Bought iShares MSCI Brazil Index (EWZ) – Big up day for the RSI portfolio – RSI buy signal for TAO July 30, 2010
Posted by Marlowe Cassetti in EWZ, TAO.add a comment
After jiggering my holdings around I purchased the required number of shares of iShares MSCI Brazil Index (EWZ) this morning. I didn’t fineness this one and wait for a pullback. The model is to take the next trade at the opening. As a good follower, I made the trade. In the immortal words of Admiral David Farragut, "Damn the torpedoes! Full speed ahead!"
I’m now planning what to do next if RSI keeps issuing more buy signals. That is a tough question and it hinges on how much of a portion should I allocate to my income funds. This is a pressing problem. With that said, the RSI portfolio had a big up day today, with the backdrop of a flat, going nowhere market. All but two positions had nice gains adding up to a good finish.
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After the close RSI generated another buy signal and no surprise, another foreign ETF:
- Buy 494 shares Claymore/AlphaShares China Real Estate (TAO) Stop = -$2.02 Target = +$6.07 Volatility = 4.44%
This fund has a narrow focus than the other foreign funds that RSI has recently picked and I consider it a negative for this fund. Also the trading volume is on the light side. Its chart is below.
It has a nice positive upward trend and it handily outperforms the overall US market. Since I already own three far East funds I will pass on this one. Although I am awaking up to the message from RSI, I have to honor the Turtle restriction on correlation of holdings.
Have a great weekend and I’ll catch you later.
Another RSI Buy iShares MSCI Brazil Index (EWZ); Bought iShares FTSE/Xinhua China 25 Index (FXI) & SPDR S&P Emerging Europe (GUR) July 29, 2010
Posted by Marlowe Cassetti in EWZ, FXI, GUR.add a comment
Okay, RSI continues to recommend another foreign ETF, adding to the significant tell. So here it is:
- Buy 89 shares of iShares MSCI Brazil Index (EWZ) Stop = -$11.12 Target = +$33.37 Volatility = 6.37%
Looking at the chart below, it has made a good move from its mid July low. It has been beating the market since the May low, and most likely will continue its upward trend. I cannot buy it right now unless I shift some funds funds from the income part of the portfolio. I think I need to pay attention to this significant tell.
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As detailed in yesterday’s blog I bought the two funds, FXI and GUR soon after the morning opening. Why didn’t I wait for the obligatory “buy on dip” event? The RSI methodology is predicated on buying at the next day’s open. I really shouldn’t be “finessing” the buy which isn’t in the simulation. What you do is your own business. Just my thought.
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So how is my divorce from external influences going, you ask? I’m starting to get comfortable with it. My list of downloaded podcasts has shrunk to just a few after I excised all the “what’s happening in the markets today” programs. What’s tough is not clicking on the Yahoo Finance and TD Ameritrade buttons during the day. Now I restrict my clicks to only those necessary to performing the RSI process.
Have a good evening and I’ll catch you later.
Trailing stop hit on iShares MSCI Chile Fund (ECH); RSI buy signals for iShares FTSE/Xinhua China 25 Index (FXI) & SPDR S&P Emerging Europe (GUR) – A significant tell? July 28, 2010
Posted by Marlowe Cassetti in ECH, FXI, GUR.add a comment
RSI’s trend following module generated two buy signals today:
Buy 181 shares iShares FTSE/Xinhua China 25 Index (FXI) Stop = -$5.51 Target = +$16.53 Volatility = 5.35%
Buy 148 shares SPDR S&P Emerging Europe (GUR) Stop = -$6.75 Target = +$20.26 Volatility = 6.21%
Remember the shares noted are for a $1,000 risk (1% of a $100,000 portfolio) so adjust your order accordingly for your risk profile. Also, the target value is where to initiate a 30%R trailing stop.
Let’s take a look at their two charts.
They both have made good upward progress since their July 20th lows. FXI has underperformed the general market, as measured by the equal weighted S&P 500 (RSP), while GUR has outperformed since late May. Because these two have broken out and have paused, I have no problem if you decide to wait until they finish their pullback before buying them.
