Atin: I think you have it basically right, but let me set out my interpretation again. We made a low on 10/27, and starting the third day out through the tenth day out, we look for 1% up in price on volume which is higher than the prior day in any of the indices. I prefer the Nasdaq Composite. The last day in the "window" is 11/11. If it does not occur, we try to find the next low, and start counting again.
The Stock Farmer system has a "bottom" indicator called a "blue bar" that helps find the best day from which to count, but I think the 3-10 day window makes the low pretty easy to spot without understanding the mechanics of the "blue bar" indicator.
On shorts, O'Neill's language is in one of my earlier posts. But, as I understand it (and am trying to maintain the same discipline on the PB shorts) your most sucessful shorting will occur just as the market direction turns as it did starting 10/8. The Stock Farmer "red bar" or O'Neill's "distribution" day is the signal. Shorting in a bear market is also good, but I think you need to watch for the intermediate term changes in market direction to be safe and maximize your returns.
I think the down turn we saw yesterday was presaged by the "distribution" we saw on 11/5 (higher daily volume, opened higher closed basically unchanged), but whether that is another point from which to short remains to be seen. John's open short list would probably tell us. How he did this week compared to the two previous, and how he does next week compared to this past should tell us something of value.
I certainly know what you mean about watching your favorite stocks go up after you move to cash. I think I would be up another 15-20% at this point if I'd just stayed with all of my positions that I closed out before the Monday debacle. However, I don't think I'd have as clear a head as I have, and would not be focused on the discipline of preserving my capital for the real McCoy when it finally comes. Also wouldn't be looking as hard for the nice bases out of which the new leadership will come. However, I will say that many of my last positions are still on my watch list. Provide they breakout when we "follow through", I'll buy them again. For example, look at SFSK.
Does that clarify my interpretation of Chapter 7? |
