Week of 2011 AU 12

My account gained 0.5% this week, while SPY fell 1.6%.  This ended up as an “OK” week, but on Monday it had seemed like it would be “best week ever”.  I am back to the same account balance as on June 10th.

Business news: Various reports are conspiring to create the impression that the double-dip recession might not be starting just yet.  I predict a “relief rally” that will last about two weeks.  Might not start until the week after next, though.

Daily progress table: The table below has been revamped.  I think the new format is less likely to coerce me into making bad trades, but it is still too complicated and needs further simplification.
      Shares, options, and dividends are now shown separately.  For options, the naming convention is “AUp7½”, which means an option that settles in AUgust, is a put (rather than call), and has a strike price of $7.50.
      Each daily-gain cell shows the day’s closing %gain-so-far as the main number.  For puts and dividends, the daily figure is shown as an addend for the share’s %gain (I *think* I’ve got the math right on this).  The upper-right number is the %account for this investment (minimum 0.1% for very small holdings).  The lower-right number shows the percentage of total purchase that I still own (or blank for 100%).  After part of the investment is sold, the daily gain varies less because the gain for the no-longer-owned part has become fixed.
      When an investment is completely sold, the main number becomes gray and the actual gain appears in the “Results” column.  (These gains can be very large for puts, but their %account is very small.)  For shares, the daily %account decreases three days later when the sale settles; for puts the sale settles the next day; for dividends it varies (the expected settlement date is shown in the “Results” column).  Settlement is shown by a red upper-right number, while a green number indicates a new purchase; the number can vary slightly while remaining black, as the investments in the account change size relative to each other.
      The “owned” percentage gets smaller when an investment is partially sold and gets larger when more is purchased.  When puts are completely sold, the owned amount goes to 0% and the daily figure stops changing (add this figure to the share-gain to find the overall gain).  When shares are completely sold, the owned amount does not decrease; instead, the daily gain continues to fluctuate to show whether I picked a good day to sell.  For dividends, the owned amount goes up when dividends are accrued and back down to 0% when they settle.
      When the daily price for a put is so low that the put-price plus the share-price is less than the strike-price, a red underline appears and the “me” daily account balance is adjusted upward to compensate.  The max-loss shows the minimum value that shares+puts must have, but Schwab doesn’t handle this properly.

