 Days Remaining: 4
Starting Price: 48.87 Current Price: 53.78 Profit: 4.91
Clear Up Trend
Akamai Technologies (AKAM) is now in
a primary UP cycle. The strong gain in AKAM has caused the model to reduce the
remaining length to 4 days. After that the up trend continues but with
turbulence. Stay tuned.
CLICK
HERE --- to view the results for AKAM as generated by the model (version
4.0) for 2006 [New
Dec 1]
ET Primary
Direction: DOWN Started on xx Days Remaining: xx
Starting Price: xx Current Price: 23.05
Turbulence Days
Remaining: 14
E*Trade
(ET) is in a primary DOWN cycle. ET is now in turbulence mode. However, ET is
close to reversing. It needs a bit of a push to the upside to make it happen.
The remaining length of 14 days means little if the reversal happens. Stay
tuned.
GOOG Primary Direction: UP Started on xx Days Remaining: xx
Starting
Price: xx Current Price: 484.11
Turbulence Days Remaining: 1
Google (GOOG) is in a primary UP
cycle with turbulence. However, GOOG should shake off the turbulence on Monday
and resume its climb up. Stay tuned.
CLICK HERE --- to view the results for GOOG as generated by the model (version 4.0) for 2006
STX Primary Direction: DOWN Started on Wednesday, November 1 Days Remaining: 3
Starting
Price: 22.26 Current Price: 26.40
Loss: 4.14
Seagate Technologies (STX) is in a
primary DOWN cycle. The turbulence has dissipated. As a footnote, I have
reviewed STX to assess why the model is wrong. What I found was that on Nov 15
’06, the model just missed putting STX in an up cycle. A move size of an
additional 10 cents would have caused the flip to the up. In addition, at the
time, the hourly model was pointing up. Had that happened, STX would have
remained in an up cycle until today and beyond. Those are the breaks – that’s
the way life is.
There is a lesson to be learned. One
is that we should try to time our moves with the market moves. Had we done this
with STX, we would not have shorted it. We may not have bought it, but…
I am using this incident to see if I
can rectify such a mistake much earlier. I think I have found a partial
solution. Stay tuned.
CLICK HERE --- to view the results for STX as generated by the model (version 4.0) for 2006 [New Dec 1]
WMT Primary Direction: DOWN Started on xx Days Remaining: 5
Starting
Price: xx Current Price: 46.35
Clear Down Trend
Wal-Mart
(WMT) is in a primary DOWN cycle that has 5 days of length remaining.
SPECIAL SECTION (under construction)
(How To) Grow Your Wealth
Quickly
and, after I complete my objective,
Anyone Can Make a Million Quickly
I have invested over the years but I’ve had
difficulty making a good return. In retrospect, I didn’t have the discipline or
a model to be ‘successful’. All this changed when I started to use a model of
price movements. It just so happens that I developed what I refer to as the
hybrid timing model which evaluates cyclic price movements in the financial
markets.
My past investment universe included stocks, options
and futures. Again, in retrospect, I could not succeed because I was not able
to get a handle on the time trends of the issues I was investing in. So about 7
years ago, I stopped my active investing strategy (except for a few buy and
hold stocks). During this time, I fiddled with mathematics to try to get a
handle on how short term moves occurred in the markets.
In early 2006 I came to the conclusion that the model
I had developed was of sufficient accuracy to be of value in the short term
investing arena. During the last 4 months I have been posting some of the real
time results from the model on this web site. I am very pleased with the
results. Recently, I started to invest (with real money) in some of the issues I
follow (in particular, the market barometers). I started with stocks (or ETF’s)
but I have now moved to options for my speculation funds.
I have set a target for myself. My objective is to
convert $5,000 into 1 million dollars in 2 years. Hence, the title of my work:
‘Grow Your Wealth Quickly’. My plan is to use options to carry this out. My
official starting point for this endeavor is Oct. 1, 2006 (revised to Nov.
1’06). I realize this is a lofty goal but I feel I am up to it. I will report my
progress on this site. It will be one heck of a show, in real time. You will
get to see with real money what can be accomplished with the model.
Based on what I have learned, I have concluded that
one needs to use options (or futures) to make money quickly (or to loose it
quickly). One problem with the simple buying of call and put options is that
this practice is a bit like buying lottery tickets. The odds are stacked against
the buyer. Investing in stocks is much safer but too slow for accumulating
wealth quickly. Thus, several conclusions I have made, regarding my speculative
funds, are:
1)
I will not invest in stocks,
2)
I will invest in options,
3)
I will focus on credit option spreads.
