Wednesday, July 6, 2011

Animal Spirit Forecasts

This blog is superceded by the Animal Spirit Forecasts website, which includes a forum for subscribers.

Animal Spirit Forecasts is about gauging sentiment forward in time. This forecasting methodology is based on a data source which I devised starting 20 years ago. It began with research into correlations between environment and human behavior as measured in the financial markets. What began as research became conviction and then realization. I started making money with this data source 10 years ago and have been refining the analysis and improving returns ever since. The newsletter tracks my actual trades in the stock market, precious metals, and currencies (Euro and dollar).

Using the tools detailed below every trade that I have made since March, 2010 has been recorded (Trades Link) and the following $100,000 account record compiled (blue line below).

Please observe the amazingly small drawdowns (periods of negative account build) due to small positions and being consistently on the right side of the market.  This is due to my data sources described below.

As a subscriber you will have access to my current positions in an Excel spreadsheet on the website in a subscriber-only forum.

The keys to my success are:

1) an index of environmental data and solar-lunar cycles that I dub I1
2) technical composite indexes using daily and weekly data.

The following links are learning tools for the data series that use day-in and day-out:

I1 for Investors

Learn about I1 and it's trading rules

To download I1 history for your own research into this powerful new data source:

I use one of the components of I1 to time trades within the longer I1 moves.  This component is a variable monthly cycle calculated from various solar and lunar relationships.  This short-term timing component helps me pinpoint tradeable moves within longer trends.  This has it's own rule set.

I also use a daily technical composite for the stock market which I have found very useful when it reaches extremes.  It and it's rule set is at:

There are also similar forward gauges for precious metals, bonds, dollar, and crude.
Precious metals:


All of the posts prior to the subscription cutover are available as well as the Excel spreadsheet of every trade that I have posted (and made in my own accounts, delayed by 2 weeks).

I invite you to investigate the accuracy of these data sources which you will find nowhere else.

I offer a 1-week trial if you request it by emailing

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What you will receive are:

Daily Commentary - due to the timing of the various data sources this will be e-mailed twice, once shortly after market close and again with complete data 7:30pm, while ARCA trading is still going on.

Intraday Commentary - trades arising out of the strategy in the Daily Commentary as well as stops and new situations

Weekly Commentary - e-mailed Saturday with economic issues, upcoming trades, longer-term views on stock markets, precious metals, bonds, and currencies. The oil market is coming out of period where it has been dominated by international political events, so I'll be picking up my commentary and trades on the oil market as well.

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Tuesday, July 5, 2011

7/5 Daily Commentary

Daily Commentary - Word doc, click here.
                                PDF, click here.

This is the last commentary available via the blog.  Please subscribe per the Sign-Up page to continue receiving Animal Spirit Forecasts.  My thanks to the many readers that have signed up for subscription.  Your support has genuinely touched me. if you want to subscribe.  Just indicate that you want to subscribe and intend to send payment.  For details see the Sign-Up page.

7/5 3:40

SP futures 30-minute M/A has held the first test.   SPX and DJI have topped.  Nasdaq is filling out it's 5th of c.  I don't hold any Nasdaq shorts and will attempt to enter futures short on break of 2353.25.  I'll short SP futures on a rally after a 30-minute close below 1326.

The stock market is making a head-and-shoulders top. Although the smoothed I1 declines into late August the ensuing I1 advance stays well below 3.25 which, according to the rule set in the Intro and Concepts page, means that longer-term traders can stay short.  I intend to keep a small core short position but will go primarily to cash on these swings. On an even longer time frame the market declines into 2nd quarter 2012.

I want to invite readers to subscribe.  If paypal then email at and I will start your subscription pending mail or bank billpay payment.

7/5 2:05

SPX and DJI have completed their c wave up.  I have no exposure to Nasdaq and had a stop order at 2353.25 which never got filled.  Meanwhile the SP 30-minute M/A crept up to the current price range.  Selling 1% ES  futures at 30-minute, 92-unit M/A minus .5% on a 30-minute close.  Currently any 30-minute close below 1326.

7/5 9:50

The stock market is finding support at SP futures 30-minute M/A. 
There are 2 M/A support break points:
SP futures 30-minute,92-unit M/A breaks at any 30-minute close below 1324.50
The closer one is NQ futures 15-minute, 86-unit which breaks at 2353.25.  I have an order in shorting here on a stop.

