Saturday 23 July 2011

Week of 2011 JL 22

My account rose 0.2% this week, while SPY rose 2.2%.  Basically, DRETF did very well and counterbalanced my losses on everything else.  The chart at right looks very bullish to me; I am feeling overweighted on bearish investments now.  If the market does not do very badly on Monday or does do very well on Tuesday, perhaps I should sell some stuff on Wednesday to cut my exposure.

US politics: The debt-ceiling battle is now entering its final week before the artificial deadline, so I am expecting a lot of bearish disinformation to come out of Washington.  President Obama and Speaker Boehner are officially no longer talking to each other.

Euro politics: Germany and France have now decided to allow Greece to default on its debt.  This should be bearish for financial stocks, but I don’t know what it will do to the market as a whole.  Perhaps lots of money will move back from the USA to Europe, but perhaps not since both markets tend to move together.

Business news: This was the first week of the summer Earnings Season.  Many larger companies posted very good earnings, which will help the broad market to go up if it wants to.

DRETF: Recovery completed!  On Thursday the closing price for D.UN was exactly the same as it was on May 20th, just before they announced the new stock issue.  (This may have been manipulated.)  After Thursday’s close, they announced the purchase of another C$600 million worth of real estate, including some choice properties on Bay St. in Toronto.  To pay for that, they will be selling other properties rather than issuing new stock.  Clearly, this is a company that realizes when the market for its stock is saturated!  I should buy more, but I’m feeling overweighted on DRETF as it is.

Daily % gainMax % lossPut
Symb size since Fri Mon Tue Wed Thu Fri Beg End
DRETF 22% MR30 1.1 1.1 1.8 2.1 3.5 4.6 (none)
TLT 12% MA25 -0.2 -0.7 0.3 -0.3 -0.6 -0.4 −1.7 −1.7 AU20
FRED 7% MA31 -3.5 -4.1 -3.4 -3.6 -3.1 -3.5 −3.6 −3.6 AU20
RWM 7% JL01 -1.3 -0.1 -2.1 -2.0 -2.5 -2.5 −3.1 −3.1 AU20
UUP 8% JL13 -0.4 -0.2 -0.4 -0.9 -1.8 -1.8 −2.4 −2.4 (stop)
SCHA 3% JL14 0.1 -0.9 1.2 1.2 2.0 2.3 (none)
SBB 9% JL18 0.5 -1.8 -1.6 -2.7 -2.5 −2.3 −4.5 (stop)
SPY 0.0 -0.8 0.8 0.7 2.1 2.2
me 0.0 -0.1 -0.1 -0.2 0.0 0.2

TLT: Not going anywhere.  Outlook for next week is negative due to the deficit battle.

FRED: Not going anywhere.  I have orders to buy at a lower price and sell at a higher price, but neither one has triggered for weeks.  Soon I shall have to decide whether to renew my put or walk away.

RWM: Not looking good, but I can give it a few more weeks.

UUP: The US dollar went down instead of up!  Hopefully Thursday’s big move was the short-term bottom.  I should sell this on its next upswing, which might yield 1% profit.

SCHA: Bought more on Monday because it was a 50% retracement of the recent run-up.  This might turn out to have been the bottom of the downswing.

SBB: The “bloodbath” didn’t happen.  Had to lower my stop on Tuesday.  Sell next Wednesday unless it starts going someplace.

WSH: This is a 20-day oscillator pick for Friday.  They just settled a foreign-bribery case in which they admitted guilt.  Buy on Monday?

RPRX: Recommended by Tom Carreno, who predicts that its price will double by October.  Looks like I can buy it for $6.18, which would be a 38% retrace.  Stop at $5.57, which is resistance-turned-support from last month, for a max loss of 11%.  Or buy the November put and sell in September if it doesn't go anywhere, which would also be around 10% loss but without the nasty downspike risk that stops have.

