feel like i am done trading for this year

me not chasing.

oops, just realized i forgot to post my last chart here.


chart on 12/3, LIS 1780

Sentiment is going down

This holiday season may be different. I see sentiment going down. I am closing my positions (long and short) to have a light thanksgiving.

Support and resistance based on ES 4h.

Happy Thanksgiving, everyone.

Quick Update on Gold - ahead of FED minutes

Market movement is strange today. ECB news is not enough to move the market but I saw a 16 points strange round trip. I guess there is something brewing.
I am still thinking of new high on SPX. I will hold long position as long as SPX 1780 holds. I am not confident on Gold. I bot GLD Jan puts 100% to hedge my long GLD.

North of 1800

I have not updated the blog for a while. I really don't have too much to say. The market is a simple long.

As long as VIX is tamed, it is safe to go long. After the break out of 1750, SPX retested the area multiple times. it is now a very good support. This is the base of the bull market.

Hourly ES is less strong. Indicators are all weakening. I see 2 supports on the chart, 1775-1777 area and the upper bound of the 1750-1770 support box. There may be chance to see a minor pull back but nothing to worry about. If you are not fully long, take that as chance to add more. ：）


2 more charts on Gold.

Earning Season Again

It is earning season again. It's time to lay out plans for stocks and for the overall market.

I think the broad market will stay in calm for the remainder of this week. Let DC figure out what they need to do. The government, the economy, the debtors, and all other stakeholders can live with whatever it is. If the issues are solved this week, unexpected, the market will go back to a large time frame rally mode. My price tag? 1750 maybe. This is a perfect setup for ER play, as the market impact is minimum. We can isolate beta and focus on alpha.

[add 2]

 
My first pick is credit cards. US consumers are buying again. They always love to buy things. Now some of them are out of job / out of office. What can they do to kill the time? Shopping.

COF – Capital One Financial - is currently scheduled to be announced after the close on Thursday, October 17, 2013.

Rumors:
Capital One Financial is a holding company whose subsidiaries provide a variety of products and services to consumers using its proprietary information-based strategy. The corporation's principal subsidiary, Capital One Bank offers credit card products. Capital One Services, Inc., another subsidiary of the corporation, provides various operating, administrative and other services to the corporation and its subsidiaries. The Consensus Estimate is for earnings of $1.75 this quarter and the whipser is for a profit of $1.84 per share.

If the number is in mid 1.8, the valuation should support an immediate price spike to 75+. The guidance will provide a better picture of the mid- to long- term target. My wild guess is 80 in 6 months.

Performance:
COF, along with much of the market, has had a very strong past couple of days and it would be natural for a short pullback. However, the fundamental trends continue to be in favor of COF in addition to the support for the entire sector by the Fed, and the move above $70 for the stock is a technical breakout that suggests any pullback that holds above $70 should be bought. That should be true here as we head into an expected earnings beat.

[add chart]

Trading plan:

Searching for Alpha

The Value Investing Congress took place on September 16th & 17th in New York. It's time to review their picks and put together our own trading plans.

Here's the performance breakdown from October 3rd, 2012 until August 29th, 2013:

- 17 out of 21 picks outperformed the S&P 500
- Average performance of picks: +49%
- Performance of S&P 500 over same time frame: +13.3%


Jeff Ubben's Picks
Long Valeant Pharmaceuticals (VRX) +77.1%
Long Moody's (MCO): +44.2%
Long CBRE (CBG): +14.3%
Long Motorola Solutions (MSI): +11.7%
He also mentioned these names: Halliburton (HAL): +42.5%, Adobe (ADBE) +41%


Mick McGuire's Picks
Long Gencorp (GY): +50.5% 
Long Brookfield Residential Properties (BRP): +39.6%
Long Alexander & Baldwin (ALEX): +28.7%


Alex Roepers' Picks
Long Rockwood Holdings (ROC): +34.9%
Long Energizer (ENR): +34%
Long Clariant (CLN VX): +33.9%
Long FLSmidth (FLS DC): -5.7%
Long Joy Global (JOY): -45.1%


Whitney Tilson's Picks
Long Netflix (NFLX): +409.8%
Long Howard Hughes (HHC): +46%
Long Berkshire Hathaway (BRK.A): +26.1%


Guy Gottfried's Picks
Long Canam Group (TSE:CAM): +81.2%
Long ClubLink Enterprises (TSE:CLK): +19.1%


Bob Robotti's Picks
Long Calfrac Well Services (TSE:CFW): +34.8%

These guys are pretty amazing, aren't they?

Here is the list for 2013 picks. Special thanks to Market Folly for putting all things together.
Guys, let's do it!!!

Value Investing Congress Notes: New York 2013

the Awesome Portfolio Checklist

sorry for my absence. me on road all the time.

here is a checklist i need to document. i will do some write up on it later when i get chance.

