Archive for January, 2016

The Sell Signal Continues

Saturday, January 30th, 2016

January 30, 2016

Was it Confucius who said ” one picture is worth 1000 words ” ?

 If he were alive today and had $1 million invested in the stock market ( SPY ),  Confucius  would say the ( chart ) of SPY  for December 31, 2015 was a picture worth more than 1000 words because it was telling you how not to lose $ 49,786. by getting out of the market as soon as it opened on Monday, January 4, 2016.

The WHAT  TO DO action was all there December 31….   SPY ( S&P 500 ),  closed at $ 203.87 which was at  a price lower than that presented by it’s 200 day moving average trend line ( $204.04 ).  No examination of fundamentals ( WHYS ) could have told you that January 4 was the day for action.  

All the WHYS are good for is for going through the ashes as losses mount starting  the day after the WHAT TO DO day.

The current  SELL signal is good till the close February 29,  because yesterday  (the final trading day of January 2016 ) the market again closed below its 200 day moving average $193.72 …..$202.79 for the second straight month

While a chart ( picture ) is all I need to decide on WHAT TO DO AND WHEN TO DO IT,  there is additional information in the picture which reinforces the situation…

SPY’s 50 day moving average ( $200.31 ) is below its 200 day moving average trend line  ( $202.79 ) and its 20 day moving average ( $192.26 ). is below its 50 day moving average trend line .  That spells out NEGATIVE TREND to a trend follower.   I am almost certain Confucius didn’t say ” let the trend be your friend until the end ” but I’ll bet he would wish he had !

Additionally, a chart plotting the trend line of “On Balance Volume ” is spelling out distribution volume not accumulation volume.

So much for WHAT TO DO.    ( I’m not considering  yesterday’s 2.44% surge in SPY on 50% higher volume anything more than proof that the devil can also be found in the stock market and is creating mischief to lure me away from my trading model. )

As for the WHYS….As I predicted in my previous post, the FED is laying the groundwork for backing off on the March interest rate hike and using face saving language to…..save its face.

How stupid is it to be raising interest rates while Japan and other   central banks are lowering interest rates to below zero ! ?

If you were A  Tokyo resident,  would you rather pay your bank interest to keep your money on deposit with it , or would you buy dollars and move your money here?  Worldwide buying of dollars to invest in the USA  strengthens the dollar  against other currencies and, importantly,  against commodities such as oil which is being used as collateral to finance a lot of debt including that of sovereign hedge funds !  

As the price of oil drops there are margin calls going out for more funds to secure existing under water positions.  In turn, the debtors liquidate profitable positions ( including USA stock market positions and USA real estate ) to meet the margin calls or to offset losses.

It seems there is a worldwide ” stealth liquidation ” of USA assets  in progress.  This means there is almost no place to hide for USA investors and that all bets are off until Fed policy softens , oil prices stabilize etc.

So, I’m riding it out with  the emphasis on ” Out ” …as in out of the market since December 31…

Or,  as in ” a bird in hand ( cash )  is worth two birds  in the bush ( stock market position ) “

Richard Maurice Gore.

 

 

 

 

Game On !

Saturday, January 16th, 2016

January 16, 2016

 

BUY and HOLD versus TREND TRADING.…….2016 Season

SPY ( ETF basket of S&P 500 stocks ) close December 31, 2015 at $203.87….Sell Signal….GET OUT OF THE WATER….NOW!

On a $1,000,000 investment BUY and HOLD unrealized loss year as of January 15……  7.86% ….$78,667.

On $1,000,000 pulled from market at the next market opening ( January 4 )…actual loss equals 1.65%………$.16,500.

BUT, this isn’t necessarily how the results will look on December 31, 2016.

I follow the dictates of the SPY 200 day moving average,  mechanical model which generated the December 31, 2015 sell signal.

Acting on WHY ( Should )is for theoreticians because the market rarely does WHAT it should do WHEN theoreticians make their WHY   pronouncements.  Trend traders follow the  dictates of their trading model which is primarily  based on the back tested accuracy of  mechanical commands,…. disregarding emotion, and  fundamentals.

