Stocks ended a holiday-shortened session Thursday at new highs for the year following upbeat reports on unemployment and durable goods orders.

A weaker dollar also helped buoy the market, lifting energy and materials stocks. Christmas Eve trading was extremely light.

The encouraging signs of the labor market and consumer demand helped assuage investors who were disappointed the day before by an unexpected plunge in new home sales last month. (commentary & photo courtesy of AP)

On this shortened trading day my profit target was hit and my position was sold in United States Natural Gas (UNG). Strangely its price kicked up at the opening, hit my price of $12.80, only to selloff the rest of the day. It was a good ride while it lasted and it netted a nice profit of 18% in a little over a five weeks. Not too shabby. My major problem is that RSI’s picks come in small doses, except when the market moves big, such as this past March.

Have a Merry Christmas. Catch you after the market closes next Monday.

Stocks ended an erratic session with a slender gain Wednesday as rising commodities prices offset disappointment over an unexpected drop in home sales.

Gains in commodities drove the shares of energy and materials-producing companies higher, lending support to the overall stock market. Gold, oil and other commodities rose as the dollar dropped.

The dollar snapped a four-day winning streak as the latest economic data reinforced investors’ belief that the recovery will be slow. (commentary courtesy of AP)

My stock watch generated a delayed buy of iShares Dow Jones US Home Construction (ITB). What do I mean by a "delayed buy"? Actually, the RSI operational system generated a buy of ITB months ago, July 30, 2009 to be exact. Since I didn’t have this version of RSI operational in late July, I didn’t have the opportunity to buy it at that time. However, since it hadn’t gone anywhere since the recommendation I decided to monitor it for a breakout. The trigger went off today and I bought at a price of $12.14. No, this is not the RSI system methodology but rather a wild hair. Somewhere there is a rationale but I’ll spare you the excuses, I mean details.

Anyhow, although ITB has gone nowhere it does look as if it is poised to move upward. We shall see.

FYI – My stop loss level is set at $0.82 below my fill price.

As I mentioned in my blog several weeks ago concerning “holding position” funds, I sold the appropriate number of shares to cover the cost of my anticipated purchase and then seconds later bought ITB. I was pleased to have made this maneuver quite seamlessly and it is now in my trading playbook.

Catch you later after the market closes.

Stocks pushed higher for a third straight day after a surprisingly strong report on housing provided the latest evidence that the economy is picking up speed.

All major indexes gained less than 1 percent Tuesday, with the Standard & Poor’s 500 index and the Nasdaq composite index closing at new highs for the year. The Dow Jones industrial average rose 50 points, bringing its three-day point gain to 156. (commentary and photo courtesy of AP)

Okay, so we have a nice up day in the market and maybe a continuation along this path will lead to a resumption of the bull move that started in March of this year. We shall know the answer in the fullness of time. Until then I will be waiting for RSI to lead my investment decisions.

Catch you tomorrow.

Another wave of corporate dealmaking stoked investors’ confidence in the economy and carried stocks sharply higher Monday.

Analyst upgrades of Alcoa Inc. and Intel Corp. and positive momentum on President Obama’s health care overhaul also helped drive a broad advance on the stock market. Major indexes closed off their highs of the day but still rose about 1 percent. The Dow Jones industrial average jumped into the black for the month.

Bond prices tumbled as stocks rose, pushing the yield on the benchmark 10-year Treasury note up to its highest level since August. The dollar strengthened, hurting commodities prices.(commentary & photo courtesy of AP)

The Wall Street Journal calls the current decade the “Lost Decade” since it has been the most dismal decade ever for the stock market. Even the 1930s were better. With that sobering statistic in mind, how do we plan for the future? Surely the next decade, which we are about to enter, will be better. Statistical history says, yes it will be, but I suspect we are in for a rough ride. The “Way Ahead” will be fraught with dangers and opportunities. I somehow feel confident that a systematic, objective trading/investing methodology, such as RSI, will be the guiding light to The Way Ahead.

No new RSI picks today. Catch you tomorrow.

