Occam's razor "When presented with competing hypotheses to solve a problem, one should select the solution with the fewest assumptions." Occam's razor is the basic principle behind what we do. We call it trend following and the working hypothesis is that all we need to time the market (and individual stocks) is to identify the dominant trend. The charts below are placing the market on the cusp of, or already in the midst of, an important change in intermediate term trend. The breakdowns below only tell a part of the story as many individual stocks have already established intermediate term downtrends as sell signals in the trading table attest. But these 4 are the biggies, with only the S&P and Dow clinging onto teetering uptrends. Dow Jones Industrials SPX NASDAQ 100 Russell 2000 The odds are moving rapidly toward a major intermediate term trend change across the board. Between these four major indexes, two have cleanly broken down out of their uptrend channels (Nasdaq and Russell) and one (SPX) is hanging onto its uptrend by a thread. The Dow touched its lower channel line on Friday, but late buying in the blue chips lifted it up off support, at least temporarily. New downtrends need to get footholds before retracement rallies and ensuing Sell Signals can be triggered. For now we have enough portfolio stocks in clear downtrends to continue to provide high probability Short signals: FB, TWTR, BABA, BIDU, EEM, etc. "The trend is your friend." - Occam's Razor OPEN TRADES No new trades for Monday. Eleven out of thirty-two trades hit new option price highs on Friday. There are 10 trading days until October expiration, 30 trading days until November expiration. The far right column represents the highest percentage return that the option achieved since entry, thus representing what has been possible for each trade. Knowing what has been possible tells us if the trade algorithm has brains (it does), capturing the most of what is possible is called trade management. In that too, Occam's razor has a say and it points toward a minimalist strategy. Take quick profits and run, or, stay in for targeted gains (i.e., +100%) and leave some of position on through expiration. I favor the latter two, but not all strategies fit all traders, We will continue to explore and focus on trade management in future reports.
