Comments on: Tech Talk for Tuesday July 27th 2010

By: Don Vialoux

Don Vialoux — Wed, 28 Jul 2010 18:06:47 +0000

Hi Greg DS. EquityClock.com shows an average optimal time to enter the natural gas trade at the end of August. However, interesting comments on CNBC this morning suggest that timing is likely to be earlier than usual this year. The latest long term weather forecast is that likelihood of hurricanes during the next two weeks are highly unlikely, but thereafter are highly likely and are likely to lead to a series of significant storms. Natural gas prices are highly sensitive to anticipation on hurricanes. Meanwhile, prices are moving higher due to greater demand for power needed for air conditioning.

By: Don Vialoux

Don Vialoux — Wed, 28 Jul 2010 18:00:28 +0000

Hi KC. GDX holds a basket of global senior producers. GDXJ hold a basket of junior producers and explorers. Best to go to the Market Vector web site to see content and weights. Selection depends upon your risk/reward parameters.

By: chris

chris — Wed, 28 Jul 2010 12:05:07 +0000

VXX is an even worse ETF. USO doesn’t even track the oil prices – see business week this week for further details on ETFs.

Some ETFs are just horrible investments.

By: Amelia

Amelia — Wed, 28 Jul 2010 11:02:22 +0000

Hi krystal
Yes I used to trade these but can’t stomach it anymore (even though I had tight risk controls). The reason is volatility isn’t high enough right now to get clear direction from the indicators and because you basically have to watch the trade all day.
The VIX is only 23 right now and I wouldn’t use the strategy I had unless it was over 30. It would have worked in May of this year.
The trading was excellent in the fall of 2008.
You can trade them over a period of days but you have to be very careful and have conviction. The other thing is these instruments have a “tracking” error when held for long periods of time if the market is whipsawing up and down and not on a strong trend line.

By: krystal

krystal — Tue, 27 Jul 2010 19:59:11 +0000

Amelia,
Your comments with reference to HXD, HXU are in past tense. Do you no longer use these and why not? I appreciate your willingness to share. Thank-you.

By: Greg DS

Greg DS — Tue, 27 Jul 2010 19:28:11 +0000

DON – thanks for the gold advise. What is the ideal date for GAS this year – end of Aug or early Sept?

BTW – I don’t often agree with Ken Norquay…but the news media is out of control re. his Lordness Black.

Greg

By: KC

KC — Tue, 27 Jul 2010 17:52:55 +0000

Hello Don,

What is the difference between GDX and GDXJ? Do you prefer one over the other and why ? Why are we seeing a big dip in gold equities today ? Thank you for your help as always.

By: DaveA

DaveA — Tue, 27 Jul 2010 17:23:34 +0000

Hi, Anyone any comments on gold. GLD appears to be right at support at 113. Dave

By: Ann

Ann — Tue, 27 Jul 2010 17:03:31 +0000

Thanks for thoughts and ideas, Amelia!

By: Amelia

Amelia — Tue, 27 Jul 2010 16:33:52 +0000

I wouldn’t hold a volatile ETF overnight because I just don’t know what the news flow is going to be for those 17 and a half hours. I used trailing stops to protect gains throughout the day and a hard stop for the capital I risked in the trade. One thing you could do if you really want to hold overnight is to evaluate the volatility of the stock for the past few days and use this metric to determine the stops so that even if it gaps on the open your position may remain intact if the gap is within the volatility you are comfortable with. But this could not be good if the gap change on the open indicates a change in the direction of the market. But I would only trade a volatile ETF like HXD and HXU on a trend or a change in direction of a trend. Position size depended on the momentum of the moment and stops depended on the volatility and my risk parameters.

I used to trade HXD and HXU using the indicators above as well as parabolic SAR. I would compound the gains with changes in direction of the market (say on a 10 minute basis) by switching between the ETFs and I did hold these ones overnight sometimes. The strategy worked best when volatility was very high and I did it during the fall of 2008 for about 2 months.