The stock market broke a three-day slide as two big technology companies signaled that business was improving, raising hopes about business spending.

Tech stocks led the market higher in choppy trading Friday. Software company Oracle Corp. and BlackBerry maker Research In Motion Ltd. each posted earnings that topped expectations.

For the week, the Dow fell 1.4 percent, the S&P 500 index fell 0.4 percent and the Nasdaq rose 1 percent.(commentary courtesy of AP)

With the crush of holiday activities, I just don’t have the opportunity to report RSI’s year to date results. I will post these results before the year is out. I think you will find it to be instructive, so please stay tuned.

There were no RSI picks after Friday’s market close. Catch you after the close on Monday.

Citigroup’s surprisingly low pricing of a stock offer this week provides a clear sign that investors are still nervous about the banking giant’s ability to regain its financial health.

On Wednesday, Citigroup Inc. said it would sell 5.4 billion shares of stock at a price of $3.15 per share to help repay $20 billion in government bailout loans. That price was 9 percent below where shares were trading before the announcement.

"The market is not buying the Citi story right now," said Alois Pirker, a research director at financial consultancy Aite Group.

The U.S. government also balked at the deal, stepping away from selling a portion of its nearly 34 percent stake in Citigroup. (commentary courtesy AP)

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So the headlines tell the tale of a falling market. What about the Santa Claus Rally? Forget about it. There is really a flimsy basis for such a mythical event. That is why I want to rely on a objective system such as RSI. I don’t have to predict, I let RSI do all the work. Yes, its recommended ETFs are few and far between, but in this market this is a good recipe to help preserve capitol.

And as usual there were no picks from RSI. Catch you after the market closes Friday.

The stock market stalled after an early advance Wednesday as the Federal Reserve reminded investors that it would start to wean the economy from an array of emergency supports next year.

The Dow Jones industrials slipped 11 points, while broader indexes ended with modest gains but off their highest levels of the day.

Investors knew several of the Fed’s programs would be dismantled in 2010, but the added detail about its plans as well as lingering concerns about inflation tugged at the market. (commentary & photo courtesy of AP)

I got an email from a fellow system developer commenting on my discussion concerning the MAR ratio. He correctly pointed out that MAR is computed differently than the ratio I was using. I use the annualized return computed over a span of three years and divide it by the maximum drawdown for the same period. My ratio is a risk adjusted annualized return. The MAR ratio is also a risk adjusted return but it is computed on a monthly basis and is geared more for futures trading where trades are more frequent and  thus monthly return and drawdown are more of a concern. Anyway I probably shouldn’t be referring to my risk adjusted annualized return as the MAR ratio but instead as the RAAR. Whatever it is called it is still a useful metric for evaluating systems performance.

Yesterday I had an opportunity to listen to a broadcast of some well qualified “market experts” and economists discussing the state of the US and world markets and economy. My takeaway was they all expected the economy to improve over the next year, but at a slow pace. One expert referred to the current market as being in the grip of a malaise not knowing which way to move. It dawned on me this market malaise was contributed to the indecision influencing RSI’s lack of making new picks. That is there are no trends for the trend following modules to pick and there are no extreme price moves for the other modules to exploit. So I close tonight’s blog with the usual, no RSI picks today.

The stock market fell and Treasurys slipped after inflation rose faster than expected last month.

Trading was subdued Tuesday as Federal Reserve policymakers gathered for a two-day meeting on interest rates.

The Labor Department says wholesale prices jumped 1.8 percent last month, more than double the gain analysts expected.

For the day, the Dow Jones industrial average is down 49 at 10,452, falling from a 14-month high Monday. The Standard & Poor’s 500 index is down 6 at 1,108. The Nasdaq composite index is down 11 at 2,201. (commentary & photo courtesy of AP)

As I stated in yesterday’s blog, I waited for SEA to open and I put in a limit bid of $13.13 which was immediately filled. This was 4 cents below the actual open price. After the fill I entered a stop loss order at $12.15. So now I wait and see how this plays out.