So what
are option spreads? Simply put, an option spread is a strategy (in its simplest
form) that involves 2 calls (or 2 puts). The investor buys 1 call and sells
short another call with a different strike price. For a credit spread, the
investor sells a more valuable option and buys a cheaper option for a net credit
to one’s account. This can be done with both calls and puts.
Let’s
consider the SPY ETF that mirrors the S&P500. I am writing this on Sunday,
July 30’06. Let’s consider the August 2006 contracts. Credit spreads can be
created with calls if you think the trend is down. Credit spreads for an up
market would be created with puts.
Consider
the following credit spread involving calls (down SPY trend):
Buy: August 129 SPY @
$1.10
Sell: August
127 SPY @ $2.35
The cash SPY
when these option prices were retrieved was $127.98.
In this
case you would be credited with $1.25 (less commissions). The maximum loss that
you can incur is $2.00. Thus, in initiating this spread, you would be required
to deposit $0.75 which would be coupled with the $1.25 credit for a total of
$2.00 (the maximum loss). The spread has an intrinsic value of $0.98. If by
expiration (in 3 weeks), the SPY has dropped to 127 (or lower), you pocket the
credit of $1.25 you received. If the SPY closes at expiration at 128, you get
to keep $0.25 of the $1.25 credit. If SPY closes at $129 (or higher), you give
back the $1.25 credit plus the $0.75 you deposited. The bottom line is that you
are risking $0.75 to have it become anywhere from zero to $2.00. If you are
good at identifying trends, you will be a winner.
Another
credit spread involving calls of SPY is:
Buy: August 130 SPY @
$0.70
Sell: August 128 SPY @
$1.65
This
spread would yield you a credit of $0.95. The intrinsic value of this spread is
zero. You would risk $1.05 to enter this spread. If the SPY remains unchanged
(or goes down) by expiration, you pocket the entire $0.95.
Why a
credit spread and not a debit spread. My simple answer at this point is because
of the eventuality that the market (SPY) reverses. Let’s assume the SPY has
just entered a down trend. You decide to sell the Aug 127 at $2.35 and buy the
Aug 129 at $1.10 for a credit of $1.25. The cash SPY is 128. Let’s further
assume you were right with the trend and 2 weeks later the SPY is at 127 (a
drop of 1). At that point in time, there may be an issue you will need to deal
with. Expiration may (for arguments sake) be 1 or 2 weeks away. You need to go
into a credit spread involving puts. So what does one do with the call spread.
With regards to the calls you can close the spread completely or you may buy
back the call you shorted (and hopefully you will be able to buy it with the
funds you received as credit). If you only buy the call you shorted, you would
be left holding the call you bought. If you are right about the reversal to the
up side, that call will increase in price. At the same time, you would
initialize a credit spread with puts.
A $1,000 investment if doubled ten times in a row would be
worth over 1 million dollars. Can it be done? Yes – maybe not 10 in a row, but…
What you need is to have a good handle on the trend. I plan to do it. This is
my Tour de France. Stay Tuned. Naturally, your comments are welcome.
To Be Continued….
MY MAILBAG
I have received some mail as
of Nov 26 which I would like to share with you.
Message #1:
Header: McGillEngStudent01
Time: November 21, 2006 12:48:41 AM
Text:
My Reply to Message #1:
How nice of
you to write. You are an engineering student at McGill – I know it is in
At this point,
I have little doubt that the model is a viable tool for trading and yes it is
100% mathematical. The biggest obstacle I am encountering is ‘myself’ and my
second guessing the model. My behavior has landed me in several situations that
I did not want to be in. I am in one of them right now – my OIH position. I
need to ‘straighten myself out’. I will get control of myself and then we will
see what can really be done.
With regards
to books, I really don’t have anything to recommend. I have formulated my own
ideas and much of what I have done is based on my engineering background. With
the web, there is no lack of information. Some of the brokerage houses also
provide good background literature.
Good luck and
keep in touch.
+++++++++++++++++++++++++++++++++++
Message #2:
Header: amkor & chipmos
Time: November 24, 2006 12:03:24 PM
Text:
My Reply to Message #2:
Ay yes, AMKR –
it does bring back memories. Unfortunately, I cannot cover it. I don’t have the
resources at this time. I can tell you that AMKR does tend to move with the SMH
index (semiconductor index). The big difference is that the magnitude of the
moves for AMKR are much bigger (both going up and going down). Keep you eyes on
SMH and see if that helps you out. It is no different than looking at SPY or
DIA to assess the market direction and then investing accordingly. Good luck.
