September 11, 2022

Stocks gave a good account of themselves Friday, with NYSE breadth well better than the averages, ARK Innovation (ARKK) up 4.5%, and the median enterprise software name up 4.2%.

The latter, still largely beaten-down, nonetheless is a good indicator of the speculative sentiment. The median software stock rose 2.9% vs the S&P's 1.53%.

The consumer discretionary sector hit a new relative strength line high for this move. It is preceding price, a plus. As discussed, this is one of the early-cycle sectors that tend to outperform in a new bull market.

Another early-cycle group, the brokers, continues its move apace. It is hard to imagine the market getting into too much trouble with this leading indicator acting the way it has. Their cousins, the banks, outperform since June 16, but only slightly, due to the inverted 2s10s yield curve spread.

To review, we have been cautious due to the relatively small number of breakouts that have shown impressive post-breakout follow-through. It was noted that these could be counted on the fingers of one hand. CEG, ELF, and STNG are some of these.

Last week, these were joined by breakouts CALM (Focus List buy), DRVN, IONS, LTHM (Focus List buy), PRCT, and WCN.

Overall, the quality of the market's leadership is lacking. For this reason, there is no compelling reason to have much long exposure, if any.

Among the names, the following is believed to be the most attractive for our strategy of speculation in the $13+ market. Click to zoom in.

DCP Midstream (DCP)

In summation, let's continue to play things close to the vest. The better actors are very few, not from the growth camp, and not all that impressive.

System 7

For those of you who wrote in requesting more info on System 7:

If System 7 successfully produces a consistent return with the right trade frequency, it will be spun off as a separate service. This solves the dilemma of my being compensated for use of my IP (intellectual property) as well as the additional time and effort needed for production without having to increase the cost of the current service. Increasing the cost of the current service would be unfair to long-only, breakout subscribers who are not interested in a different approach.

If System 7 becomes a reality, Charter Memberships would be offered for a limited introductory period to current subscribers at a generous discount to what the general public would pay. A Charter Membership would be offered at a lifetime price, whereby there would be no price increases assuming a member does not allow their membership to lapse.

As mentioned, the challenge for this model is not accuracy but trade frequency of 12/month. I would probably bring in System R to assure us of a frequency of 12/month.

This is not for everyone. For those interested, it would be a stripped-down signal service. No education, no videos, no step-by-step entry criteria.

Just signals. Entry, stop, 1R exit. It would be for those investors who understand the concept of entering on pullbacks in a dominant trend. Controlled risk targeting consistent singles and a few doubles that has the potential to add up to an attractive, risk-adjusted return at the end of the day.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
Bread and butter pullback: Pt V (1:41)
System R
Short-selling (25:53)
Wyckoff spring reversal (2:30) 
5-minute breakup test (8:01)
Screens (21:03)
The Income Model