Will I buy them? Yes, I need to put the profits from ECH to work. It won’t earn much in money market funds will it? Will I buy tomorrow morning? Maybe so, maybe so.
I spent my last blog detailing how I set the trailing stop for iShares MSCI Chile Investable Market Index Fund (ECH). A market downdraft today tripped the stop and the position was closed and a nice profit booked.
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Of interest, is that RSI’s recent picks, including today, have been in the direction of foreign ETFs. Is this a significant tell? Only time will tell, but so far the call on ECH has been good and hopefully a harbinger of good things yet to come. We shall see. Catch you later.
A review of R and setting a profitable trailing stop; Weaning off external influences July 26, 2010
Posted by Marlowe Cassetti in ECH.add a comment
From time to time I have referred to the risk measure R. I also normalize the risk to $1,000, which is 1% of our hypothetical $100,000 portfolio. More exactly it is 1% of the risk budget, but for now let us assume they are one and the same. Therefore when we purchase an ETF, the number of shares are sized to limit our risk, for that security, to $1,000 or R. Generally RSI’s trading modules follow a minus one R, stop loss and a plus two R trailing stop initiation level. So, this is what transpires after my broker signals me the +2R level has been breached. I compute the security’s current price volatility which is equal to the 2.5 times the 20 day Average True Range (ATR). This is the current value of R, expressed in terms of the stock price. I then send in an order to my broker to sell the fund at a trailing stop of a dollar value which computes to 30% on one R. If you do the math this is 75% of the 20 day ATR. The broker sets a stop under the highest high after this order is entered. As long as the security is not falling, the stop will not be hit. The profits will continue to run as the price goes up.
So let’s look at how this worked out for a recent example of iShares MSCI Chile Investable Market Index Fund (ECH).
A few trading days ago my broker emailed me Securities Alert: ECH – Price rises above $63.17. Since the 20-day ATR was $1.13 this led to a decrement price of $0.85 ( 75% of $1.13) for the trailing stop. Thus a floor of $0.85 below the highest high is established for selling ECH. I will inform you when the position is sold.
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Well, it has been several day now since my epiphany relative to blocking out external influences. This includes checking up on the markets, viewing my portfolio, having morning coffee and watching the market opening on Bloomberg Financial News, downloading and listening to financial podcasts. I have been weaning myself off all this stuff. It is really tough like quitting cigarettes. Do I miss it? You bet it do, but I’m coming around to the realization that I’m missing nothing and avoiding deviations from my trading plan.
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No new RSI signals today. Catch you later.
Internet Problems – Bought EWT July 22, 2010
Posted by Marlowe Cassetti in EWT.add a comment
My ISP went down Wednesday, so no blog yesterday. I did buy EWT. Hope to be back and running later today.
No new RSI signals last night.
Bought iShares MSCI Taiwan Index (EWT) – More on the process July 21, 2010
Posted by Marlowe Cassetti in DOG, ECH, EWT, SH.add a comment
In yesterday’s blog I expounded on the importance of “the process”. Well today I discovered a flaw in my process. I hadn’t updated my email address for all my trailing stop alerts. Wow, that was a shocker. On the web page where I was setting my alert level for EWT @ $16.45/share I noticed a message that my broker was unable to contact me at the email address I had provided. That was certainly a wakeup call. One must be diligent in all phases of the process for the process to be effective. It is the small things that can bite you.
Another, but related topic, I received an email from a longtime friend who has been following my work. His question had to do with my plans for my two short funds DOG & SH now that RSI was picking long side funds, i.e. EWT. My answer was the following:
All positions will be sold when:
1) -either they fall below their sell stop price
2) -or rise to their profit alert price at which time a trailing stop will be initiated
3) -and if the price were then to fall 30% R below the subsequent high price
This process is based upon testing and doesn’t require me to predict the direction and subsequent course of the markets. However, in the works is 1) – adding to winning positions plus 2) – raising stops after +R gain.
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Sorry about the lost blog with my ISP outage. I need to develop backups, but living in a remote access location I don’t have too many options. And guess what, my broker sent me a message that my trailing stop initiation alert was hit for iShares MSCI Chile Investable Market Index Fund (ECH). I will be initiating the trailing stop as soon as I rectify some of the numbers.
