this was in Steve Sjuggerud's free e-zine tonight...

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"As a simple generalization, go long commodities, and short the U.S. stock market."
-- Jim Rogers, from an interview with us from Shanghai earlier this month

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hmmmmmm,

that sounds about right.

-ja

Problem with that quote is Jim Rogers has only been half right. Last time I looked the cot has had quite an awful run the past year.

<Last time I looked the cot has had quite an awful run the past year.>
I'm going to start trading an anti-COT strategy since the COT doesn't work anymore.

(I really just said that so Larry could have more quotes for his new book).

Steve,

I refrained from commenting on optionyount's post because I couldn't make any sense out of it. The best I can tell, it goes something like this -- Jim Rogers is bearish on the stock market and he has been wrong about that and the COT has had an "awful" run. For the life of me, I just cant figure out what Jim Rogers has to do with the COT.

Mark my word, it's just a matter of time before somebody posts something like: "There was a bombing in London and the COT is lousy."

Yeah, my book doesn't have to be much more than copy and paste to have plenty of material.

Larry

Larry,

I was just being facetious when I said the COT doesn't work anymore and I would start trading opposite of it.

Steve, I realize you weren't being serious. And it would be fine if you were serious. After all, if it doesn't work anymore the logical thing to do would be to fade it.

Larry

Talking about trading against a stragety it reminded me of a thought I had about the BB system. I was doing so badly, I thought ," I ought to go short at open when something drops below the lower BB on strong volume." Of course, that seemed silly on the face of it, but in trying to refine the system, I've hit ona few signs that might increase the likelihood of a fast rebound and whose absence therefore may signal a greater likelihood for the stock to continue down. I don't have firm data. I want to get another week's worth of trades at least and then wait for them all to finish, but I'll tell you what I'm working on so you can add to it or refute it.
1. The 20d sma not only has to be up but up sustainedly. I'm looking for the 20d being higher than the 20d 80days ago and that being higher than 160 days ago. Of course you could just use a longer sma.
2. The stock shows, in a candle chart, that there is no appreciable height to the body; in other words that the open and the close are the same or very close.
3. That while the stock closed below the BB it had a positive day and shows a hollow candle.
4. It didn't look good on the first day and went down on the next two days on decreasing volume each day.
5. It looks like a reversal day with the close being near or above the open.
Anyway, just sharing.
h

Here's an idea Short on any close below the lower bollinger band. Cover on any close that is higher than the short point otherwise cover after 15 or 20 days. The percentages are reversed, you won't win many trades, but the trades that you do win you will be following the time honored practice of cutting your losers short and letting your profits run. Which is apparently why the system isn't working right now. We're taking small profits quickly but letting our losers get too large.

How's that for a crazy idea!

Jim

P.S.
Larry,
I am having trouble trying to figure out when I should let my profits run. The 200 DMA crossover system produces pretty good results (I've tested it back 3 years) but if I could figure out a mechanical way to let my profits run instead of selling when the RSI hits 9 or 10 I could turn a good system into a great system. 2 recent examples CMC & FLSH. I was thinking maybe if volume shows a large increase stay with the trade. Any ideas?

jim,

here's a "cut your losses short, let your winners run" strategy...
larry's parabolic SAR strategy! it seems to work very well if you're patient.

just a tho't.

-ja

Jim,

Off hand I can’t remember what the 200 DMA crossover system is, but as far as exits are concerned I can give you some alternatives:

1. Use a daily PSAR as a trailing stop.
2. Look for the first level of resistance like the 50-day moving average or an area where there has been supply in the past.
3. Look for bearish divergences to give you an indication that that momentum is slowing.

My favorite is the PSAR stop. Volume is tricky. You generally want to see higher volume on up days and lower volume on down days. But too much up volume can be a sign of exhaustion.

Larry

Larry,
What's not to understand about my quote. The original quote I assumed was to correlate Jim Rogers' investing strategies to the cot strategy. Isn't this a COT/Smart Money forum? For the past year the market has performed very well while the COT has been short. Am I wrong? And commodities have performed well in that period of time as well. So, if you shorted the stock market and bought commodities you'd be breakeven theoretically, correct?

I didn't see a word in the original post about the COT. What this forum is about is explained at the top of the page.

And I have no idea if Jim Rogers made money or broke even in the past year. And I don't think a quote from a couple of weeks ago that says, in his opinion and very generally speaking, you want to be long commodities and short stocks gives us a clue as to how well he's doing.

So, no, I didn't understand your point. But now I think I do. Thank you.

Larry

ja, have you been able to keep any psar trades longer than you would with a psar stop? In other words have you found a lower stop once you've made a large profit that allowed you to keep the trade going. I tried a generous 3XATR and it didn't work, at least on that down trend.
h

i have a few parabolic SAR positions, some in ETF's, some in high yielding stocks. i use the weekly SAR dots ONLY. if it goes bullish i'm in, if it goes bearish i'm out. i do try to buy when the SAR dot has just turned bullish AND the price is above it's 50 DMA - but that's not a "rule"... just something i'd like to see.

i wouldn't try this with volitile "growth" or "small cap" stocks - too many whipsaws. but for ETF's & high income stocks this strat works. you're looking for efficient trending vehicals, not rockets.

in case you care: i have XLE, BHP & OIH and, for my "income" stocks, EENC, PCU & PTF to name a few.

all have profits.

-ja

Ja,
It's in the spirit of trend following that I'd like to find an exit that's a bit more relaxed than the psar. Everything has it's ups and downs and certainly the up move is likely over when it hits the psar, but I'd like to stay in and catch the next and the next, etc. Especially for oil and metal stocks.
h

Howard,

I think you may be slipping into a little bit of "looking for the Holy Grail." No matter where you put your stop you will be losing something to gain something else. If you use PSAR you may be stopped out before a trend is finished (of course you can always get back in). If you use a more relaxed stop you will give up more of your profits.

So choose your poison.

Larry

howard,

larry's right - but you can try this.

create a folder on stockcharts.com of energy stocks & etf's, weekly charts with parabolic SAR & 40 WMA. look for new bullish (or bearish) sar dots to appear. buy the bullish ones, sell the bearish ones.

since we're in a bull market in oil this should keep you in energy most of the time. you can even do this with mutual funds. ICENX or ENPIX are good.

no one says you have to hold any particular stock - just stay on the right side of the sector and you should do fine.

-ja

Has anyone backtested the PSAR system for a couple of years? (oil, precious metals, S&P, Nasdaq 100)

Jim

Jim,

Backtesting wouldn't apply here. PSAR is just a convenient way to have an entry and exit point to catch a trend. The key is to choose the right sectors that may be ready to trend. So because of the subjective part of choosing sectors, backtesting wouldn't be very useful.

Larry