		│	Daily % gain size owned												│	Max % loss		│	Results
Symbol	since	│	Fri		Mon		Tue		Wed		Thu		Fri		│	Beg	End	│
DRETF	MR30	│	-7.5	16	-9.6	16	-8.0	16	-8.0	0	-3.9	0	-4.9	0	│			│	−4.0%
div.	—	│	1.5	0.1 25	1.5	0.1 25	1.5	0.1 25	1.5	0.1 25	1.5	0.1 25	1.5	0.1 25	│			│	(AU 15)
TLT	MA25	│	6.2	13	9.6	13	9.9	13	13.2	0	7.5	0	9.6	0	│			│	+8.1%
div.	—	│	1.0	0.1 33	1.0	0 0	1.0	0 0	1.0	0 0	1.0	0 0	1.0	0 0	│			│
AUp97	JN20	│	-3.2	0 0	-3.2	0 0	-3.2	0 0	-3.2	0 0	-3.2	0 0	-3.2	0 0	│			│	−98%
FRED	MA31	│	-19.4	11	-22.4	10	-15.1	10	-22.2	10	-17.4	11	-18.2	11	│	−5.8	(none)	│	−19.2%
AUp15	JN20	│	8.2	1.8	9.3	1.9	8.6	1.9 0	8.6	0 0	8.6	0 0	8.6	0 0	│			│	+170%
AUp12½	JN20	│	4.2	0.6	5.3	0.8	2.9	0.8 0	2.9	0 0	2.9	0 0	2.9	0 0	│			│	+262%
RWM	JL01	│	5.7	19 82	13.1	20 82	5.1	20 82	11.2	20 82	6.5	19 82	6.0	19 82	│	+0.3	(none)	│
AUp30	JL01	│	-0.5	0 0	-0.5	0 0	-0.5	0 0	-0.5	0 0	-0.5	0 0	-0.5	0 0	│			│	−78%
SEp34	AU08	│			-0.1	0.6	-2.5	0.6 0	-2.5	0 0	-2.5	0 0	-2.5	0 0	│			│	−38%
SCHA	JL14	│	-9.5	8	-17.4	8	-12.0	8	-3.6	12 63	-0.6	13 63	-0.6	13 63	│			│	−0.2%
SBB	JL18	│	6.8	6 25	9.1	3 25	7.4	0 25	8.5	0 25	7.0	0 25	7.0	0 25	│			│	+5.6%
IAU	JL25	│	2.3	12	5.6	12	6.6	12	10.4	13	8.0	12	7.5	12	│	−4.3	+3.1	│
SEp97	AU11	│									-0.8	0.3	-1.7	0.3	│			│
RPRX	JL25	│	-21.8	2	-30.2	2	-29.6	2	-31.4	2	-27.8	2	-26.0	2	│	−9.7	−9.7	│
NOp7½	JL25	│	9.3	1.3	20.9	1.4	20.9	1.4	20.9	1.5	20.9	1.5	19.7	1.4	│			│
FXF	AU01	│	1.6	6	3.2	6	7.6	7	7.6	13 48	1.0	13 48	0.1	13 48	│	−0.4	+1.3	│	+1.3%
TZA	AU05	│	-1.3	4	24.6	4	-0.8	4	13.3	0	-3.2	0	-5.5	0	│			│	−0.2%
SPY		│	0.0		-6.5		-2.2		-6.5		-2.3		-1.6		│			│
me		│	0.0		2.1		1.0		1.2		1.0		0.5		│			│

DRETF: Sold last Friday; settled on Wednesday.  The fourth dividend payment is due August 15th.  DRETF has recovered some, but it’s still below its 200-day moving average.  I’m not buying it back yet.

TLT: Sold last Friday (although waiting would have been better); settled on Wednesday.  The third interest payment settled last Friday, but arrived after I wrote last week’s report so I’m noting it as having settled on Monday.  Final gain: 8.1% shares, 1.0% dividends, -3.2% puts, total 5.9%.  Since all %account values are now zero, the TLT investment is complete and will not appear in next week’s table.

FRED: Sold the puts on Tuesday, which turned out to be the worst day of the week for a put-sale because the stock price was at its maximum.  Sold the shares on Friday at midday, but then the price went up 1% after I sold.  Just overall bad timing.  Final result: -19.2% shares, 8.6% older puts, 2.9% newer puts, total 7.7% loss.  This is worse than the 5.8% loss I would have received by exercising the options.

RWM: Bought more last Friday, raising this invesment to 19% of account and 82% of it is still owned.  This thing basically performed as expected this week—it was everything else that reduced my profits!  Got rid of the trailing sell-stop on RWM and replaced it with buy-stops on SCHA, which is safer because SCHA has no transaction costs for Schwab customers.
      On Monday I bought puts because I had to take my wife to the emergency room and couldn’t watch the market.  Then I sold the puts on Tuesday, which turned out to be an especially bad day for put-sales.

SCHA: The shares sold last Friday settled on Wednesday—but on Wednesday I bought new shares, which were sold this Friday and will settle next Wednesday.  The new shares were sold at a profit, which reduced my overall loss on SCHA from 6.6% to only 0.2%.  I have orders on file to buy more shares on Monday, if the price rises; I am basically using SCHA as “ballast” to counteract RWM during periods when the market is rising.

SBB: Shares sold last Wednesday, Thursday, and Friday were settled this Monday, Tuesday, and Wednesday.  Should have waited and sold it later.  SBB is complete and will not appear in next week’s table (unless I buy more).