As I reported earlier today I did purchase a position in iShares MSCI Taiwan Index (EWT) yesterday. I got in around the morning opening and it is behaving just fine.
On the system development front, I’m giving up on operation Sow’s Ear. It just isn’t working out. On another project, I have several potential trading modules that requiring a knowledge of day of the week. Some of these modules have origins back to my futures trading days. Anyway, I developed the code to compute DoW. Now my wife wants me to her birth day. She thinks it was Wednesday, but I’ll give my code a test.
No new RSI picks today, catch you later.
Stocks close higher as investors digest earnings – Process is what it is all about, that is the question – New Buy iShares MSCI Taiwan Index (EWT) July 20, 2010
Posted by Marlowe Cassetti in EWT.add a comment
Investors are trying to get a read on the economy using earnings reports. They’re finding it’s not so easy.
The result Tuesday was yet another erratic day of stock trading. The Dow Jones industrial average rose 75 points after having fallen 140 in early trading in response to a series of disappointing revenue reports. Analysts were hard-pressed 
to come up with a reason for the turnaround. But trading was extremely light, and that tends to skew stock prices.
Analysts said some investors were getting a little more upbeat as they awaited earnings reports from Yahoo Inc. and Apple Inc. after the close. But those reports came in mixed, just like those from the many companies that have also reported second-quarter results. Apple’s stock surged in after-hours trading, but Yahoo fell. Like IBM Corp., Johnson & Johnson and Goldman Sachs Inc., its revenue fell short of expectations.
Advancing stocks outpaced losers by 4 to 1 on the New York Stock Exchange. Volume came to a light 1.1 billion shares. (market commentary & photo courtesy of AP via Yahoo Finance)
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Yes, it has been a few days since my last blog. Remember if there are no changes to the RSI portfolio or if there are no new RSI buy suggestions then I have the option to blog or not to blog. I really have to assess if a daily blog is necessary to “the process” and process is what it is all about. Let me expand on that thought.
RSI is a purely mechanical trading/investing system. The process is simple if one follows the system and doesn’t let their emotions obstruct the process. As I have pointed out, I use this blog to “journal” what is happening and it acts as a traders diary.
I have mentioned this book before, but I cannot praise it enough. It is The Little book of Behavioral Investing – How Not to Be Your Own Worst Enemy by James Montier. If you are an investor or a trader or a wantabe, this is a must read for you to overcome the most disastrous pitfalls and self inflicted wounds. It has helped me focus in on the important processes and block out the trivial. And here is how:
I am realizing that discussing daily market activity in my nightly blog is not part of the RSI process and instead is an impediment to the process. Likewise, keeping up with the latest economic/market news and podcasts, although entertaining, is not a productive activity. In fact, this type of distraction is counterproductive. Also checking the market status and my portfolio scoreboard is likewise unproductive and may lead to impulsive buying and selling. These two behaviors are tough habits to overcome. I’ve been trying to overcome these two and it is very tough. I do need to check my email for any messages from my broker for notices that my price alerts have been triggered for my initiation of trailing stops. Although this actividy is somewhat “time critical” but can easily be performed each evening at which time I can also check on any stop loss activity.
With my newfound extra time that has been freed up by cutting out the unnecessary, I can work on testing and refining the RSI system.
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This evening RSI issued a buy signal:
Buy 702 shares iShares MSCI Taiwan Index (EWT) Stop = -$1.42 below entry; Trailing stop alert = +$4.27 above entry; Volatility = 4.6%
This buy signal was generated by a trend following module and appears to be following the general trend of the strength in the Asian markets. It is trading at the upper end of its upward sloping price channel.
It looks good to me so I may place an order tomorrow morning.
Wall Street ends best week in a year – Stopped out of Short QQQ ProShares (PSQ) July 9, 2010
Posted by Marlowe Cassetti in PSQ.add a comment
Wall Street ended higher on Friday, concluding its best week in a year, as investors looked ahead to the start of the earnings season.
