Sunday Funday Smart Money Update

Corona Del Mar, CA

Howdy Friend!

Many, many years ago when I was trading OEX options, I would call a 900 number to get updates from a "master trader."

I remember frantically dialing the number. I was then trying to get off the phone as soon as possible since I was being charged by the minute.

As a broke college student living on the bad side of town, those calls were taking away my beer money. And my trading was evaporating my savings all too quickly...sound familiar?

Looking back on the strategy, which was a combination of stop and reverse along with time of day analysis and news events -- I would have been better off calling Ms. Cleo's psychic hotline. Her fake Jamaican accent always killed me.

// By the way, DO NOT type in Ms. Cleo into the Google video search. Yikes! //

Anyhoo...it was on these calls that I first heard "sell Rosh Hashanah, buy Yom Kippur". Rosh Hashanah was this Friday. Yom Kippur is Monday the 28th.

I never put much weight into calendar trading because it's been mined dry for decades. From a statistical standpoint, calendar trade edges appear to be fleeting at best when I've done deep analysis.

For example, last week (and every September now for five years) I warned you that September is the most volatile month. But all 12 months are up on average in the US stock market if you go back to 1800.

Old adages like "sell in May and go away" are pointless and a relic of pre-computer analysis.

Recently I've been doing some testing with The Boss "SuperAi". I am finding some amazing edges for day trading the S&P 500. The rules have nothing to do with the news or any kind of stop and reverse technical indicators.

Sadly, if the "gurus" hired someone to program their "rules" into a computer, they'd be shocked to discover that their whiz-bang system doesn't work.

Now since I did program the Smart Money rules into a computer a very long 14 years ago, let's discuss what that strategy is saying now:

The Smart Money S&P 500 is on a buy signal still.

The Smart Money for long-term US bonds (not normally discussed here) is on a sell as of last week.

I know there's a great deal of fear and worry going into this election. Have a plan (preferably a trading strategy with exact rules) and stick with it. The "news" is a complete joke and can't be a factor in your trading. They would convince you the sky is pink with polka dots if it made their masters a buck. I'm officially going to start calling news reporters "news operatives" because they are clearly being directed by a small group of corporations that are operating by Machiavelli's playbook.

Today, Hurst's yellow journalism doesn't hold a candle to the modern era's fight against truth. A couple years ago, I started a subscription to newspapers.com just to fact check the fact checkers. So far the Ministry of Truth hasn't gone in and redacted old newspaper articles.

As you know, I live in California where we supposedly saw the hottest temperature ever recorded this year (130 in Death Valley). Not true. The record was 134.2F set in July 1913 as you can see below:

I'm especially wary of any weather claims, because my family moved to CA in the 1930's during the Dust Bowl. It was a terrible time for them as they were farmers and the top soil dried up and blew away. Steinbeck wrote about it in The Grapes of Wrath. That was the hottest time in modern history by far.

If you read my special report about The Ghost of Bernie Madoff, there are literally amoral people sitting around all day scheming of ways to pick your pockets.

In that report I slammed "commission-free" trades. I did this because you needed to be aware that your "free" orders are being routed to high-frequency trading firms to be picked apart and fleeced.

I suppose that I drifted towards tested analysis (back testing my ideas with a computer) because I was getting fleeced by trading newsletters, gurus, and unproven technical analysis "theories" that were unscientific and therefore untestable (like Elliott Wave).

Maybe you can relate?

While you can still fool yourself with back testing if you don't confirm with out-of-sample analysis, it's the closest thing to the truth that I've discovered and profited from in all my years of trading. As a subscriber to this newsletter, I promise to only give you trading ideas on what I've tested. You don't even have to call me on a 900 number.

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Trade smart,

Dan "Prince of Proof" Murphy

Disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.