Grim News Rocks Markets – So goes January? January 29, 2010
Posted by Marlowe Cassetti in IYZ.add a comment
Stocks dropped on Friday, as worries about fiscal turmoil in Europe and a drop in technology stocks pushed the S&P 500 to its worst monthly decline since February 2009.
Uncertainty about the fiscal stability of Greece, Portugal and Spain caused U.S. investors to pull back from early gains, even as Greek and European Union officials said there was no chance of a Greek default or EU bailout.
The Dow Jones industrial average dropped 53.13 points, or 0.52 percent, to 10,067.33. The Standard & Poor’s 500 Index lost 10.66 points, or 0.98 percent, to 1,073.87. The Nasdaq Composite Index fell 31.65 points, or 1.45 percent, to 2,147.35. (market commentary & photo courtesy of AP)
Grim news fuels a grim market selloff. I’m surprised that today’s market action hasn’t triggered any further stop loss selling in my portfolio. My holding in iShares Dow Jones US Telecom (IYZ) is moving ever closer to its stop. We have to wait and see what transpires.
I’m glad to see an end to January. What about the old saw … So goes January so goes the year. Let’s hope this is not the case this year.
Catch you next month.
Markets Looking Ugly! It’s the Economy Stupid January 28, 2010
Posted by Marlowe Cassetti in NVDA.add a comment
The stock market resumed its slide Thursday as disappointing forecasts from technology companies brought new concerns about the economy.
A weaker outlook from technology maker Qualcomm Inc. dragged the Nasdaq composite index lower. Drops in Motorola Inc. and Apple Inc. also hurt tech stocks. The Dow Jones industrial average fell almost 116 points, its sixth loss in nine days.
The recent drop in stocks is worrisome for some analysts because Friday is the last trading day of January. Traders often note that as goes January, so goes the year. The so-called January barometer holds that the performance of the S&P 500 index in January is a predictor of how stocks will end the year. There have been only five major errors since 1950, for an accuracy rate of 91.5 percent, according to the Stock Trader’s Almanac
Technology could get a bounce Friday from Amazon.com Inc. and Microsoft Corp., which posted improved earnings after the closing bell. Their stocks rose in after-hours electronic trading. (commentary & photo courtesy of AP)
The markets are sure looking ugly and the economy is looking even uglier. Yes, Obama has woken up to the fact that the economy and jobs are the key issue facing the US. Wasn’t it Bill Clinton’s 1992 presidential campaign slogan of “It’s the economy stupid”? As we go forward there must be a light at the end of the tunnel. Will things get better this year or will we have to wait until 2011? Remember times of great distress and financial uncertainty are often great opportunities for profit.
Do you recall the story of my friend Jack and RSI’s pick of NVDA? Anyway, NVDA hit its stop loss sell level today and was sold. I had a small position in NVDA. I need to chat with Jack and find out if he is honoring the sell stop I suggested.
In the last 15 trading days NVDA has been on a relentless downhill run. With a -3.35% loss today it is time to get out.
No RSI picks tonight. Catch you tomorrow.
The Selling Continues – Sold iShares S&P North Amer Tech-Multimd Ntwk (IGN) January 27, 2010
Posted by Marlowe Cassetti in DBC, DDM, IGN, SSO.add a comment
The Federal Reserve reassured stock market investors Wednesday that the economy is improving and that interest 
rates will stay low.
Stocks recovered from an early slide to end moderately higher after the Fed issued a more upbeat assessment of the economy following a two-day meeting on interest rates. Treasury prices also reversed direction and began falling as investors withdrew money from safe haven holdings.
The Dow Jones industrial average rose 41.87, or 0.4 percent, to 10,236.16. It was down about 40 ahead of the Fed’s statement. The Standard & Poor’s 500 index rose 5.33, or 0.5 percent, to 1,097.50, while the Nasdaq composite index rose 17.68, or 0.8 percent, to 2,221.41.(commentary & photo courtesy of AP)
Within my portfolio the selling does continue, although the market recovered from earlier in the day losses. I had good expectations for IGN. It hit a high on the 19th of this month only to start a downturn that culminated in my position getting stopped out.
As I mentioned before all this selling has built up my cash reserves. I’m awaiting word from RSI before I decide on how to deploy these cash reserves. I may move it into a holding fund, leave it in cash or a mix of the two. As of today my portfolio is 25% equities and the rest is in cash or income producing funds.
Progress on the trend following module continues and is encouraging. Trend following in any form has the problem of large drawdown and poor win/loss ratio. This fact of life can be validated by searching the literature. I’ve been somewhat successful in minimizing these adverse effects. With that said, the acid test is to see, via simulation, how much “value added” does the inclusion of this module into the RSI framework yield.
