My bullish falling-wedge did indeed play out, and since Wednesday afternoon, the market has formed a bull-flag. A 100% completion of the flag would take the SPX right up to the December 4th peak at 1119.
It’s not the greatest looking flag though. SPY had a high-volume jolt of selling at 1pm on Thursday, and the “cloth” part of flags should ideally be periods of quiet, low-volume trading. Apple also made an exhaustion gap on Thursday morning. It peaked right at it’s December 4th peak, which came on another exhaustion gap. Déjà vu all over again, though Apple held up better intra-day this time. Other red flags (ha, ha) are the BKX and IWM making 9/36/15 cross-downs
So, we have a mediocre-looking bullish pattern, and we also have the big retail-sales report at 8:30am, and it is always a potential market mover. Click on the entry on the Bloomberg calendar to see a chart.
The bulls need to get the SPX up to at least 1113. If the retail-sales report disappoints, and the market plunges, then it just might take out the lower end of the range. Bulls should be rooting for the banks and small-caps cross back up.
George,
The big traders are taking their tax losses.
K,
I’m not a fan of spreading money all
over the place. Agree with cutting losses
and going with winners. But I would
look for 1 or 2 winners…and really pile-in
when things go right with stops of course.
George,
bad news. I’m in the mood to work during my winter break and use the capital to satisfy my trading urges
Paula,
I’m not a fan either that’s why I am considering just owning SPY as an exposure to the big pie and then picking 4-5 different stocks at a time and weeding out the winning trades from losers. the losers would be replaced by other potentials until we have 4-5 winners + the SPY (which might be loser or winner depending on its mood)
I don’t think we can have more than 10% in any position that’s why 1-2 winners might not work but 5 would be ok.
any opinions on this outtake?
For one thing I know things will change dramatically because i have read on power of persuasion and would present the terrible idea before the less terrible (which is the one i ideally would like to pass through) haha
Paula,
How many “big traders” have tax losses in 2009? If they are traders and use stops, they don’t have remnants of 2007′s and 2008′s peaks stuffed into their portfolios. Joe Sixpack still has GOOG at a cost basis of $700+ & 401k’s obviously hold funds purchased near the peaks. But neither of those groups participate in tax loss selling.
However, I think the opposite factor is quite true, which may drive the market lower in early 2010: tax avoidance profit taking as a large group of investors sell off their 2009 winners in January (or the first sign of trouble) with a year to pay Uncle Sam.
Ah, K, you are experiencing the mutual fund manager’s nightmare. How to get returns that beat the averages without going too far out on a limb. I think you have the right idea: focus on a few ideas, scale into them as they start to work, and maintain a ready pile of cash ready to deploy when needed. If you want to mimic the index, don’t even keep the pile of cash, just use SPY as your cash pile and cash in the index as you find an investment idea. At least you’ll perform close to the index and can point to a -20% index return and say, “Nobody could make money in this environment.” If you sit in that much cash, and SPY goes up, you’ll underperform every day you have that much cash sitting around. Hence, all managers are closet indexers!
Because you can’t TRADE in 2,000,000 share blocks!!!! Heck, once you break more than a few thousand shares, getting in and out can get complicated. Plus, commissions aren’t your problem when you are a mutual fund manager, they just drive fund expenses up!
2thfixr. our goal is S&P as a benchmark. so we had wrong idea before to mimic it in my opinion. we need to destroy the benchmark’s performance
here’s the latest performance since inception
http://i48.tinypic.com/2wg6d7o.png
my goal is to turn it positive
Well K, that graph shows the whole ballgame, doesn’t it? Sitting in cash during the downturn saved big bucks, but not being (or being poorly) invested during the upswing has cost your fund dearly. The fund has only made about 13% for the year, while the index made 50%. The only thing you can hang your hat on is that your fund is worth more today than the unmanaged index. But I agree, you need to come up a with a plan to stay ahead of the index at this point. Perhaps sitting in cash again like you are planning?
Good luck.
On another note, my prediction for Friday, December 18th: SPX of 1060. Hug an inverse!
