Friday, April 22, 2011

R.E.S.T, the King of Commodities

Theories, Goals, & Reality
As defined by the medical community, the term "exceptional survival" is living to a specified age (75, 80, 85, or 90 years) without incidence of major chronic disease and without physical or cognitive impairment.

In the trading and investment arena one might characterize such survival as producing positive absolute returns over a multi-decade time horizon without incidence of a major losing year and without drawing down one's accounts to the point of impairment. (Think "Risk of Ruin," the point at which your account can no longer raise margin to trade.)

From the perspective of a pragmatic strategy trader, the medical term struck a chord as a viable input variable relative to what individuals are driven to do with their Remaining Exceptional Survival Time or R.E.S.T as we've coined it.

We all want as much R.E.S.T as humanly possible
From a strategic point of view, we realized that additional input variables would be needed to round out the R.E.S.T input.  Two that came to immediate mind were a legacy directive and resource input. 

One's legacy directive is tied to what one is motivated to accomplish within their remaining exceptional survival time.  The resource input calibrates the basic essential elements required to achieve one's legacy goals within their R.E.S.T period.

·         R.E.S.T - (est. # years)
·         Legacy - (your goals)
·         Resources - (needed to acquire goals)

Little R.E.S.T for the apprehensive
As with many real-time measures, each of the three inputs is variable and subject to revision based upon dynamic factors that are at times beyond the control of the individual.

Allowing for life's occasional curveballs, examining ones specific R.E.S.T goals can in our view, be a philosophically illuminating and productive exercise. 

So long as we don't get hit in the head with a debilitating wild pitch, the exercise can go a long way in answering the essential question of what one wants to do with the rest of their life and why.

Have you already succeeded in meeting your legacy directives?  If not, what's left to accomplish, and what resources will be needed in order to achieve those directives?

That's life, and there's no denying it. 
Eventually, each of us runs out of R.E.S.T, becomes ill, and then passes.  Thereafter, life goes on without us.  All that remains from our former survival is that which we've left behind in our wake.

Collectively, businesses, trusts, families, communities, cities, states, and countries have an exceptional survival time far beyond that of any single individual.   In fact, if each of the individuals comprising their larger collectives lived their lives with a robust and productive set of legacy directives, no matter how long each single  life endured, the collective should in theory be self sustaining.

R.E.S.T (The most valuable commodity in the Universe)
In the grandest scheme of things, the planet we inhabit has its own R.E.S.T period, therefore, Humanity's R.E.S.T is ultimately contingent upon the species ability to outsmart Mother Nature in the race against time toward finding an alternate means of survival once all of the Earth's resources are depleted or naturally destroyed. (Think the Space Program, Mission Control, and NASA)

Trivial Pursuit
Returning to more trivial matters, the recent threat of downgrade to US sovereign debt is not news; nonetheless, the market provided its quintessential knee-jerk reaction to the recent headline release.

The US continues to roll the dice on its R.E.S.T
In our view, the US has lost sight of its legacy directives, and in process is quickly running out of a key financial resource (its projected income vs. debt ratios) to sustain its exceptional existence.  The concept and political necessity to raise sovereign debt limits into virtual perpetuity is one that is egregiously flawed, and one that is likely to end badly. 

The good ole US of A keeps doubling down on losing bets simply because it has had the luxury and power to get away with it for decades.  The bill for this severe misallocation and abuse of global stature is now coming due.  The continued willful ignorance in avoiding the elephant in the room greatly increases the odds of the nation's risk of ruin.

We are at a point in history where one can seriously begin to question whether or not the USA has indeed run out of R.E.S.T, and survives only on the life-support rendered by those with the remaining powers to impose it.  (Think Central Banks in concert with powerful lobby groups that fund big, bloated, and broken governments.)

Well, that's our big theory for today.  It's simple, and though it has no direct correlation with trading or investment strategies, we hope you found it illuminating at some level.  Theories are interesting but the reality of price rules the day.  Price rules every day, and all of the time - end of story. 

Bunk Theory - Day-to-Day Reality Rules
In our view, "theories" are entertaining and perhaps stimulating on an intellectual level however, when it comes to putting on trades, you can take all of your theories and flush 'em right down the toilet because once your money is committed, all that counts is price, timing, entry and exit.

When, where, and why did you get "in", with what bias, and when, where, and why will you get out - period.  All of the clever anecdotes, theories, and arguments go right out the window.  In the thick of battle, theories and interesting observations are useless fodder and an immense waste of time, energy, and resources.  It's that simple.

If you agree with our reality based approach, then you're going to like Elliott Wave Technology's brand of theory-free market forecasting and trading guidance.

Sure, we use the basic tenets of theories and technical analysis to frame our perspective of the price action, but that's about as far as we go. 

We don't waste valuable time producing reams of fundamental arguments in attempt to justify or explain how these theories neatly fit all of the puzzle pieces together in a logically argued package of compelling ideas. 

By the time you digest such levels of entertainment and distraction you'll find your trades that are aligned with those arguments are going deeper and deeper into drawdown.

We have a different approach.  Instead of trying to entertain, seduce, and impress you with our clever theories and observations, we spend the bulk of our free time productively developing investment and trading strategies that prove to engage and capture price movement, lock-in profits, and mitigate risk across a wide range of markets and timeframes.

Three for Three in the S&P
The chart above will close out this article with a quick behind the scenes look at the results of our handy-work in developing one of the many short-term trading strategy's we've constructed to engage the S&P at the smallest degrees of trend.

Three trades in three days deliver 68-pts or $3400 in E-Mini profits per single contract traded.  We've become quite accustomed to taking the big boys to the cleaners in such fashion without ever once having to explain or theorize the reasons for each of our entries and exits.  All of our trading disciplines have been coded into our platform and execute automatically based upon changing market conditions.

Bear in mind we code and apply similar types of trading strategies that engage various markets at Minor, Intermediate, Primary, and Cycle degrees of trend.  The back tested results of each most certainly meet the market definition of exception survival.  Once you get with our programs, the R.E.S.T is easy.

When investing or trading remember that you are fighting a constant war, and there is no room for sensitivity.  Elliott Wave Technology is on a quest to claim victory across the board in every timeframe.  We correct course quickly when wrong, because we only have one gear, and that's getting it right. 

Trade Better/Invest Smarter
Joe Russo
Chief Editor and Technical Analyst