+++++++++++++++++++++++++++++++++++
Forecasting
the markets is like forecasting the weather. Our knowledge base (I am referring
to mankind) is such that the only reliable forecasts are short term. Long term
forecasts for the weather or the markets are simply beyond our reach at this
time.
Remember
last year, the forecasters got caught up with the unusual number of hurricanes
we were having. As a result their forecasts for 2006 were worrisome to say the
least. We were told there would be as many and more. They weren’t forecasting,
they were simply extrapolating. Now as we approach the 1 year anniversary of
Katrina, we haven’t had any hurricanes to speak of.
Yes
there is Ernesto on the horizon, but as I write this, he doesn’t know whether
he should be a tropical storm or a hurricane. Try forecasting what will happen
in the next 3 days. It’s not easy, even for the pros.
As I said,
long term forecasting is beyond man’s capability at this time. Long term
forecasting of the markets parallels that of forecasting the weather. It cannot
be done with any degree of accuracy. It boils down to ‘A Random Walk Down Wall
Street’. These are my personal views.
So what
about short term forecasting? Well that is a different story. We can all agree
that short term forecasting of the weather is a reality. It is within man’s
grasp. Five or even ten day forecasts are generally quite accurate.
What I do is short term forecasting of the markets (without any detail). The model tracks the cyclic, short term trends and tells us what to look for. It assigns no magnitudes (not yet anyway). Remember, money management is equally important as the forecasting component. If you are careless and lose all your worth on a wrong move, then being right 80% of the time will amount to nothing. You need to be WISE. Good luck to all.
Announcement:
The following is an introduction as to what I am planning for the
near future.
There are several reasons why I am publishing this web site. Two
of them are: 1) to discipline myself when it comes to investing, and 2) to find
a viable, winning strategy for investing in options. My unofficial name for
this work is (How To) Grow Your Wealth Quickly. I will be using this
heading more frequently in the future and it will be the title of a book I will
write on the subject.
At this point, I am working on the ‘how to’ part of the program. I
have already formulated a preliminary strategy which I am testing with my own
money. The strategy is focused on options and more specifically the combination
of buying credit spreads and the buying of straight calls and puts. I won’t say
any more at this time besides stating that 90% of a winning strategy is
centered on getting the direction of the move right. Given that the model can
do this about 80% of the time, I am finding that being successful trading
options is viable and is, indeed, quite profitable.
Soon, I will write more about my progress and my plans. Stay
tuned.
Do you want to see past issues of this page? Click the link below.
Past Postings
of This Page – Click Here
Questions, Comments, Suggestions or whatever else you may fancy
are welcome. I can be reached
at:
engprof6@hotmail.com
Please Note This Disclaimer: The above results are generated from a mathematical model. It provides some insight into what may be expected in the short term (2 to 4 week cycles). While reliability is of highest importance, life is such that the model is not always correct. Neither is past performance necessarily indicative of future performance. Stocks, markets, and options can change greatly in value in short time spans because of unpredictable events. The model cannot foresee such events. When they happen, the model’s performance will be poor and in some cases - wrong. The user is advised to be cautious and to try to couple the results for individual stocks to those for the market averages.
One
last point I wish to emphasize. The accuracy of the model is also dependent on
the entity that is analyzed. Some entities are more amenable to the type of
analysis the hybrid timing engine
performs. Others (especially those with elevated volatilities and/or irregular
trading volumes) may not match the anticipated performance. It is up to you to
satisfy yourself that the performance is adequate and to draw your own
conclusions.
[[ Find Out About the Model – click ]]
[[ See Past Postings of This Page – Click
]]
Why Are There Events That Go AGAINST the Model? – Click Here
Interpretation of Signals - Click Here.
Find Out What Timing Did For AAPL
- Click Here
You may have noted that what I originally called a mathematical model is now called a hybrid timing engine. The term hybrid comes about because of the method of conducting the analyses. It combines several techniques into one package. The term engine refers to ‘computational’ engine – a terminology that is frequently used by researchers. Thus, the model will henceforth be referred to as the ‘hybrid timing engine’ or the ‘hybrid computation engine’.