But with that said, the TF module came up with two picks tonight (remember, not recommended..still under development):
- Ultra S&P500 ProShares (SSO)
- PowerShares DB Commodity Index Tracking (DBC)
This is rather interesting. SSO goes hand in hand with the previous pick of Ultra Dow30 ProShares (DDM). This infers that this module has a strong bullish stance.
Catch you tomorrow.
Sold United States 12 Month Oil (USL) – Stay tuned for more January 27, 2010
Posted by Marlowe Cassetti in USL.add a comment
Stocks gave up a healthy advance and closed slightly lower Tuesday as investors suffered another bout of anxiety over President Barack Obama’s plan to regulate banks.
The Dow Jones industrial average, up 90 points in the early afternoon, closed with a loss of 2.57. The other major indexes were also down modestly.
Uneasiness about Obama’s plan to limit the size and trading operations of big banks pulled financial stocks and then the entire market lower. News reports that Paul Volcker, the head of the President’s Economic Recovery Advisory Board, would testify about the plan before Congress next week, contributed to the market’s turnaround. (market commentary courtesy of AP)
Nothing unusual or special about the sale of USL. It hit its stop loss level today. I’m taking it in stride along with the other recent sales. It is all part of process and yes it does mean a drawdown in portfolio value. This is all within manageable parameters. This is not the time to panic.
In recent days I have made some good progress on the trend following module. It should be ready for prime time any day now. Stay tuned…..
No RSI picks today, Catch you tomorrow.
BOUGHT Ultra Dow30 ProShares (DDM) and Western Asset Managed High Income Fund Inc. (MHY) January 25, 2010
Posted by Marlowe Cassetti in DDM, MHY.add a comment
Major stock indexes rose Monday as momentum shifted in favor of the reappointment of Federal Reserve Chairman Ben Bernanke.
Investors want Bernanke to remain in control of the Fed and maintain his low interest rate policy. The prospect that he might not be confirmed in the Senate for another term rattled markets last week.
Key senators including Democrats Max Baucus of Montana and Dianne Feinstein of California said Monday they would support Bernanke’s confirmation, and presidential adviser David Axelrod said Bernanke has enough votes to be confirmed. (commentary & photo courtesy of AP)
Let me explain the two headline picks. The first, DDN came up during my testing of the new, improved trend following module that isn’t ready for prime time. I have a lot more testing and verification before making any recommendations. However when I saw it I liked the contrarian nature of this pick and I bought some this morning.
As you can see DDM has taken quite a hit, but somehow RSI has an expectation that this fund will recover. Remember it is leveraged 2:1 to the DJIA. My buy was filled at $41.20 and I immediately entered a stop loss order at $38.41. Let’s see if this drop is reversed and my new module (still under development) is viable.
The other fund isn’t an ETF but rather a CEF that I selected as a “holding fund”. There are a number of reasons I selected it, mainly its low price volatility and secondly that it pays a monthly dividend that yields 9.93% annualized. For me it is an ideal fund to park money that otherwise would languish in a money market fund. See chart below.
Well, there you have it for today. RSI made no further recommendations after the market closed today. Catch you tomorrow.
The Selloff Continues; SOLD – iShares MSCI Chile Investable Mkt Idx (ECH) & Utilities Select Sector SPDR (XLU) January 22, 2010
Posted by Marlowe Cassetti in ECH, XLU.add a comment
Stocks suffered their fourth sharp drop in five trading days as investors caved to growing anxiety about President Barack Obama’s plans to restrict big banks and earnings reports that just aren’t good enough.
The Dow Jones industrial average dropped 217 points Friday, having lost 552 points, or 5.2 percent, over the past three days. Over the past five trading days, the Dow has fallen 537 points, having gained 115 points on Tuesday.
The drop gave the Dow its worst week since the index hit a 12-year low in March. All the major indicators fell more than 2 percent.(commentary & photo courtesy of AP)
Broken record, like yesterday, is a report of stop losses for the following:
- ECH –3.7%
- XLU +1.6%
As you can see it wasn’t all losses. Has my portfolio suffered? Yes. Am I beginning to panic? Absolutely not! This is all part of the process. The methodology it to place the trades and let the chips fall where they may. The stop loss parameters are there to keep losses manageable and avoid large losses. There is a positive side to all the selling is that my portfolio has now build up a nice position in cash that will be available for buying at lower prices.
There were no RSI buy recommendations today. Catch you tomorrow.
SOLD – PowerShares DB Commodity Dble Long ETN (DYY), Emerging Markets Small Cap (EWX) & PowerShares Cleantech (PZD) January 21, 2010
Posted by Marlowe Cassetti in DYY, EWX, PZD.add a comment
The stock market stumbled Thursday as President Barack Obama proposed an overhaul of the nation’s banking system that could limit financial companies’ ability to make huge profits on trading.