In this case, the trading model said NOW even though the pundits have been issuing starker and starker warnings about the age of the bull, China, the price of oil, the future of interest rates and the strength of the dollar.  The trend traders NOW was  when the price of SPY ended the month below  its 200 day moving average .  That was the moment  of reckoning.  The next day is reserved for discussing  all the WHYs.

On January 16, today,  I am sifting through the WHYs and have concluded the most important WHY is the catalyst pronouncement of Janet Yellen that the FED would raise interest rates up  to four times  during 2016.   This pronouncement constitutes a massive injection of uncertainty in the minds of businessmen…sufficient to alter expansion plans  and cause tentative earning forecasts.

Now, I picture Ms Yellen pacing and wringing her hands on how to announce the postponement of all future rate increases until the USA economy is on much firmer ground.  But, its too late ! Ms. Yellen has already been selected, ( by me ),  as Black Swan of 2015 !

 

Richard Maurice Gore

 

December 31 SELL Signal

Friday, January 1st, 2016

January 1, 2016

Thought you’d make some money when SPY was ahead 10% by mid May ? ….. Play till May ? 

Those hopes were finally dashed at 4PM yesterday as SPY slid beneath both break even and its 200 day moving average…

SPY opened 2015 at $206.33 per share  and closed 2015 yesterday at $203.87….a loss of 1.2%  (excluding the 2 % paid out in quarterly dividends during 2015 )  Net,Net a gain of 0.8% ( $8,000 )  on an investment of $1 million !  And that ignores 2015 inflation which would take a further bite of about $6,300.  Net, Net, Net for the year …$1,700 profit  on $1 million invested  !!!

This should make you feel better if you don’t have anywhere near $1 million to invest.  

On top of this, SPY generated a SELL by ending December below its 200 day moving average of $204.04.

The SPY 200 day month end / 200 day moving average model is signaling to….

GET OUT OF THE WATER…….NOW!!….

…Except for those positions so near and dear to your heart that you are willing to hold them through thick and thin ! 

Counter balancing the dictates of the 200  day month end  SPY model is the advice of Warren Buffett ( Berkshire Hathaway ) and John Bogle ( Vanguard ) who say you will beat the results of  about 90% of investment pros if you just stick with a passive index ETF such as SPY…Buy and Hold.  And, don’t forget Cramer who implores you to invest in index funds such as SPY if you don’t have the time or inclination to do the work required for investment in sector funds and/ or  individual equities.

I like the SPY 200 day model because it tells me when to be in or out of the market….not necessarily invested in SPY, because I am doing the work required to invest in sector ETFs,  individual equities and options on Index ETFs.  

At least for this year, I ( as an amatuer ) am in the exulted company of the 10% or  so of those investment pros who beat SPY, because I ended the year up 7.6% on funds actually invested, excluding dividends,  and up 4.23% on total funds available for investment, again, excluding dividends .  I’ve asked myself whether I could duplicate this result for others and the answer is no  way.

I barely have the time to invest for the two relatives who have authorized me to trade for them and these cases I only trade the SPY  model and one or two sector ETFs.  I could tell others what I am doing in general terms and show them how I use options, but I don’t have time to hold hands on an ongoing basis, act as an advisor, trade or take deposits.  I don’t have a licence to give advice and I believe I am required to tell you to disregard anything I say which could be construed as advice.

But, I can tell you this.  If you strip everything away and I didn’t have the time to research and act on sectors, individual equities and options for myself, I would most certainly focus on the SPY 200 day model to the exclusion of everything else.  I’d instruct others how  to use the 200 day model if I were unable to even think about investments or…..if I were to set up a trust for my estate or for a beneficiary I would instruct the administrator  to buy and hold  75% SPY ( big caps ) , and 25% IWM ( Russell 2000 smallest of small caps )….following Bogle and Buffet and Cramer exclusively  into passive indexes.

Richard Maurice Gore