The Dow Jones industrial average gained 58.73 points, or 0.58 percent, to 10,197.72. The Standard & Poor’s 500 Index rose 7.68 points, or 0.72 percent, to 1,077.93. The Nasdaq Composite Index added 21.05 points, or 0.97 percent, to 2,196.45.
For the holiday-shortened week, the three indexes rose more than 5 percent.
(market commentary & picture courtesy of Reuters)
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After crowing about resetting all my stops, my stop on Short QQQ ProShares (PSQ) was hit and it was sold. Not too surprising in light of such a strong market. It was not the best timing to go short this week. The chart shows the tale of its downdraft.
No RSI picks tonight, have a great weekend. I’ll catch you later.
Stocks climb for 3rd day after jobless claims fall – Going on autopilot July 8, 2010
Posted by Marlowe Cassetti in VXZ.add a comment
Investors are getting enthusiastic about stocks again after some reassuring news from the job market.
Stocks rose for a third straight day Thursday on the Labor Department’s report of a larger than expected drop in the number of newly laid-off people seeking unemployment benefits. The Dow Jones industrial average rose 121 points after climbing 275 Wednesday and advancing modestly Tuesday. The 4.7 percent gain in that time is the Dow’s best three-day move since mid-May.
Employment news has been the key driver behind the market’s moves during the past few weeks. Thursday’s news was a welcome change from a string of disappointing jobs reports, including the government’s June employment numbers, that have pounded stocks recently. (commentary & photo courtesy of AP via Yahoo Finance)
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One of the nice aspects of the RSI methodology is that it can be an automatic system. Last night I realized some of my stops and alerts were not current and some had expired. This morning I whipped up an Excel spreadsheet that calculated new stop loss levels and alert levels to put on trailing stops. After the spreadsheet calculations were completed, I entered them online to my brokerage account. Upon completion I had a newfound sense of relief. It was like switching on the autopilot. Theoretically I could go on a long vacation and not have to do anything but check my Email for notices from my broker. Did a stop get hit? Did a position trigger an alert for me to put on a trailing stop? We shall see how going on autopilot works in this troubled market.
Many months ago, I discussed on this blog the case of adding to a position. I started to model this strategy, but I found the task a bit more complex than I first thought. I need to go back to that topic again. The reason I bring this up is that one of my positions is iPath S&P 500 VIX Mid-Term Futures ETN (VXZ). It has shot up for a 13% gain since RSI first recommended it. It easily achieved a one R gain at which point I could have added another one R batch of shares. However, I do need to model this methodology. It is so easy to jump the gun before testing out this idea, but I need to remember that RSI philosophy is evidence based. Although if you are familiar with the Turtle Trading methodology, you understand that adding to winning positions is the crux of their large gains.
Look at the chart and it illustrates the retracement of the past few days. Is it headed back up from here?
No new RSI signals today. Catch you later.
Wall Street rallies on earnings optimism – Advantages of hedging July 7, 2010
Posted by Marlowe Cassetti in Blogroll.add a comment
U.S. stocks logged their best one-day gain in about six weeks on Wednesday after a bullish forecast from financial company State Street Corp fueled optimism about the coming earnings season and helped the S&P 500 break above a major resistance level.
Bank stocks led the way, but investors also scooped up beaten-down industrial and technology shares.
he Dow Jones industrial average .DJI rose 274.66 points, or 2.82 percent, to 10,018.28. The Standard & Poor’s 500 Index .SPX gained 32.21 points, or 3.13 percent, to 1,060.27. The Nasdaq Composite Index.IXIC advanced 65.59 points, or 3.13 percent, to 2,159.47. It was the indexes’ biggest percentage advance since May 27. (market commentary & photo courtesy of Reuters)
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I assume it is pure serendipity, but it is turning out that the RSI portfolio is perfectly hedged. The losses incurred by the three short positions are balanced by the other non-short holdings. In looking at this situation it appears the 1% risk position size is a helpful factor. It also helps to have diversified the portfolio between the RSI picks and several income producing “holding funds”. These two factors have resulted in a virtual hedge fund. With that said, where does the RSI portfolio go from here? i will answer that question in the fullness of time.
There were no RSI picks today, Catch you later.