2thfixr. from may to september we tried to liquidate all positions because it’s the long summer break and some work at financial institutions where they can’t have anything to do with the fund while working there so they won’t be insider trading if you know what I mean.
that’s the main reason why we’re under-performing for this year.
If we could hug inverses i’d hug them tight as my hedge
White House issues statement ‘strongly’ condemning Ugandan Anti-Homosexuality Bill.
Umm and I oppose your bills too but you won’t change them now move along?
2thfixr,
Much to your surprise big traders have
tax losses…and not all big traders use
stops.
K,
I like your second post on how to run
things better than your first post.
Good luck.
Check out the copper warehouse levels in London. That’s what I call a recovery.
http://www.kitcometals.com/charts/copper_historical_large.html#5years
20 Short
K,
I will probably get killed by everyone on this
BLOG, but I don’t like the SPY. The SPY is
an ETF and has 1/10 th the leverage of SPX
puts and calls. I like the OEX. It has about
1/2 of the leverage that the SPX has. Deep
in the money SPX calls and puts move about
$100 for every SPX point…deep in the money
OEX puts and calls move about $50 for every
SPX point. And if you day trade, you should
take a close look at the S&P 500 e-mini…it
moves $50 for every S&P 500 point and
many brokers only require $500 margin…but
you must close your position X number of
minutes prior to market close at 4PM. At
the money SPX and OEX calls and puts have
lower leverage…but beat the SPY. When
you have time I suggest you visit …cboe.com…
and take a full tour of the site. The CBOE really
looks out for the small investor. Limit orders
under 10 go into the automated system and
get a fill when hit. Always use limit orders.
K,
Reports claim the real food vitamins are
10 times more effective than synthetic
vitamins. I’m going to run a test to see
if that is true or not. I’m on synthetic
vitamin C now for 6 weeks…will then
have a blood test and switch to real
vitamin C for 6 weeks.
Tried to run the test on Paula, but she
turned me down…said no amount of
money could make her take more blood
tests than our heart doctor called for.
Larry, you see copper storage levels are correlated with copper price. There was an anomaly in ’08. All is fine, nothing to see here. PB head of a international bank told a good friend stock prices will soar in ’10. The crisis is history.
Yerk. The crisis is indeed history. Back in Oslo, the whole financial community has finally turned 100% bullish again (bar the two usual perma-bears). Predictions of doubling of the index from here on are popping up. Same guys who lost their shirt last year.
The crisis is history. Here in Asia all I see is a flattening in exports 25% below peak. Same flattening in domestic consumption. So where will the growth come from?
20 Short
K,
Congratulations on your new post with the school fund. A quote may be in order – “it’s not what you trade but how you trade it.” I’ll modify it to “know what you are trading so you’ll know how to trade it.
Before you ok the spending of a dime of the fund know exactly what you are buying – take nothing for granted.
2thfixr sez: “Heck, once you break more than a few thousand shares, getting in and out can get complicated.”
You got that right!
Vietnam unwinds stimulus
http://www.ft.com/cms/s/0/cb3a2922-df26-11de-be8e-00144feab49a.html
Paula,
I agree with you. are you implying that for the fund to have S&P exposure i should buy OEF instead of SPY (OEF is ETF for OEX)
it’s twice as cheap and in terms of an index that’s good.
hmm very interesting they are both exactly correlated and for half the price.
George, take note of that hehehe better scalping = more shares at lower price. oopps that goes back to 2thfixr’s quote
Mitch,
Thanks!! I’ll do the best I can without getting a bonus. hehehe
Julie,
I didn’t need reports to tell me that. Of course real vitamins are 1000% more effective but in industrialized world where every product is preprocessed there is no real vitamin. the few foods that you might think have real vitamin might have been modified to grow faster and have less of the natural vitamin. Just sayin but I agree with you. Missin home country, hope farmers still grow the real thing 10 years from now (i doubt it)
Dec. 13 (Bloomberg) — Nakheel PJSC’s possible non-payment of its Islamic bond due tomorrow will trigger defaults on two other securities, bringing the total of affected securities to $5.25 billion, bond documents show.
http://www.bloomberg.com/apps/news?pid=20601091&sid=atlK_E9kZ8UE