Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: d j chen who wrote (2995)	10/31/2005 7:15:45 PM
From: Walkingshadow	Respond to of 4814

Hi DJ, I also trade some of the Profunds and others like them in several retirement accounts where there are restrictions. Trading these is a bit trickier, because of the end-of-day pricing and also because some brokers have cutoff times (I believe Profunds does not, provided you have an account there). Sometimes you have to kind of anticipate things, and that can be risky. The upshot is that you can still use volume patterns as one guide to trading positions, but I would NOT suggest you make any decisions based on this one factor. To me, volume analysis is just one tool, and I try to put together a coherent picture based on independent data sources (e.g., volume, chart, technical/momentum indicators, sentiment, market internals). So the way I use volume as an input to these kinds of trades is that I examine volume in several time frames----short term (i.e., one day or two at the most), medium term (up to several weeks), and long term. I rely upon the medium term picture primarily, and the short term picture is only used to try to fine-tune the timing. Occasionally, I see something very significant in the short-term time frame that will cause me to make an immediate decision, provided what I see is corroborated elsewhere by other things. Take this with a grain of salt, because I have not really made a decision yet until I get a chance to check other things in detail. But right now, based upon certain volume patterns today and on Friday, I am considering flipping from long to short in the MFs you are talking about. So what I will do tomorrow is watch things, and I will be looking for certain favorable scenarios. For example, if QQQQ continues to rally, and I see another large spike of volume into strength, then that will encourage me to flip to a short position at the end of the session, particularly if the market does not react right away, or the rally just stalls but there is no selloff (this increases the likelihood that the following day will see a fairly sharp pullback, so I'll be able to capture most of it). On the other hand, if the market pulls back tomorrow moderately, and I see volume at the low of the day, I'll stand pat, because my conclusion will be that there is considerably less likelihood of further significant pullback, and my chances of getting whipsawed are prohibitively high. So what I am looking for tomorrow is little or limited reaction downwards, limited evidence of buying, and further evidence of selling. Then, I'll judge the relative magnitudes of each to estimate the probability that a significant pullback will occur and can be captured by flipping short at the end of the session. Just a bit of warning here----just as you wouldn't look at an intraday chart and try to make decisions on the medium-term trend or long-term trend, it is very difficult or impossible to properly interpret one day volume patterns unless the longer-term context is taken into consideration. What might seem like a big volume spike on a 1 day chart may well turn out to be an insignificant blip when the longer term chart is examined. Also, volume patterns should be examined in the context of relevant moving averages of the volumes. That's because volume spikes are relative---a very large spike when the 30 day moving average is very low (e.g., during the summer doldrums) may be very significant in the short- to medium-term, but an identical volume spike may be quite insignificant during periods of high ambient volume, such as we are currently seeing. So the short answer is..... it all depends on what I see tomorrow. The other short answer is that yes, IMHO you can use volume patterns as one aid to making trading decisions with mutual funds. I have been pretty fortunate so far with this anyway, and have gotten returns that stomp all over any buy and hold approach. T

To: d j chen who wrote (2995)	11/1/2005 3:15:18 PM
From: Walkingshadow	Read Replies (1) \| Respond to of 4814

FWIW, I just went short QQQQ and INDU. I think there will be a modest pullback now, but I doubt it will last long. Maybe only a day or two. One of the reasons I am going short now is the volumes. Today at the high of the day there was a significantly larger volume spike. When added to the previous spikes, that suggests to me a good probability that we will see a pullback while the market reacts. Again, I doubt the pullback (if it happens, that is !!) will last long at all. So there is also a significant chance I'll get whipsawed on this trade. Clearly, the medium-term and long-term trends are up, and we are looking down the bore of a year-end rally here. T