The Dow Jones industrial average skidded 213 points after dropping 122 on Wednesday, giving the Dow its biggest two-day point drop since late March. The index has seen four straight triple-digit moves and the latest slide erased the Dow’s gains for 2010. Bond prices rose as the stock market became more volatile. (commentary & photo courtesy of AP)
See the headline above for the portfolio positions stopped out today. These sales were executed in an orderly manner starting from the morning and going on to the close. Losses were:
- DYY –5.3%
- EWX –2.2%
- PZD –6.8%
The chart shows the struggle of the three funds, but true to our methodology we have to follow the discipline of initiating stop loss protection.
Due to technical difficulties, RSI doesn’t have a run for tonight. I will try again in the morning and if there any new picks I will send out a quick update tomorrow, hopefully before the market opens.
Catch you tomorrow.
Stocks Fall on China News January 20, 2010
Posted by Marlowe Cassetti in Blogroll.add a comment
The stock market posted its biggest drop in a month on concerns that tighter lending in China could endanger an economic recovery. Disappointing earnings from IBM and Morgan Stanley added to investors’ angst.
At the same time, a spike in the dollar pushed commodity prices sharply lower Wednesday, hurting stocks of energy companies and materials producers.
The Dow Jones industrial average fell 122 points from a 15-month high but ended well off its lows for the day. Demand for safe havens like government debt rose, pushing yields lower in the Treasury market.
Stocks have posted sharp swings since last week as investors try to determine the overall direction of the market. The Dow fell 101 points Friday and jumped 116 Tuesday. (commentary & photo courtesy of AP)
I shouldn’t have crowed about how well my portfolio did yesterday when the bottom fell out today. That’s all part of the market’s give and take, but it sure smarts anyway.
There were no RSI picks tonight …. catch you tomorrow.
A Strong Market Day – RZV Rocks January 19, 2010
Posted by Marlowe Cassetti in RZV.add a comment
Crude oil followed the stock market up on Tuesday, settling higher for the first time in five sessions.
Investors boosted health stocks, watching a Massachusetts election to fill the seat of the late Sen. Edward M. Kennedy. Some hoped for a Republican victory that would make it more difficult for Senate Democrats to pass a health care bill.
The Dow Jones industrial average rose 116 points to a 15-month high after sliding 101 on Friday. Broader indexes also rose and demand for the safety of government debt waned. (commentary & photo courtesy of AP)
This strong market day was beneficial for almost all of my holdings. Today look especially kindly on RZV – RYDEX S&P SMALLCAP 600 PUREVALUE ETF up 2.18%. As most ETF investors know ETFs are much less volatile than individual stocks, so a two plus percentage up day in an individual ETF is quite nice. As the chart below shows, RZV has been on a tear since December 2009. RSI recommended a buy on RZV on November 2, 2009. Historical testing by Merriman has shown the small cap value funds have great long-term performance and this is a often underappreciated sector in most portfolios.
I may commit a small portion of my money market funds to a “holding fund”, add to one of my existing positions, or leave it in cash. I hate to get left behind in the face of today’s strong showing and the potential rally that might ensue. I have to ponder this conundrum before I act.
I went through all my holdings and adjusted stops and profit taking alert triggers. Since the volatility values change the adjustments were needed.
I continue to work on the trend following module and I have some encouraging results. Maybe we are looking at sometime next week for it making it into the operational system.
RSI has issued no picks for today.
A Work in Progress – Get Ready for Boring January 18, 2010
Posted by Marlowe Cassetti in Blogroll.add a comment
I have mentioned previously that the RSI system is a work in progress. I have an operational system which I report on and also commit my own money. However, in the background I am always testing and proving to myself that RSI is a robust system. I really do try to keep the operational system stable throughout this process. I am at the point where I have to change the operational system. Let me explain.
In its most recent form the RSI operational system consists of the standard model RSI plus an adjunct model that operates on a portfolio of balanced long and short ETFs. Within the standard model there are several modules. One of the modules is a trend following (TF) model. Recently the weight of evidence has lead me to discard this model. I do need to replace it with a more reliable model and that mission is underway. Deleting the TF model now leaves the RSI standard system with only modules that capitalize on extreme price movement. This is not a problem except these modules only get turned on at times when the markets are quite volatile and prices gyrate. Unfortunately, it last buy recommendation occurred when It issued a buy recommendation to buy Market Vectors Gold Miners ETF (GDX) and iShares Silver Trust (SLV) on Sept 21, 2009. FYI - these two trades closed on Dec 3rd for a profit of 21.4% and 12.9% respectively.
To give you some perspective as to why I dropped the TF module, the risk adjusted annual gain shot up 3.7 times and the average trade gained 140% as the percentage winning trades was improved by 11 percentage points after removing the TF module. These numbers are quite compelling.
Bottom line …. This blog will be pretty boring with ETF picks coming few and far between until another TF module is added. No time estimate is available at this time. Until then I will be keeping my RSI selected positions and keep the stops in place and updated.