7/5 6:10am

Last Friday I got the go-ahead to short the stock market.  Currently we have 6%SDS, 4%DXD, 1%UCPIX (a long-term core), and 3% EUO.
SP, NQ, and DJ futures have broken their trend channels and are declining to support M/As.

NQ futures 15-minute, 86-unit M/A indicates 2353.25 as the break point.  I have a short order at this level on a stop. SP futures 30-minute, 92-minute M/A is at 1330.75 and the break point is 1324.

The SP futures M/A should provide temporary support.

Monday, July 4, 2011

7/4 midnight

The thing about moving averages is that they creep up on you.  I'm looking at NQ 15-minute,82-unit M/A minus .32% or 2351.25 stop currently.  Nasdaq looks like it completed a very small 5th wave up.
Since I'm expecting sentiment to turn from positive to negative I want to get as short as possible at this point.

7/4 10:00

Order in shorting YM futures at 12,512 stop.  1-minute, 163-unit M/A -.23%.

7/4 5:15pm

Futures markets re-open at 6pm EDT. 
European markets fell off of their highs to dramatically underperform Friday's U.S. trading.  Friday-Monday DAX was up 125 points or 1.7% with SPX Thursday-Friday was up 2.4%.  I like to use the DAX to estimate trading sentiment going into the nightly futures session.  DAX closed up .23% but 23 points off of it's high.
Since SP and DJ have complete wave counts I'm short Sept YM futures at 12,519 stop.  SP futures closed the morning down 1 point, while NQ closed up 10 points in a 5th up.

7/4 11:30am

I covered the NQ short at 2361 on a new high.  SP is -1, DJ +21.  SP  and DJ have completed counts up but NQ is in 5th wave now, breaking out of a rectangle wave 4.  I was short from 2357.50 and will use the 15-minute, 82-unit M/A less .2% as confirmation of trend break and re-entry.

I'm currently 6% SDS, 4% DXD, 3% EUO, and 1% UCPIX.

DAX is underperforming, advancing .7% Friday closing at 10am EDT, 6 hours ahead of New York.  With U.S. markets up 1.4% Friday the DAX will only keep up if it closes up .7% instead of .32% currently. 
Jul 1, 2011 7,374.49 7,443.20 7,357.03 7,419.44 32,625,500 7,419.44

Jun 30, 2011 7,310.34 7,378.35 7,285.44 7,376.24 32,845,500 7,376.24

Jun 29, 2011 7,230.95 7,320.30 7,230.95 7,294.14 38,853,400 7,294.14

Jun 28, 2011 7,138.50 7,187.08 7,075.19 7,170.43 37,509,000 7,170.43

Jun 27, 2011 7,101.15 7,144.44 7,079.11 7,107.90 28,088,600 7,107.90

Jun 24, 2011 7,231.73 7,273.32 7,099.22 7,121.38 40,547,100 7,121.38

In Asia, all of the markets rallied less than Friday's U.S. except for Shanghai and Hong Kong which are playing catch-up.  Nikkei up .98% underperformed U.S. Friday tape.

Saturday, July 2, 2011

7/2 Weekly Commentary

Here is the link to the Weekly Commentary:
Click here.

Tuesday evening will be the cutover to the newsletter subscription format. 
The details for signing up for e-mail delivery are at the Sign-up Page.

It's only $10 a month, $100 a year and signing up now will freeze the rate for 3 years.  Charging for the newsletter, while not making me rich, keeps me motivated to produce the communications that go along with my trading method.  Hope to see you there.

Steve Koteles

Friday, July 1, 2011

7/1 Daily Commentary Flash

The daily technical composite is now in weak sell signal, cancelling the buy signal in effect for the past several weeks.
I put the details into a PDF and I guarantee that you can access via this link.  ARCA is open until 8pm if you want to buy some short ETFs.

