Saturday, 4 February 2012

Week of 2012 FE 03

SPY rose by 2.2% this week, to its highest weekly close since July, while my account fell by 0.7% to its lowest weekly close ever.  The loss floor is now the same as my account balance because I am out of the market.

Euro news: The prime minister of Greece has announced that he will resign on Monday if a deal to avoid defaulting on his nation’s debts can’t be worked out over the weekend.  It seems Germany has decided that it is time for Greece to default, so there will be no deal.  It takes six weeks to do a “voluntary restructuring”, so if there is no deal this weekend then Greece will not be able to make the March 20th interest payment on its bonds.

US news: Friday’s unemployment report seemed like good news: unemployment fell to 8.3%!  The market loved it!  But one of the reasons why the unemployment number fell is that about 700,000 people gave up looking for work, so they no longer count (even though they’re still hurting).  Next week there will probably be a reaction low as traders realize that Friday’s report wasn’t quite as good as it first seemed.

This week’s pie chart includes a new black segment labelled <out>.  This is money that I have withdrawn from the account for living expenses.  The black segment will remain for the remainder of the year to prevent my account value from seeming to drop suddenly.  Withdrawn money is not a “loss”!

Daily % gain
size
Max % lossResults
Symb  Buy Fri   Mon   Tue   Wed   Thu   Fri Beg   End
 
RWM  JA06 -4.7  17 -4.1  17 -3.9  17 -5.9  18 -6.6  17 -8.6  17 −5.1 −5.1 −5.1%
TZA  JA23 -6.9 9 -3.7  12 -3.6  12 -9.7  12 -11.3  12 -17.2  12 −12.8 −12.1 −9.0%
TNA  FE01 +0.6  10 +2.0  10 +9.0  10 −15.1 −14.1 +0.5%
SPY +5.0 +4.7 +4.6 +5.6 +5.7 +7.2
me -1.5 -1.3 -1.2 -2.2 -2.2 -2.2
floor -2.2 -2.7 -2.7 -2.2 -2.2 -2.2

MACD-based swing trades

Ticker
Symbol
Buy dateBuy priceSell dateSell priceProfit
ModelActualMAModelActualMAMA
TZA JA 23 13:00 JA 23 13:26 $22.46 ⑽ $22.31 ⑽ FE 01 12:00 FE 01 12:12 $20.21 $20.16 -8.2% -9.0%
JA 30 11:00 $21.41 ⑽ $21.37 ⑶
TNA (Do not buy) FE 01 12:13   $57.81   FE 01 14:02   $58.21 +0.0% +0.5%

On Monday at 11am there was a “buy more” signal for TZA.  My trading robot finally bought something!  It bought within the same minute as the model called for, so “model buy-date” and “actual buy-date” are the same.  The buy-prices are different because TZA fell during that minute, from $21.41 at 11:00:00am to $21.37 at 11:00:20am when my order went through.

Problem: my robot bought the wrong number of shares!  The model called for 10% of my account to be invested, but the robot bought only 3%.  I fixed this bug, but decided not to manually buy the missing shares because I already had lots of RWM.  That turned out to be a good move because this TZA-swing was a loser (and RWM stopped out the same day).  The “actual profit” value looks worse because I bought fewer of the second tranche lower-priced shares, but my total dollar loss is less than what the model called for.

On Wednesday at 12pm there was a “sell” signal, but the robot didn’t sell due to yet another programming bug.  I fixed the bug and manually sold the shares.  Because the market jumped so much on Wednesday, I assumed that the model would call for buying TNA so I bought it manually—forgetting that I had recently changed the rules so TNA is not bought when PPO-signal is very high, as it was then.  So I reconceptualized TNA as a day-trade.  This turned out to be the wrong move because TNA had a nice pair of days after I sold it.  Oh well.

With the current parameters, the TZA swing-trading model has now had five losses in a row.  The last gain was NO 02.  Before that there had been four more losses, after a big gain on SE 23.  So really it’s been four bad months of almost continuous losses on TZA.  I can hardly wait for the market to turn.

Surfing the oscillations

Here is SPY for the last year.  Note the “Santa Rally” in the latter part of December, extending into February, just like this year.  Note how there is usually a downswing just after exceeding a previous high, and the market has just exceeded its high from last July.  Note how last July’s high was preceded by an “enthusiasm gap”, just like this latest high.  Note how last July’s high was followed by a week-long downswing, followed by a week of retrace, followed by several weeks of crash.  Note that the 200-day moving average is now at pretty much the same level as it was last July.

If past is prologue, then the market has now topped; it will swing down until FE 10, then swing back up FE 17, then head down towards a spike-low around MR 02.  However, MR 02 is too early; the market needs to drop around 17%-20% by MR 13 in order for Dr. Bernanke at the Fed to have a reasonable-seeming excuse to start printing US dollars like there’s no tomorrow, which he needs to do this summer in order to assure Obama’s re-election in November.  So something doesn’t *quite* add up here with these dates.

DanEric can barely contain himself, but he avoids calling a top because he got burned on that last month (as did many others, last month and in January 2011 as well).  Presumably, Lucas Papademos will resign as Greek P.M. on Monday, which will be taken as an excuse for a big gap-down (just like last July, when a Greek default was perceived as “imminent”).

I will wait for MACD to tell me when to short the market.

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