Monday 18 July 2011

Week of 2011 JL 15

My account rose 0.4% this week, while SPY lost 2.0%.  Things are proceeding according to plan.  Really, 0.4% is a fine result for an average week (that would be 20%/yr), but it doesn’t look so hot after two weeks of no-change and six weeks of losses before that.

Politics: The debt-ceiling battle is proceeding as expected, so I predict a big drop in SPY next week.

Daily % gainMax % lossPut
Symb size since Fri Mon Tue Wed Thu Fri Beg End
DRETF 21% MR30 0.4 -0.4 -0.5 0.4 0.2 1.1 (none)
TLT 12% MA25 -0.7 0.1 0.3 0.4 -0.3 -0.2 −1.7 −1.7 AU20
FRED 7% MA31 -1.5 -3.9 -4.4 -3.4 -4.3 -3.5 −3.6 −3.6 AU20
TYP 6% JN23 -15.5 -11.4 -8.4 -9.1 -6.8 -11.7 −9.3 −9.3 −9.3%
RWM 7% JL01 -2.5 -0.8 -0.5 -1.1 -0.1 -1.3 −3.1 −3.1 AU20
UUP 8% JL13 -0.2 -0.2 -0.4 −2.4 −2.4 (stop)
SCHA 1% JL14 -0.5 0.1 (none)
SPY 0.0 -1.8 -2.2 -1.9 -2.6 -2.0
me 0.0 -0.1 0.0 0.1 0.2 0.4

DRETF: Still not quite recovered yet.

TLT: It’s taking a hit from the debt-ceiling scare.  Hopefully it will pop back up on August 2nd.  If not, I have the put.

TYP: Didn’t recover fast enough.  The put expired so I sold.  Probably would make money next week but I didn’t want that much risk.

RWM: Doing okay.  Has now mostly paid for its put.  Hopefully will go up a lot next week.

UUP: The US dollar seems to be at the bottom of its short-term oscillation.  I’ll probably hold this for a week or two.  This is a low risk/low reward trade.

SCHA: Preparing for the next upswing.  I had an order to buy when the market retraced 38% of its recent rise, which triggered.  I have more orders to buy at 50% and 63% retracements (the three usual retrace amounts).  Really, I don’t need a put on RWM, I just need small amounts of contrary investments.

SBB: To buy at Monday’s open.  I’m expecting a bloodbath on Wall St. next week, so I need more bearish stuff.

Saturday 9 July 2011

Week of 2011 JL 08

Ho hum.  This week, SPY rose by 0.4%, while my account once again did not move.  This is to be expected, if the market is tracing out the right shoulder of a head-and-shoulders formation (the left shoulder was February), except that the right shoulder is now too tall.  If the bearish argument is correct, the two-week rally is now over and SPY should start heading back down.

News: On Thursday, ADP said that they had seen in uptick in the number of paycheques they were printing for US companies, so the market gapped up.  On Friday, the government said that the number of new jobs for June was only ⅛ of what had been expected and so unemployment rose; the market gapped down but not as much as it had gone up on Thursday so I am not sure whether Thursday should be counted as an Island top.  Perhaps this entire year should be called a Broadening top.  For now, the market seems to be in a bullish mood, responding to minor good news more strongly than to major bad news.  However, volume is down by ⅓ from last week.  Many traders are sitting on cash, perhaps waiting for lower prices or a sign that the lower prices aren’t coming.

Politics: It is my belief that the government needs the stock market to be doing badly this month, in order to prove the Obama administration’s claim that lack of progress on the debt ceiling is “spooking the market”.  The US government has been manipulating the market heavily over the last two years and probably has some more tricks up its sleeve and a wilingness to use them.  Was ADP mistaken or did the government lie about unemployment in order to spook the market?  Was the whole point of the SPR oil release to make the market jump so it could then fall further without doing major damage?  I expect that the market will be falling from July 18th (Obama’s debt-ceiling deadline) until August 2nd (Bernanke’s debt-ceiling deadline) in order to create an ‼emergency‼ that the Republicans can use as political cover for the vote to raise taxes on the rich, a vote that they have known for months will soon be required of them.

