Archive for June, 2016

Month End SPY Signal, June 2016

Thursday, June 30th, 2016

June 30, 2016

 

If I had told you last Friday, after the BREXIT announcement, that SPY would close June above it’s 200 day moving average of price, would you have believed me ? Was the sky falling in, or were there international money funds just trying to scare the hell out of you so that they could  pick up your shares at a more reasonable prices.?

As it turns out, the sky isn’t falling, exactly, but if you will look down and ahead , it would be fair to conclude the road may be littered  with potholes sufficiently deep to ruin you low profile rims, if not your portfolio.

On one side of the equation, you have low interest rates which may remain unchanged into 2017….plus an earnings season which gives every indication of being positive for stocks, well, some stocks.  On the other side of the argument, you have,  BREXIT and the potential for a  level of  international political and economic uncertainty that will make the dollar a safe haven for the forseeable future.  And that means it will be tough for dollar exports and inward remittances of overseas profits which need to get translated into dollars.  I’ve concluded, for me its best to stay with USA companies whose profits are mainly driven by USA revenues.

My lineup includes SPY  and Put writing involving July $200 and August $180 contracts.

ETFs  in descending order of investment: IWM, MDY, SPY, SDY, VNQ, XLU, ITA and XBI

Equities in descending order of dollars invested: T. VZ, NOC, TASR, AMZN,DLTR,FB, MCD, BAESY, SNE

Utilities: ED, EXC, AEP

If you had ignored the December 31, sell signal your $1 million invested in SPY  ( Shares  4905   ) would now be worth $1,027,744

If you had acted on the sell signal and repurchase signal,  you would now have ( Shares 4786   )  and they would be worth $1,002,811

The next buy / sell signal for SPY will be generated at the close of business July 31

 

Richard Maurice Gore

 

 

SPY Model Still On Green

Wednesday, June 1st, 2016

June 1, 2016

SPY closed May 31, 2016 at $209.84 per share.

SPY’s 200 day moving average of price closed at $ 199.97,

At 4.9% above SPY’s 200 day moving average the BUY signal for SPY remains in effect till the close June 30, 2016…..if you follow the back tested model I follow….which has generated only six trades since January 1, 2000…..five of the six SPY trades have been winners. The model has dramatically out performed BUY and HOLD.

I use the SPY model more as the backdrop for all my market decisions.  I, personally,  would not go out and buy SPY at $209.84 per share. Instead, just yesterday  I wrote 10 contracts to buy  SPY at $200, even if the price of SPY is $190 or lower at the options expiry  July 15.  I was paid a premium ( yesterday ) of  $1.07 per share to make this commitment.  This will work out to be 4.339% per annum .  The annual dividend for a shareholder of SPY is 2.20% per annum.  So, I am being paid more than twice the annual dividend of SPY ( now, not quarterly ) ) to be bullish on SPY at $200 per share.

If SPY had closed on May 31, below its 200 day moving price average, sell signal ,  I would not have made this trade. I would have been trying to guess how much SPY would sell off  and would use some of my sidelines money to write contracts to buy SPY,  at that estimated  level, for a greater premium… and continue to nibble in this fashion as SPY moved lower.

In this way, I would be averaging down my cost of SPY, something I would not do with any stock,  which could be sent to zero.  SPY will eventually come back, even if my heirs need to show some patience !

At some point soon, I will amend this post ( in upper case, as a postscript  ) to update your wealth effect if you ignored the December 31, 2015 sell signal and had continued to hold till  today ….versus following the model exactly. ( SEE POSTSCRIPT BELOW )

Richard Maurice Gore

PS: IF YOU DID NOT SELL YOUR 4,905 SHARES OF SPY ON JANUARY 4, THEY WOULD NOW BE WORTH $ 1,029,266…2.93 % EXCLUDING         DIVIDENDS

IF YOU FOLLOWED THE SPY MODEL AND SOLD JANUARY 4 AND THEN REPURCHASED AT HE BUY SIGNAL, YOUR 4,786 SHARES             WOULD  NOW BE WORTH $1, 004,294., EXCLUDING DIVIDENDS.

The model has no chance to get even until after the next sell signal.