IAU: Looks like it peaked on Wednesday at $1805/oz, so I bought a put on Thursday, locking in my gains.  Some pundits think gold will drop to the 50-day average ($1600/oz) and then bounce back up; others think it will go to the 150-day average ($1500/oz) and bounce; some admit they don’t know whether gold will bounce any time soon.  If it doesn’t bounce by September 17th, I can exercise the option and get a +3.1% gain.

RPRX: Not going anywhere.  I said I would give it until September.

FXF: Fell 3% and triggered my stop on Wednesday, but then went back up so I bought replacement shares at the same price—which then gapped down 4% on Thursday!  I barely eked out a profit for the two sets of shares.

On the pie chart, you can see that my main investments are RWM (a bet that the Russell 2000 stock-average will go down) and IAU (which holds gold bars in a warehouse).  The thin yellow line is the put for IAU, green for the RPRX shares, brown is the put for RPRX.  All the remaining pie segments are already sold and will settle to cash on the dates indicated.  The DRETF dividend does not appear on this chart because Schwab does not include accrued dividends in account balances until they actually settle.

Week of 2011 AU 05

My account rose 0.3% this week, while SPY crashed 7.2%.  All in all, not a bad week.  I was nimble and quickly rearranged my portfolio on Friday when the market failed to bounce as expected on Thursday.

US politics: Republicans and Democrats came to agreement and passed a bill on Monday to increase the deficit ceiling.  Unfortunately, what they both agreed on was that the bill sucked (though they disagreed on which were the sucky parts).  Obama did not get the token tax increase on the rich, nor the right to ignore the issue for a whole year.  The government will reduce spending during a depression, which will of course crash the economy.  It’s June 1937 all over again!

Business news: Many companies reported good earnings this week, but no one believes anymore that future earnings will be as good as these.  The market is in full panic mode!

I didn’t feel like fixing the “daily progress” table this week, so it still has all the problems identified last week.

			│	Daily % gain						│	Max % loss		│	Put Date/ Real Gain
Symb	size	since	│	Fri	Mon	Tue	Wed	Thu	Fri	│	Beg	End	│
DRETF	22%	MR30	│	1.1	1.2	0.2	0.0	-2.0	-4.6	│			│	−2.4%
TLT	13%	MA25	│	0.5	1.0	3.6	3.7	7.4	4.2	│	−1.7	+4.9	│	+6.1%
FRED	13%	MA31	│	-2.6	-2.5	-6.0	-4.4	-7.0	-7.2	│	−5.8	−5.8	│	AU20
RWM	23%	JL01	│	-0.2	0.2	2.5	2.2	5.5	4.2	│		+0.3	│	(stop)
SCHA	8%	JL14	│	-2.6	-3.2	-6.3	-3.2	-7.8	-9.5	│			│	−3.1%
SBB	10%	JL18	│	2.2	3.0	5.3	5.0	6.3	6.7	│	−4.5	+3.9	│	+5.6%
IAU	12%	JL25	│	0.1	-0.3	2.1	2.1	1.6	2.3	│	−4.3	−4.3	│	(stop)
RPRX	4%	JL25	│	-6.5	-6.0	-8.1	-7.8	-10.6	-10.6	│	−9.7	−9.7	│	NO19
FXF	6%	AU01	│		-0.6	1.8	1.3	1.5	1.6	│	−4.3	−0.4	│	(stop)
TZA	4%	AU05	│						-1.2	│	−5.4	−0.2	│	−0.2%
SPY			│	0.0	-0.4	-3.0	-2.4	-7.0	-7.2	│			│
me			│	0.0	0.1	0.4	0.5	-0.1	0.3	│			│

DRETF: Abandon ship!  Things seemed to be going okay.  I bought more on Thursday (note the green bar is slightly shorter) because it looked cheap.  But then the market tanked and took DRETF with it, piercing the 200-day moving average.  Sold all at Friday’s open, which luckily was a 1% gap-up for the broad US market, but not for DRETF.

TLT: Dividend recognized on Monday.  Sold the puts on Thursday.  Got rid of it on Friday because it went down even though stocks were going down so bonds should have been going up.  I got more than the 5% profit I had been hoping for when I bought it!

