the Trade-Radar + TradingStockAlerts blog

Equity markets have felt the impact of the quants and their algorithms for some years now. Commodity markets, on the other hand, have been a bit more old fashioned. Investors should be aware, however, that situation is changing. Automated trading strategies are expanding into commodities as firms look to apply these techniques to other asset classes. And it's happening at a rapid pace. It is thought that as much as 35 to 50% of volume in the most active front-end oil contracts is generated by algorithmic trading. There are differences in automated commodities trading when compared with the way it's done in equity markets. Here are the three strategies most commonly in use in commodities markets. The first is called ETRM which stands for electronic trading and risk management. In this scenario, which comprises the majority of automated trading in commodities, there is actually a lot of human input driving the trading with assistance from fairly standard electronic trading ...

I've introduced a new feature to the Trade Radar web site tonight. It's called the Trade Radar Stock Market Research Assistant . What it does -- When doing stock research, you might want to see a description of the company, a chart, headlines and blog posts, various sets of financial data and financial ratios, earnings call transcripts, etc. It's not unusual to have to visit several sites to see the best data in each category. At each site you have to enter a ticker symbol and navigate to the page you are actually interested in. The Trade Radar Stock Market Research Assistant removes the drudgery. Just enter a ticker symbol one time and the Research Assistant will hit up to eleven sites to retrieve pages that present best in class data. When I refer to "best in class" data, I mean that some sites are better at presenting certain kinds of information. I've evaluated a number of sites and created a set of resources that meet my standards for offering th...

In the new, soon-to-be released version of the TradeRadar software I will be more than quadrupling the number of fundamental indicators that will be evaluated for every stock. One of the indicators is beta. In my research to determine how to evaluate beta in the program, I realized I needed a refresher course on what beta means for an investor. The following is the result of my investigation. Definition -- The beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole. It tells you how fluctuations in the return of a stock co-vary with an index, often the S&P 500. An asset with a beta of 0 means that its price is not at all correlated with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; the asset generally decreases in value if the market goes up and vice versa. Another way of distinguishing between beta ...

The stock market took a body punch today. Should you sell everything? Let's take a look at two representative indexes. First up is the S&P 500. Check the red ellipse drawn on the chart. This ellipse highlights the area where there is a convergence of the 50-day moving average, the lower Bollinger Band and a short term support level established in June. In other words, this range from 945 to 955 should provide serious support for this important index. This next chart shows the NASDAQ 100. Here we have drawn a red circle and a blue ellipse. The red circle highlights the convergence of the 50-day moving average and the short term support level established in June, much as we saw above in the chart of the S&P 500. In the case of the NASDAQ, however, the lower Bollinger Band is higher than the previously mentioned indicators and the index has already slid pretty close to it. So the NASDAQ 100 has two support areas: the range from 1510 to 1520 and that range around the lower Boll...

Wow! Stocks have put together two days of rip-roaring gains. The major averages have added roughly 12% in barely two sessions. So where do we stand technically? With charts a mess and moving averages pointing steeply down, it's worth looking at resistance and support levels. The major averages have moved up aggressively but have not yet cleared the first resistance levels. Indeed, today they began penetrating above resistance but fell back. These are the levels we are watching: S&P 500: 850 NASDAQ 100: 1500 Dow Industrials: today the Dow breached first resistance at about 8250 but was not able to get past 8500 Russell 2000: 450 A clear push above these levels would imply the current rally has legs. Failure to break above them would bring out the caution flag again. As an example, the chart of the S&P 500 is presented below. The resistance level described above stands out plainly. In closing, I would like to point out that none of the major averages have reached their 20-day...

Credit markets are showing glimmers of improvement. Note the following quotes from MarketWatch.com : The cost of short-term dollar loans dropped more than expected Monday, a signal that money markets are slowly returning to normal after threatening to derail the global financial system earlier this month, economists said. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.05875%, down sharply from 4.41875% on Friday. The one-month rate fell to 3.75125% from 4.18125% on Friday. Later Monday, U.S. Federal Reserve Chairman Ben Bernanke, in testimony prepared for delivery at a hearing before the House Budget Committee, said he was encouraged by signs a severe credit blockage was easing after massive efforts by governments around the world to recapitalize major banks and guarantee short-term bank debts. On Friday, three-month Libor posted its first weekly decline since July. The rate had pushed as high as 4.81875% on Oct. 10. In yesterday's Weekly Review...