Talking about waiting things out, RSI’s pick of UNG has done quite well and is up close to 11% since it was picked. Natural gas has been on a tear recently. All this brought about by Exxon buying XTO Energy, so there may be more life left in UNG? We shall see. I need to update my loyal readers as to changes in the stop loss & profit targets. I hope to address that tomorrow.

No RSI picks tonight, catch you tomorrow after the close.

TODAY IN THE MARKET – Easing concerns over global credit problems and more signs of corporate dealmaking nudged major stock indexes to new highs for the year.

Stock indicators rose but posted uneven advances Monday following news that Abu Dhabi had extended $10 billion to Dubai to help the Middle Eastern city-state stay afloat. Markets had been worried in recent weeks that debt problems in the former boomtown could send ripples through global credit markets. (commentary & photo courtesy of AP News)

If you have been following this blog for a while, you are aware that this blog is not only about investing in ETFs but it is also about trading system development. So if this subject is of interest to you please read further.

RSI has made a selection so let’s see it:

• Buy  925 shares Claymore/Delta Global Shipping (SEA) at the market open tomorrow. Set a stop loss $0.98 below your fill price.

I will be buying SEA at the open, but I want to see the opening bid/ask spread and if too large I will place a limit order. I suggest you use a similar tactic. FYI- SEA pays a 3.8% yield, which in these times is pretty large.

The chart shows that SEA is in a possible uptrend, assuming it is tracing out higher highs and higher lows. It should be interesting…. global shipping just may be the ticket.

This weekend I did extensive testing of several trading modules. How do I include/exclude a module from the RSI system? Rather than using the highest absolute profit, I use other criteria that helps this decision. As an example, for each $1,000 of portfolio risk I like to have at least $600 to $1,200 average return per trade and at least 55% win ratio. Within those parameters I want a MAR ratio of at least 2.0. The MAR ratio is the ratio of the average annual return divided by the largest percentage draw down.  It is a measure of the risk adjusted return and it is a great number to maximize when running optimizations. I developed a promising module that had great profit numbers but I could not achieve decent MAR performance. So I ended up dropping it from consideration. This is reminiscent of my days in aeronautical/rocket research when we went down blind alleys in pursuit of better solutions.

Okay, the following are the results of a recent investigation of varying the stop loss factor on the resulting MAR ratio for a RSI module.

This module was originally designed with a Kstop factor of 1.0, but the analysis showed a Kstop value of 0.6 produced a 50% improvement in the MAR ratio. This improvement results in a huge enhancement in trading system performance. This is what I like to see.

I’ve taken much of your time to wade through all this stuff, so I’ll let you go now. Have a good evening and I’ll catch you tomorrow after the market close and after another Christmas party.

Encouraging news about how consumers feel about the economy and how much they’re spending sent stocks higher on Friday.

The strong showing in retail sales last month raised hopes that consumers are starting to feel more comfortable opening their wallets after months of building savings. The 1.3 percent increase was more than double the gain that analysts had forecast.

The government’s retail report came as a relief to many investors who have been frustrated that consumer spending, a mainstay of the U.S. economy, has remained in a funk even as other parts of the economy recover.(commentary & photo courtesy of AP)

At the end of the market week I sometimes run a long term market timing model that generates which ETFs are in a long term Buy signal and which ones are in a long term Sell signal. I developed this model based on the work by Mr. Glenn Malloy, UBS Financial. I like to look at the list of ETF & CEF funds that are in a long term sell category. At the end of this week the list of 77 funds are dominated by short and ultra-short funds. Some of the non-short funds are long bond funds such as TLT, the US dollar fund  UUP and our friend UNG which RSI has picked and that I still own. Checking my portfolio, UNG is up 4.4% since buying it on 11/16/09. As I mentioned when RSI first picked this fund, it looked like RSI was trying to “catch a falling knife”. So do I still want to hold UNG? You bet I will since that is part of the scheme of the RSI trading methodology that is “follow the rules”. With that said, the “Mallory Indicator” is a good long-term market timing tool.

At the market close today, RSI made no selections. Have a great and warm weekend.