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Market review 22.04.03
Healthy pause, Latin America, Oil, Rates, Jerry Parker
This week, many parts of the equity market took a healthy breather after the solid run they had in the preceding 2 weeks. I’ll keep the market review brief today, and then discuss a recent interview with trader Jerry Parker.
Apart from Canada and the Gulf region, Latin America has some of the best global charts right now. We looked at Mexico (EWW) previously – it’s up 3% this week.
And here’s Columbia (ICOL) coming out of a giant base:
Within the US, we want to see IWM clear the resistance shown below. We already saw SPX and NYA confirm false breakdowns 2 weeks ago.
Leading sectors and stocks
Breakouts are showing follow-through in many of the leading stocks and sectors that I’ve been discussing. This includes oil, steel, rare earths, clean power (TAN, PWR, CCJ, etc.), select tech (PANW), and farmland (LAND).
CVE Monthly. Breakout. This is several other oil & materials stocks continue to have solid monthly charts (eg. IMO, CNQ, ENB).
TOU Weekly. 2 months ago, I found this Canadian oil stock after it made a breakout and new 52-week highs. It struck me as having one of the cleanest uptrends within the oil sector. It’s moved +20% since closing the week above the breakout level.
REMX and LAND are also showing excellent follow-through.
This chart of 30-year Mortgage Rates is quite amazing. We’re witnessing the steepest rise in mortgage rates in over two decades.
Jerry Parker Interview
Richard Dennis is a trend follower that was featured in Jack Schwager's original Market Wizards book. A quote of his: “I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline.”
Just like in the Eddie Murphy movie Trading Places, Richard wanted to show that great traders are made not born. So, in the mid 80s, he put an ad in the paper looking for new traders. Over a thousand people applied but only 20 were accepted. They became known as the original Turtle Traders (featured in Michael Covel’s book). Everyone came from different backgrounds, had no trading experience, and were taught to follow simple trend following rules.
Jerry Parker was the most successful of the turtles. Trader Kevin Muir interviewed him just this Friday. Have a listen – I thought Kevin asked very intelligent questions and Jerry gave some great insights.
Trend following means cutting losses and letting winners run. It’s replicating a call option without paying an option premium.
It’s not easy being a trend follower, as most people sell their winners too early.
Simplest systems are the best. Don’t optimize. Instead, look at historical charts and see what would’ve kept you in the big trends.
Don’t predict or be too skeptical. Just keep buying breakouts.
Position size and diversify based on correlations and volatility.
Markets have become a lot choppier since Jerry started in the 80s. Solution: increase your timeframe and reduce position sizes.
Used to aim for 200% annual returns in the 80s. Now 15-20%.
Favorite books: Market Wizards 1 & 2 (by Jack Schwager), Winning on Wall Street (Marty Zweig).
Next week, I'll feature a presentation that Jack Schwager gave a while back.
Adding to the lessons from the above interview, here’s a few tweets to reflect on:
That’s all for this week! If you found this post useful, please give it a like and share. Thanks for reading.
Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.