FRED: I’ve lost interest in FRED.  The lovely chart pattern that induced me to buy it has been ruined by the market crash.  Didn’t sell it on Friday because its put is already maxed out (shown by red underline) and so it can’t hurt me anymore.  On Monday, the shares+puts were worth slightly more together (-2.1%) than apart (-2.5%), hence the red underline even though the daily gain is above the loss floor.  If I can catch the bottom, maybe sell the puts for a huge gain and then ride the stock back up for two weeks, selling for a small loss?

RWM: At purchase I had intended to sell half when the price increased by 6.5%, which happened on Tuesday.  Bought lots more on Friday to rebalance the portfolio towards bearishness, because of the ongoing crash.  After Friday’s close, decided to switch to a 4.5% trailing stop so my minimum gain will be positive even if next Monday goes against me.  If RWM goes up another 1% or so, it looks like I can afford to buy a two-week put without pushing my minimum gain into negative territory.  Puts are much nicer than stops!

SCHA: Wednesday looked like such a cute little bottom that I sort of wanted to spank it!  So I bought some SCHA.  Then Thursday was even lower so I bought some more.  Dumped it at Friday’s open because the market is crashing.  Buy it back at the real bottom.

SBB: 5.6% gain in three weeks!  Sold half on Tuesday because I sold RWM.  Sold another quarter on Wednesday because the market was even lower.  I shouldn't have sold the final quarter on Thursday because the market was crashing.

RPRX: Same as FRED.  Maybe sell puts at bottom and ride shares back up.

FXF: Doing great!  Am using a 3% trailing stop, because this thing hasn’t dropped even 3% from its peaks since May.  Tuesday was the last big uptick before the Swiss government intervened with some sales of newly-minted francs, trying to drive the price down.  And *still* it rises!

TZA: Tried to increase profits during the crash, but I bought this just before a mini-reversal.

Week of 2011 JL 29

My account fell 0.6% this week, while SPY fell 3.9%.  My account balance is the same as it was a month ago!  I am not happy with DRETF right now.

US politics: The artificial deficit deadline grows near.  The Establishment (elephants and donkeys) have proclaimed victory, but they need to peel off some Tea Party and some Progressive Caucus votes.  It seems quite possible that the proclamation will turn out to have been premature.

Business news: Many companies reported bad earnings this week.

My “Daily progress” table below is getting overcomplicated.  It doesn’t handle options very well.  I have been avoiding mixing options with different expiry dates, or having fewer options that only partiallly cover my shares, because the table format can’t handle that (rather than because those would be bad investment moves).  Something needs to be done to prevent this table from cramping my investment style, but I’m not sure yet just what.

			│	Daily % gain						│	Max % loss		│	Put Expiry
Symb	size	since	│	Fri	Mon	Tue	Wed	Thu	Fri	│	Beg	End	│
DRETF	20%	MR30	│	4.6	3.2	2.8	1.5	1.3	1.1	│			│	(none)
TLT	12%	MA25	│	-0.4	-0.7	-0.5	-0.5	-0.4	0.5	│	−1.7	−1.7	│	AU20
FRED	14%	MA31	│	-3.5	-4.5	-3.9	-5.0	-3.0	-2.6	│	−3.6	−5.8	│	AU20
RWM	7%	JL01	│	-2.5	-1.9	-1.1	0.6	0.5	-0.2	│	−3.1		│	(none)
UUP	8%	JL13	│	-1.8	-1.9	-2.7	-2.0	-1.8	-2.3	│	−2.4	−2.4	│	−2.5%
SCHA	4%	JL14	│	2.3	1.2	0.4	-1.9	-2.4	-2.6	│			│	(none)
SBB	10%	JL18	│	-2.5	-1.6	-0.6	2.2	2.4	2.2	│	−4.5	−4.5	│	(stop)
WSH	6%	JL25	│		-0.3	0.7	2.2	1.6	2.9	│	−4.3	+0.3	│	+0.2%
IAU	12%	JL25	│		-0.6	-0.3	-0.7	-0.5	0.1	│	−4.4	−4.3	│	(stop)
RPRX	4%	JL25	│		3.0	-1.5	-5.4	-7.0	-6.5	│	−10.6	−9.7	│	NO19
SPY			│	0.0	-0.6	-0.9	-3.0	-3.2	-3.9	│			│
me			│	0.0	-0.2	-0.2	-0.4	-0.5	-0.6	│			│

