Weinstein Model Overview

stageanalysisFor the Spock Gold and Silver Mining Matrix , you will see each stock rated according to this model, marked in the Traffic Light column. Most of the holdings are Weinstein Stage 1 or 2, but some are also still in Stage 4, which I am avoiding right now, but at some stage they will transition to Stage 1 then to Stage 2. In addition to the Weinstein overlay I am using a proprietary extra-day algorithm to generate the trade bias (buy and sell signals). Hope this explains what is going on in the background. This is not a not a hit and miss affair folks. What you are getting is an edge in the market in a beaten down sector where the value is astonishing in many cases.

Weinstein’s strategy revolves around two themes: identifying which stage the stock is in and using a 30-week moving average to help with timing and identification.

Stage 1 is the horizontal trading range that begins the method. After declining out of stage 4, price moves sideways, sometimes rising above the 30-week moving average and sometimes not. The moving average flattens out, following price horizontally. Price is choppy but usually forming a rectangle or sideways price movement. Volume may rise as people cash out of the stock after waiting for it to move up.

Stage 2 is the uphill run. Price breaks out of the trading range of stage 1 on impressive volume, which helps power the stock upward, leaving the moving average trailing behind. In the early portion of stage 2, price may throwback at least once to the top of the trading range marked during stage 1. The moving average turns up. Price makes higher highs and higher lows (think of an ugly double bottom here). If you don’t see higher lows, then it’s not stage 2. Price will remain above the moving average

Stage 3 is the top. Price levels out and begins to move horizontally again. The moving average is climbing but flattens out, eventually catching price, slicing through it. Volume may increase as price churns sideways, forming sharp peaks and troughs while trying to pick a new trend direction. Weinstein says traders should take profits in this stage, but investors can hold on by selling half their position. If price moves up, forming another stage 2 advance, then continue to hold. A downward breakout from the trading range should cause a sale.

Stage 4 is the downhill run. Volume is not the key to this stage because it can be heavy or light as price drops. Price breaks out downward from the stage 3 top and may pullback into the trading range. After that, though, price continues down. The moving average usually remains above the stock as price drops.

<strong>Most of the small and mid tier gold minersĀ  in the Matrix are Stage 1 and 2. So that is where the focus is. Many large cap miners are not in the matrix, for a reason, including balance sheet issues, like debt. So they are generally excluded from coverage. Examples of those excluded are Kinross, Goldfields, DRD, Anglogold, Newcrest Mining etc where the debt is a significant part of their enterprise value, and will weigh them down in the future as cash-flows get consumed servicing the debt. </strong>

The other point worth noting is that GDX includes a lot of these highly indebted large cap miners. For that reason, as an investment, GDX will generally underform over the longer term, compared to the stocks in the Spock Matrix.

Trade Well and Prosper. Spock.

Spock Matrix Overview

Trading Background

Spock is a professional market trader, and has been trading the global financial markets across all asset classes for over 30 years. His focus is on extra-day trading only, taking short and medium term positions, based on both fundamental and technical analysis. The focus at the moment is on the precious metals mining sector, where extreme value propositions are now appearing, after a five year grinding bear market in the sector. In addition, on a weekly basis, a global matrix is generated, which gives a macro picture across all global general asset classes and sectors, showing what stage they are in (bull, bear or consolidation), and what asset classes and sectors to avoid on the long side, and profit from on the short side.

Spock Matrix

The Spock Trading System was developed over a period of 12 months starting in early 2015. It was developed to simplify trading decisions by providing long, short or flat trading signals, after the market close each day.

Most day traders eventually lose all their trading capital. So the Spock Trading System focuses on extra-day trading signals. Intra-day trading is for the professionals only, as the markets are now driven by high frequency trading machines, using algorithms. The average trader does not stand a chance against these machines on an intra-day basis, over the long term. The trading signals are generated from a proprietary matrix of indicators over several time frames that have been extensively back tested and are calculated after the close each day.

The basis of the Spock Trading System is that it is unemotional, logical trading. No opinion or thought is required to enter or exit a trade. The signals are generated AFTER the market close and the trades are entered the next day, during the trading session. Generally no trades are placed in the first 60 minutes of market open, until the market settles down.

Although the system generates numerous signals daily, not all trades are taken. The reason is that some discretion is used to determine which trades have a higher probability of success. This decision is based on the technical analysis aspects of the security. For example, if the security is close to a major resistance line, and a long signal is generated, it is unlikely the trade is entered. However, if the security is just above a major support line, then the long trade would be entered.

Generally no individual trade is more than 5% to 10% of trading capital. Therefore, the risks are minimized, so that trading capital is protected, as if one 5% trade does blow up prior to an exit, a maximum loss to total trading capital is never more than 1% to 2%.

The bottom line is that the Spock Trading System generates consistent profits, with minimum risks, no intra-day trading stress and therefore no emotional input to trading decisions. The trader can place the orders, and stay generally detached from the markets, whilst generating significant returns on trading capital.

Trade well and prosper. Spock.