Daily % gainMax % lossPut
Symb size since Fri Tue Wed Thu Fri Beg End
DRETF 21% MR30 -0.8 0.1 -1.8 0.7 0.4
TLT 12% MA25 -1.0 -0.9 -0.7 -0.8 -0.7 −2.0 −1.7 AU20
FRED 7% MA31 0.7 0.4 -0.3 -0.8 -1.5 −3.6 −3.6 AU20
TYP 5% JN23 -15.1 -12.0 -13.3 -12.1 -15.5 −9.3 −9.3 JL16
RWM 7% JL01 -1.0 -1.5 -1.9 -2.6 -2.5 −3.1 −3.1 AU20
SPY 0.0 -0.1 0.0 1.1 0.4
me 0.0 0.1 -0.4 0.1 0.0

The market was closed Monday for US Independence Day.  I did not buy or sell anything this week.

DRETF: Still on track for recovery.  Spent most of the week in positive-gain territory, but this includes past dividends.

TLT: On Tuesday I recognized the dividend that had actually been payable the previous Friday.  The money arrived this Friday after the close.  There will be another dividend for August, so my minimum gain for August 20th will be -1.4%.

TYP: Spent the entire week below its loss floor, so every day I had to adjust my account balance upward to compensate.  This sort of thing is part of why Schwab says that leveraged-inverse ETFs are not suitable for any investor.
      Next week, TYP has to go because its put is expiring.  Unless the market tanks, TYP will end up as a 9.3% loss.

Friday 1 July 2011

Week of 2011 JL 01

This week, SPY rose an amazing 5.6%, while my account did not move.  SPY is now back to where it was for most of May and also late February.  If it goes even 1% higher, the bearish argument will look ridiculous.  As it is, the bearish argument requires that everyone and their brother *not* pile into the stock market now because “hey, it’s going up!”  For SPY to rise this much and then fall again anytime soon is quite rare.  In October 2009, SPY rose 7% in two weeks, then fell 6% in the next two weeks—but then it started back upward and did not continue into bear territory.  The bearish argument, as explained by J.W. Jones, would require the market to pretty much sit where it is for the month of July, forming the right shoulder of a head-and-shoulders pattern, then plummet for several months after that.  My current investments are pretty much as described by Brigadier General (ret.) Joseph Shaefer, who always wants to invest by-the-book.  Well, the book isn’t working for General Shaefer this time!  I guess I need to buy some bullish investments as a hedge.

Hooray for puts!  The last time I went “bear” when the market decided to go “bull” was in late March.  I lost lots of money on stops that I have yet to make back.  This time, the puts minimized my loss without requiring that I sell the underlying shares, so there is still a chance that things could go my way again before the puts expire.

On Tuesday, I called Schwab to ask how to sell put-protected stock using conditional alerts.  The call-centre person told me to just use two alerts with the same conditions (one for the stock and one for the put) and trust Schwab’s computers to make the trades in the correct order.  This morning I found out that doesn’t work: my order to buy shares of RWM was triggered, then my order to buy a protective put for it was triggered, but was rejected because the purchase of the shares hadn’t completed yet.  Thankfully the price hadn’t moved much by the time I noticed and bought the put manually.  So I called Schwab again and was told that the only way to do this is to use a conditional alert with two legs (IF condition THEN buy this AND THEN buy that), which is only available using StreetSmart Edge, not  Unfortunately, StreetSmart Edge is Windows-only and expects a modern computer with 4 GB of main RAM, ½ GB of video RAM, etc.  It won’t install under Crossover and I can no longer install anything (such as Virtualbox or KVM) from the Ubuntu repository because my “Intrepid Ibex” distro is three years old and no longer supported.  So I rebooted into Windows XP.  Edge complains that my computer is too old but mostly works anyway, with occasional crashes and failures to save layout settings.  I only need to use it when editing conditional alerts, which doesn’t happen every day.