DRETF: Argh!  Last week’s press release was deliberately misleading.  Now I read that “there was no suprise” that of course Dundee would have to issue more shares to pay for their new purchases, even though their press release said they would just sell some existing holdings and previous releases have mentioned stock-issues.  Now DRETF’s share price won’t be going anywhere for a month, and it hasn’t really gone anywhere since March.  I sold ⅖ of my holdings just as the price was gapping down, for a measly 0.53% profit.  Hopefully I got the dividend just before the sale.

TLT: I do not understand option pricing well enough.  TLT is up 2% since I bought it, which would have been 1.8% gain after transaction cost, but I show a gain of only 0.5% because the put has lost so much value.  Once again the problem seems to be that I am not taking enough risk.  Maybe I should have bough a lower put that would have worsened my max-loss but wouldn’t decline in value so much?

FRED: My buy order finally triggered on Thursday!  And FRED went up on Friday so it looks like I chose a good time to buy shares.  Problem: the automated purchase of the puts once again did not go through.  I called Schwab for the third time and this time I think I got the right answer: they do not support shares+puts purchases for people with only level-0 options privileges.  So I bought the put (August $12.50) on Friday.  This is a very short-duration put, which will turn out to have been a good idea if FRED shoots up over the next few weeks.  But really I bought it to avoid making the above table too complicated, which is a bad reason.
      Because share+put automated transactions will not be available to me until at least December, I will have to rethink how to sell stuff.  I have to sell the put manually before I sell the shares automatically, which means I have to decide when to sell it.

RWM: Getting close now.  I sold the puts on Friday to prepare for maybe selling the shares next week.  In the meantime, RWM is hedged by SCHA so really I don’t need any puts.  RWM is up 4.3% from when I bought it but my “daily gain” shows a loss due to the decline in the value of the put.

UUP: I hate stops!  Hates them, I say.  UUP gapped down on Tuesday, whacked my stop, then went back up.  Anyway this trade hasn’t been going my way all along.

SCHA: Bought more on Wednesday because it was a 63% retracement of the recent run-up.  Hopefully I can catch the bottom and buy more for the next upswing.

SBB: Doing well.

WSH: I hate stops!  Looked bad on Wednesday, so I raised my stop to ensure profit.  Then it gapped down at the open on Friday, triggering my stop, then went right back up.  Maybe buy it back next week?

IAU: The July dip didn’t happen.  Instead, gold has been rising due to Euro and US default fears.  George Maniere said “Under no circumstances should you open a position in gold here”, so I did—because it cannot possibly be true that there are no circumstances that suggest a gold position right now, so I think George is trying to convince himself rather than stating an objective analysis.  Traders need to be contrarians: if the US defaults, the price of gold will spike.  Bought more on Wednesday, for about the same price.

RPRX: My low bid for the shares was accepted.  Waited for the price to rise later in the day and then got a good deal on the put.  Stock ends the day higher.  So far, so good!  Then it plummets.  This could be bad for a month.  Oh well.

FXF: The Swiss franc is going up, for much the same reasons as gold, but it’s going up much faster.  Buy on Monday?

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 % gain						│	Max % loss		│	Put Expiry
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.

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 % gain						│	Max % loss		│	Put Expiry
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.

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 % gain					│	Max % loss		│	Put Expiry
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.

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 StreetSmart.com.  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 % gain						│	Stop %		│	Realized Gain
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 StreetSmart.com).  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.

2007-08:	13%
2008-09:	40%
2009-10:	23%
2010-11:	5%

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.