7/1 Daily Commentary

I wanted to get out the Daily early.  When all of the market date is available I'll update the post with the daily technical composite and other markets.
When the daily technical composite registers a strong buy, as it did 13 trading days ago, everything else takes a back seat.  I1 takes a back seat to a rally from 2 weeks of congestion on a +24 buy signal in the daily technical composite.  I was disappointed that yesterday's rally did not take more out of the sails of the momentum, taking it only from +10 to +6.  As stated then I expected today to be another up day to complete the work of neutralizing the oversold condition.  I nibbled at NQ shorts today but got out with tiny losses twice because the count kept extending.  I am short now from 2357.50.
I have kept positions small until I see the composite this evening.  I'll post it 7:30EDT in time for ARCA.  If the composite declines below +4, which I expect, then I'll add more short ETFs.  The combination of an oversold condition, pre-holiday with light trade, and end-of-quarter.
The market completed it's abc from last week's lows this afternoon.  SP futures count it best.  I have to use futures because most of this rally happened overnight.  Cash counts with huge opening moves don't make sense in a strong trending environment. 

Zeroing in on wave (v) the final wave in the abc shows that all waves are complete.
In spite of the huge rally over the past 2 days the dollar has stayed above the bottom made on Wednesday.  I consider this important market information.

7/1 3:55

SP futures rallied to resistance as seen by the range bars.  It looks to be putting in a head-and-shoulders.
Range is 1334.50 to 1336.50.

7/1 2:50

Shorted 1% NQ at 2357.50 on what looks like a completed wave structure.

7/1 2:07

Covered NQ at 2352.75, looking for 1 final high.

7/1 2:05

I shorted NQ at 2351.50.  The final, tiny 5th wave has extended with wave 3 just completed.  I'll buy NQ back at 2352.25 and short again on final high.

7/1 1:45

Today's rally should definitely turn the tech composite neutral.  I shorted at a point 30 points up on the day for NQ futures.  This is a pre-holiday and window-dressing rally so it should level off and not go ballistic like for an unexpected event. 
The dollar has held it's ground and gold/silver have declined, which bodes poorly for the stock market going beyond today. 

7/1 1:10

Shorted 1% NQ 2351.50.  Bought 2% SDS at 20.15. 

7/1 12:45

The SP futures count is almost complete as well.  The counts are clearer after this last rally. 

I'm using a 1-minute, 75-unit M/A of NQ futures with an envelope of .05%, or 1.5 points to signal a break. 
If NQ is in a small wave iv and goes sideways into a rectangle then this M/A will flatten and lose it's effectiveness but by then a longer M/A will catch and be viable.

7/1 12:35

The count for Nasdaq is wave c is close to complete.
It looks like s4 has completed it's 3rd wave up, so I'm expecting some sideways and 1 more high.

7/1 11:45

I covered the NQ short at 2344.50 for a 1 point loss. I'm going to use a 1-minute M/A to re-enter.

7/1 11:30

I shorted NQ at 2343.50.

7/1 11:25

I covered NQ at 2338 and am waiting for 1 more new high above 2344.

7/1 10:50

I shorted NQ futures at 2337.25. 

7/1 10:10

Looking to short 1% NQ Sep Futures at 2340.

7/1 9:50

Here is the reason I decided to give the stock market another day to top out.
Historically, when the technical composite buy signal results in a significant rally then that rally continues until the composite declines to +4 or lower.  I'll run the composite again at 7:20pm EDT to verify it reached +4 today. 

7/1 pre-open

I generated the daily technical composite yesterday at 7:20pm EDT.  Even with yesterday's big rally the composite was not able to retreat to neutral.  This caused me to exit the NQ short and sell 2% SDS and 2% QID.  I'm currently 4%DXD, 2%SDS, and 3%EUO.  Overnight the 15-minute M/A for NQ futures climbed to the current trading range.  So even if I'm wrong about a final pop today I have a re-entry for NQ short nearby.  The green line is the 82-unit M/A.  10 points below is the breakdown.
I'll be shorting on a pop to 2330.
SP, DJ, and NQ futures are at 50-day M/A resistance, so what rally can be mustered should be nominal and short-lived.
Gold and silver broke down overnight.  I should have shorted yesterday but instead took position long dollar.  If stocks break down then precious metals should as well.
The dollar bottom looks like it is in.  It did not break above it's 10-minute M/A by more than .2% (16 ticks) last night so initial confirmation is not in.  I'm using dollar as a primary confirmation for stock trend change.