A New Type of Market?
    Some Thoughts on Trading ETFs in The
            Current Market Environment.

                          9/25/2014

     The last two months have not been giving us good orthorox Peerless signals.
      I suspect the most important reason is that artificial computerized trading systems
      are now using 1.75% bands around the DJI's 21-day ma.   We should, too.
      Use the same non-confirmations but with narrower bands.   Note, too when
      a rally fails to reach the upper band.  This also signifies weakness.

      We want to use narrower bands with all the major ETFS, too.

                     Bands around 21- day ma

                                   standard            improved
                                                           current
                    DIA           .030                   .015
                    IWM         .045                   .03
                    QQQ         .04                    .025
                    SPY           .030                  .0175
                    FAS           .10                    .05
                    IBB            .085                  .05

      When you read the Hotline, understand my dual position.   On the one hand
       I am the :"high priest: of the Peerless orthodoxt, as represented by its automatic
       signals.: I am expected to present Peerless as it is by many.  On the other hand,
       Peerless has grown in complexity over the years by adapting to new environments
       and taking advantage of new discoveries.  So, each day, .I  look at what is unusual
       about the current market's technicals and back-test it, provided it is unusual and
       it has not been studied before. 

      If I were trading ETFs, I would employ the nuances and novel interpretations
        in this environment and keep the Peerless orthodoxy in mind as background,
        but always emphasizing its basic principles of bands, non-confirmations, A/D Line trends
        and confirmed breakouts. Most important in catching trends, I would use the Closing
        Power trend breaks, especially after non-confirmations or when the trends are extended
        and well-tested.

        In this environment, it is always necessary to pick the right ETF.  Here we want
        liquidity, volatility and a history of past successes using CP trend-breaks.  We want
        also to make allowances for where we are in the bull market's age.  Divergences
        between the DIA and IWM become severe in the late stages of a bull market.  IWM
        will make a better short sale at this time than DIA or, perhaps IBB (or BBH_, which has a history
        of holding up late into bull markets.  .

     


                 Professionals Know Best

    I still like using Closing Power trend-breaks, especially after non-confirmations.
     One could take just DIA or expand out to the other ETFs, depending on whether
     they are lagging or leading, weak or strong in terms of relative strength and
     internal strength readings.   There will be whipsaws and you might not draw the
     lines exactly like I do, but usually it is the presence of a few bigger trends that
     we catch that gives us good gains.  DIA is not necessarily the best to trade.
     Below are five of the bigger major ETFs found in our DJI-30 data download.
          
                         DIA   +19.5%
                         SPY   +23.5%
                         QQQ + 16.3%
                         FAS + 46%
                         IWM + 51.3%
                         IBB + 49.3%

    







     There are times when Peerless does not give enough signals or is out of synch with
     the markets.  At these times, I usually first think about band widths and revert back
     to basics.

     1. Sometimes, a study of the market shows that momentum is slowing down and instead
     of using the 3.5% bands, a 1.75% upper band would work much better to sell at
     and sell short when there are big or negative non-confirmations, too.  See this in
     the DJI current chart.   Here I would emphasize the P-I, A/D Lien and IP21.  These
     are the essential Peerless internal strength indicators.   

     We might want to use +1.75% upper bands when the Annualized Rate of change
     of the 21-dma is below, say +.60.   We also might want to use turns upwards by
     the 6-day Inverted MKDS turns up to buy. 




    
     2) Sometimes, as in the recent Buy B10, Peerless is wrong.   It should not have occurred
     when both the P-I and V-I were negative.  The Hotline tries to correct this by mentioning
     such limitations as the signals occur.

     3) Sometimes, looking back for past parallels yields an important discovery.  Realizing
     the limits of Peerless in a market that frequently teaches the need to be open and
     flexible to new variations, I want to put a new signal in if it tests well.

      -------------------------------------------------------------------------------------------------

     I will have to go back over the signals and history to find some past examples.  I do
     recall that 1963 and 1964 there were hardly any signals.   The market was on good
     behavior after the crash of 1962.