Lower Trading Commissions? Just Ask!

Wedding Sparklers
Celebrate lower commissions!

I have trading accounts with three different brokers, for reasons I won’t bore you with. One – the most expensive – I’ve been with for years. I won’t mention any names but you can probably figure it out.

In corresponding with them over a technical issue, I mentioned at the end of my message that I would trade with them a lot more if the commission fees were more in line with the other two brokerages I use.

That prompted an immediate reduction from $9.95 per trade to $7.95 per trade, with possibly lower commissions based on trade volume over a 30 day period. Yay!

Sure, it’s still a ways off from $4.95 commission (or less) that you can find at some of the smaller brokerages, but it’s a Good Thing none the less. And a $4 round-trip reduction will definitely increase my trading frequency with them.

See? All ya gotta do is ask.

 

My Son, the Mean-Reversionist.

Today I when I saw the news of the Greek “no” vote, I made a loud groan. My twelve year old son, who often talks to me about the market, asked me what was wrong.

I explained the Greek situation, and how much chaos it was creating. He said “so dad, you better get ready to buy some stocks tomorrow!” At first I thought he misunderstood, so I pointed out that the market would likely go down as a result of the vote.

He replied “well yeah, but that’s when you buy, because it’ll go up again!”

My son, the mean-reversionist.

Multiple Inside Days

inside SPY

What an unusual candlestick pattern we have in the S&P500 over the past few days! Now, I don’t much go for candlestick patterns as a predictor of anything, but I thought it might be fun to take a look at this.

Three ‘red’ days in a row (close below open), yet the close and opens of the most recent two days are enclosed within the big bar before them. Some might define “multiple inside days” as bars that are confined within the high and low of a larger bar, but whatever. It’s still pretty unusual, don’t ya think?

In fact, since the SPY ETF has been trading since 1993, this has only happened 13 other times. And it seems to be happening less and less.

What happens after this odd bar combination? What crazy predictive value does this bar pattern have? Well the results are good, for what it’s worth. From the close of this the third bar, most of the 1-day and 2-day moves (from close to close) have been positive. Here’s a table:

Date/Time 1day G/L % 2day G/L %
4/6/1993 0.28 0
7/1/1993 -0.56 -1.67
10/21/1993 -0.54 -0.27
5/13/1994 0 1.69
5/16/1994 1.69 2.25
7/17/1996 1.57 0.79
11/26/1997 0.13 2.75
12/24/2001 0.55 1.16
1/30/2004 0.43 0.26
12/21/2005 0.52 0.58
12/19/2007 0.63 1.54
6/24/2009 2.17 1.91
1/26/2010 0.48 -0.68
7/1/2015 ??? ???

What does this all mean? Well, probably nothing much. Other than that I might have too much time on my hands.

Where My Money’s At For June

Seasonally, the first half of June tends to be a little dicey. That and the current market conditions have led me to keep only a light presence in the market, with a focus on some alternative investments besides stocks. I just got back from vacation, and I had stopped putting on new trades before I left. Who wants to be tied to the market while on vacation? Not me!

At the beginning of June I entered a position with ZLS (ProShares UltraShort Silver ETF), as silver prices tend to dip during the month of June. When this play is a win, it tends to do 15-20% or so. As of right now I’m up 12%, which is making my trigger finger a little itchy.

Gasoline futures tend to rise in the last week in June, through the end of July. Looks like today is getting a bump and giving me a signal, so I’ll enter into a position with UGA at the end of the day. Crossing my fingers and hoping gas prices go up! (Wait, did I just say that?!)

I’ve also been investigating short-squeeze plays . Since I don’t have access to historical fundamental data such as short ratios, I can’t currently backtest my theory. I’ve been forward-testing it for a few weeks, and also placed four trades, and so far so good(3 of 4 were wins). A friend has pointed me to a source for historical fundamental data so I might give that a go.

And lastly, I continue to use very small mean-reversion strategies, with profit targets in the range of 2% and a duration of just a few days. Seems perfect for this low-volatility, go-nowhere market we’re currently in.

01-DSCF1234
My boys and niece swimming in a glacial lake in Alaska. Note that no one is looking at stock prices.

 

Sometimes Lines Are Just Lines

As you can see from the graph below, the market has fallen dramatically below a very solid line of support. Sell everything and hide in the root cellar until the storm passes….

lines-are-just-lines
Sell! Sell!

 

Except the market kept moving:

Oops! I sold too soon!
Oops! I sold too soon!

 

I was reading an online article written by a diehard chartist. I won’t link to it to spare him any embarrassment. He had drawn lines on charts showing how previous bull markets had topped out by dipping under diagonal lines of support (“channels”). So if those two previous markets had ended that way, and this current market was also dipping under his line of support, then…well the end is nigh!

Notice I said “his” line of support. The problem of course is that these lines are subjective. You can look at a chart and say “well obviously the line should go from here to here.” But how do actually quantify that? And if the price dips┬ásignificantly below the line and then rebounds, what do you do? Say something pithy like “well the support line was severely tested, but is still holding for now.” Really?

Or maybe you just redraw the line.

Lots of people do. Lines of support and resistance, like much about chart-based trading in general, is backward-looking and subject to hindsight. Yes the price did such and such and lined up just so. And yes in the future, a small subset of traders might actually set their buy or sell orders near one of those lines. But all the other traders could care less where you drew your line, or why. Or perhaps they drew Fibonacci lines or horizontal lines or Andrews Pitchforks (yes that’s a thing) or Gann lines (yes, also a thing) or doodled on a chart and accidentally traded that doodle. Or maybe you’re trading against a robot who doesn’t give a crap about your puny human lines of support.

Lines of support/resistance are notoriously untestable because they’re subjective. Personally, if I can’t test a theory, I won’t put my money anywhere near it. Sometimes lines are just lines.