The market certainly swung through a wide range on Friday. The first half hour showed more variation than is often seen over the course of an entire day. The S&P 500 opened with a big gap and fell 7%. Forty minutes later it had closed the gap and moved into the green. The market then proceeded to sink in a fairly steady and orderly way down to nearly its earlier lows until 3:00 when the index turned up and began to rally like crazy. By 3:36, it had erased its loss and was up 2.5%. The index then turned down and closed with a 1.18% loss. I relate this intra-day behavior to illustrate why I got the impression that Friday was some kind of climactic day. Maybe not " the " climactic day denoting the absolute bottom but at least some kind of tradable bottom. The whipsaw action seemed to signal a change of trend might be in the air. As a result, by mid-day I sold half of my positions in the ProShares Ultra Short Midcap 400 ETF (MZZ) and the Ultra Short QQQ (QID). The Ultra Short...

Back in January when the market was going through its first set of gyrations and hitting a serious low I wrote a post titled " Time to get conservative with your 401K ". In that post I suggested that, in the interest of preserving capital, it might be a good idea to move approximately half of your 401K holdings into a stable value fund. It's true, this does have an element of market timing. On the other hand, there is nothing wrong with being defensive when it is clear that the market is in a serious downtrend. In fact, the post was somewhat inspired by the writing of Random Roger who advises that investors avoid allowing their portfolios to go "down a lot" though "down a little" is probably unavoidable in a down market. With the Fed and the Treasury moving to support Fannie Mae and Freddie Mac, it is time to discuss this strategy again. At the time of the original post, there was a debate about the nature of the holdings of stable value funds. The fu...

Having been working with the Trade Radar trend reversal indicator for over a year, it is time to talk about insights I have gained. This article is a continuation of the original post titled " The Trouble with Trend Reversal Indicators ". This post is concerned with "follow-through" or the ability for a new trend to fully establish and maintain itself. In other words, did the stock throw a head-fake or did it truly do an about face? Trend reversals tend to be driven initially by internal factors affecting a stock: earnings or buy-out rumors, for example. There are also external factors that affect a stock. In the first post we talked about "event risk" or things that come out of the blue that would not have been predictable after having read an 8-K. One of the more formidable external factors for an individual stock is the market itself. In my observations, I have seen a number of stocks generate great looking BUY signals. Many of these stocks did see some...

With the latest release of the TradeRadar software (we're up to version 3.0.1 now), I thought I should provide a description of the trading system the software supports. History -- The earlier releases of the software focused on technical analysis of closing price data. We started out with the basic BUY/SELL signal logic including measures of how strong the signal is, how well-shaped the signal is, etc. The next version added trend lines whose angles were measured and used to determine whether the signal was strong enough. With these indicators, we added what look like colored LEDs on the Dashboard screen of the software where the detail of the indicator computations is presented. The LEDs would be set to Red/Yellow/Green based on whether the individual indicator was strong enough to support the BUY or SELL signal. For example, if you are looking for a BUY signal and the LED is Red, then the indicator is saying that a BUY signal is not confirmed. If all or most of the LEDs are Gree...

As I have discussed in the past, the TradeRadar analysis attempts to identify stocks that are undergoing reversals. Given my current bullish attitude, this means that we will be featuring stocks that have declined over the last six months or so and are now beginning to bounce off their lows and show some strength in their stock price. One thing I have noticed about using the TradeRadar BUY signal is that the stock picks don't carve out a perfect V-shape when they undergo reversals. They tend to hit bottom, then move up fairly quickly, thus triggering the initial TradeRadar BUY signal. Then they tend to back off and go into a consolidation phase after which, if the reversal is meaningful, the stock moves up to new highs. In this case, there is a good chance that a cheaper entry point can be obtained. Looking at the following chart of Allis Chalmers (ALY), for example, TradeRadar Alert HQ gave a BUY signal toward the end of February and I purchased the stock at $13.16. The stock soon...

As I continue to use the TradeRadar software to analyze many different stocks in various situations, I am getting a better feel for the strengths and weaknesses of the BUY and SELL signals. There are definitely a few nuances users should be aware of when trading based on the signals. Beware of earnings announcements -- Let's use a BUY signals as an example. Things will work the same for a SELL signal except in reverse. When a BUY signal is generated, it is the result of a clear downward trend being broken. The stock has made a bottom and begun moving up. The downtrend may have lasted six months, a year or even more. Given the fact that the stock has been in a bearish phase, there is a certain amount of risk in buying the stock. We often see false rallies within bearish trends and there is always the potential that a BUY signal is a trap. This is why I always recommend that users of the software do some research to become comfortable with the stock generating the signal. It is alw...

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...