Daily % gainStop %Realized
Symb size since Fri Mon Tue Wed Thu Fri Beg End
DRETF 21% MR30 -3.2 -3.9 -3.2 -2.2 -0.7 -0.8
TLT 12% MA25 0.6 0.0 -0.4 -0.5 -0.6 -1.0 −2.0 −2.0 AU20
FRED 8% MA31 -2.1 -0.6 1.9 -0.5 -0.7 0.7 −6.6 −3.6 AU20
CGO 6% JN15 0.1 0.1 0.3 0.9 1.2 2.0 −4.4 +0.6 0.6%
ENB 6% JN15 -3.0 -1.9 0.1 0.6 1.7 2.2 −4.4 +0.5 0.5%
TYP 5% JN23 -0.2 -4.0 -6.9 -7.7 -10.7 -15.9 −8.7 -9.4 JL16
RWM 7% JL01 -1.0 −3.1 −3.1 AU20
SPY 0.0 0.9 2.2 3.1 4.1 5.6
me 0.0 -0.3 -0.1 -0.1 0.0 -0.3

DRETF: On track for recovery.  Did not trade on Friday due to Canada Day.  The CAD/USD exchange rate went up, but Schwab says the USD price of this stock went down?

FRED: Bought put coverage for the last ¼ of the shares.  This improves my loss floor but requires that I use a double-leg conditional alert to sell that first quarter.  I am now protected in case FRED decides to swing back down to $12.75 one last time.

CGO: Since the market was so bullish, I decided not to sell CGO at Wednesday’s open as planned.  Instead, I gave it a trailing 0.6% stop (having found out how to do fractional trailing stops using  This increased my gain by 0.3%.

ENB: It’s a miracle!  I actually ended up with a profit on this thing!  I used a 0.8% trailing stop, but it turned out I would have made 0.8% more gain if I had sold at Wednesday’s open as planned.  Of course, I would have made even more by keeping this until Friday, but there was no way to know that.  CGO and ENB were the first 20-day oscillator picks and both were profitable (barely).

TYP: Shouldn’t buy things in disgust.  Should’t buy put options that have only two weeks left.  Should have sold this as soon as Obama announced the release of oil from the SPR, which was a “black swan event” that ruined the bearish case for this purchase.  Ah well; live and learn.
      On Tuesday, I bought put coverage for the other half of the shares.  This actually *lowered* my loss floor because the share-price had dropped a lot and so the puts had become expensive.  The advantage is that now the shares cannot stop out.  But there seems no way that the market will drop enough in the next two weeks to sell this at a profit, so I expect I’ll be exercising the option and taking my 9.4% loss.
      Because this is a 3× leveraged inverse ETF, and the market is rising so rapidly, the prices of the puts are not going up fast enough to keep pace with the falling share price, so the daily gain figures are lower than the loss floor.  As far as Schwab’s “account balance” is concerned, I lost 0.3% overall for the week, but I adjusted that up to 0.0% because really the liquidation value of the shares-plus-puts can’t be less than the exercise price so my loss cannot be worse than 9.4%.

IWM/RWM trend trades

I’ve invented yet another algorithm for picking profitable stock trades!  Hopefully this one will make lots of money, unlike the previous ones.

Rule: When IWM or RWM drops by at least 8% from its peak, then buy it.  Sell ½ when it goes up by 6.5%.  Sell the other ½ at 8.5% gain.  Protect using puts that have 3-6 weeks of remaining time.

According to my calculations (which are almost certainly wrong), this rule would have yielded 80% profit over the last 4 years—but much more in earlier years than later because volatility has been so low recently.

On Tuesday, I put in conditional orders to buy IWM and RWM at the calculated prices.  On Friday, the order for RWM was triggered.  I have no idea whether this is the top of the market; no one does.  But if it is near the top than I will win, and oftentimes the market does reverse itself soon after an 8% movement.