Economists are useless unless their names are Lakshman or Anirvan.

I generally find that most economists are useless and do not add anything of value to the conversation. Paying attention to lagging indicators only tells me where I have been (ie, revisions to Q Economic activity), kind of like looking into a rear view mirror. Paying attention to coincident indicators (ie, Monthly Retail Sales) only tells me where I currently am, and any fool can do that.

But looking into the future, and seeing where the economy is probably going, really adds something to the discussion. Lakshman Acuthan and Anirvan Banerji of the Economic Cycle Research Institute use leading indicators (ie. SP500, Weekly Unemployment Claims, Mortgage Application activity, Commodity Prices, etc) to identify turning points in the economic cycle. Yesterday, Lakshman stated that a US recession can not be avoided.

Jason Goepfert at Sentimentrader crunched some numbers on the how much the market falls during recessions, and found a median decline around 25% in the SP500, with the largest decline around 55%.   The SP500 is already down about 15% from its summer high, so some of the stock market fallout has already occurred.

I love the work that Lakshman and Anirvan do at ECRI, and that Jason does at Sentimentrader. I have been following them for about 10 years. Their research, and how I have been able to apply it to my trading, has been a big part of my trading success.

Speaking of trading, my order to purchase a second lot of FAS just above Thursday's high was not hit. I have edited the order such that a break above Friday's high (11.95ish) or a drop down to 10.35 will get me long a second lot of FAS.

The Volatitility Index (VIX), looks like it is setting up for a retest of it's summer high around 48. If there is not a significant positive news event out of Europe over the next few days-weeks, I would expect the market to be trading lower over that period, with an increase in the magnitude of the swings. It might be good to make a quick run to CVS and pick up some Dramamine. Having said that, I am looking to buy that weakness in piecemeal fashion, rather than sell it. According to the Stock Traders Almanac, the best 6 months of the year tends to begin with the September/October low. Monday is the first trading day of October.

Disclosure: Long FAS.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

10/22/2009 4:30 pm update: NQ

• exited a second NQZ09 contract at 1765.25, just below the high of that mini up swing at 1766.25...
• this trade: +6.92 NQ points/contract, 1 contract closed...
• today: +1.60 NQ points/contract, 2 contracts closed...
• today relative to yesterday's closing position in the NQZ09, i am happy to have lowered my cost basis from 1763.75 to 1758.33, decreased my position size from 2 contracts to 1, and to have booked a small gain...
• i am offering my only contract out at 1777.50...
• i am bidding for 1 contract at 1747.50 and 1722.50...
• on another note, i follow the S&P 500 and the NASDAQ 100 stem.mr model's over at sentimentrader...
• i have noticed that when the stem.mr oscillator for the NASDAQ 100 appears to have peaked and begins to rollover, i may be too aggressive with my NQZ09 additions...
• i may also be too conservative when this oscillator appears to have bottomed and then turns up...
• i need to pay more attention to this...
• like i have mentioned in an earlier post, i have been following jason goepfert's work over at sentimentrader for nearly a decade...some of his models are significant inputs into forming my overall bias for the market...
• his subs are reasonably priced for the retail trader/investor....i am not sure if he has trial subs...in any case, i highly recommend his work...

Disclosure: Long NQZ09.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk ***

9/25/2009 1035 am update

• NQ and ES are both trading today within the base that has forned since the low of yesterday morning...
• i am currently long 3 NQZ09 for a discretionary swing trade...
• my average price is 1714.08...
• currently offering out 1 NQZ09 contract at the following 3 levels: 1726.50, 1736.50, 1746.50...
• while i am bullish on the NQ longer term, i would be surprised if any of these offers were taken today...however they are out there because one just never knows, does one?
• i am also long ESZ09 via my 'SPY Gopher' systemic trading model...
• ES appears to be showing a bit more RS than NQ today...it is trading closer to the top of the range than the NQ is...i imagine the negative reaction to the RIMM announcement is influencing this...i will be watching RIMM today as a potential tell for the NQ...right now RIMM is sitting at the $70 support level and hasn't moved much (up or down) since its opening gap down...i will be watching it for a break above or below its morning base...
• trading the odds posted some studies last night...these studies suggest bullish behavior for the ES today...Setup 3 in particular intrigues me, and i will model it myself for some more detailed analysis...
• jason goepfert at sentimentrader performs and posts very informative technical studies, primarily involving sentiment analysis...i have been following his work for most of this decade and it has been a significant input into my market analysis and directional bias...he offers monthly and annual subs at very reasonable rates for the retail trader...i highly recommend his work...

Disclosure: Long NQZ09, Long ESZ09.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...trade at your own risk***