The Awesome Portfolio Checklist.pdf

Stay Hedged for now

This is the update of SPX daily. As I expected, it formed a lower high and stayed at 38.2% fib level. Tomorrow we will get Employment data. Not sure what will happen, especially with tapering getting closer. It is too risky to stay in cash. I have to hold positions hedged with options and volatility ETP. Let's see how it it going.

This is the EUR hourly chart. It is a crab pattern. Statistically Crab works well.

Thoughts on metals

silver

gold

(TBC)

9/3 new week

8/30 Update: Support, Resistance, and Volatility

Update to an old chart.

I still have long positions. I don't feel right at this moment. I am thinking of unwinding.

settling down after a 9:1 day

So far I read a Double Bottom in at ES 1625 area.
So far this pull back from 1670 is unexpected but quite healthy. We did get a significant signal yesterday, a nice 9:1 down volume day. (A day when 90% of the volume on the market was negative). I have been waiting for that, in fact the lack of that signal was what convinced us that the low for this correction was not in yet last week.   I want a 2nd 9:1 day like in June to complete the selling.

 [Add chart when I get chance]

VIX also needs a rest. I am guessing a rebound is due with target at 1650 area.

  [Add chart when I get chance]

We have one more chance to reallocate and clear some unwanted positions. I will wait patiently for the next signal.

Here is another reading on the similar indicator.

http://www.thereformedbroker.com/2013/08/28/chart-o-the-day-significance-of-90-down-days/

Thursday Morning Reading

How We Get to S&P 1800

1 thing I agree with is the market should not be too weak. I also see "S&P 1800 before 1400."

How’s The Long Term Health of The S&P 500 Looking?

Long term support at 1550. Even bearish as I am, I don't see 1550 in near term. 

Technicals and Seasonals Suggest Late August Bounce

Possible.

News Headline:
Fed's Jackson Hole summit begins today but with Bernanke not in attendance. What's my expectation? No major decisions expected to be made. Non-event again. They are going to defer the decision making until they cannot.

Event or not

Ahead of the FED minutes, I am sitting in my office and guessing, will this be an event or not. I think the SP index is posed for both sides. If tapering starts, it will go to 1600 in very short period of time. If it is not, a rebound is likely due sooner or later. I believe the up target is around 1670s.

Is it time to go long? I don't think so because we are going to face the same situation next month. It is time to re-allocate and re-balancing. For the rebound, builders, mortgage industry, financials may have good chance. In the long run, I still prefer technology, industrial and discretionary spending.

Market Breadth

Quote of the day:

“Markets can remain irrational a lot longer than you and I can remain solvent.”

By John Keynes

 Me down at beach enjoying sunshine (if I can spot any). Life is good. The only reason I want to make this post is I come across the quote above today. In other words, don’t fight the trend just because you believe it should be going in the other direction. Usually the market does not moves in a straight line, but we know in 2013 that the Fed’s balance sheet was going to expand in a straight line and U.S. stocks have been more highly correlated to the Fed’s balance sheet than ever. If it has to go up, then just let it go up.

S&P 500 Index (SPX)

The advance to 1710 on August 2 is beginning to look like a potential Head of a small Head & Shoulders Top pattern. If set off by a close back below 1680 the minimum downside measuring objective will be 1650s. Since trends require increasing open interest, when it declines as the futures make new highs it signals profit taking by the bulls as they close positions. Since the top at 1710, I see continuous decline in Open Interest. Although volume is lighter than normal in August, declining open interest is a good reason to start watching for a potential trend change.

When the VIX index is low and starts advancing, the SPX tends to top. There is chance VIX is turning. A close above 14 would be a good reason to consider implementing some hedges.

[to add chart]

Breadth of the market

This market is hard to trade recently. One observation is the weak market breadth. Recently a lot of technical blogs are talking about Hindenburg Omens. I discussed it before. Here is the wiki link in case you want to read.

There are a number of criteria that set off a Hindenburg Omen, I am not sure if I totally understand it. Here is my quick and dirty explanation. It occurs when the market index is trending higher, but there are more declining stocks than advancing stocks. It could also happen when there are an unusual high number of new 52-week lows in an up-trend market. Last week we saw Hindenburg Omen four times out of the five trading day week. In fact, the last time we’ve had so many HO so closely together was in November 2007 after the S&P 500 had put in a multi-year peak.

The most common index for breadth is NYSE McClellan Summation Index. It declined every day for the last two weeks creating a divergence as the NYSE Composite Index advanced. As a reliable leading indicator, the decline reflects more issues declining than advancing. 

 [to add chart]

Until breadth improves, I am going to delay new long positions and start considering hedge ideas. I don’t know how high the S&P 500 can go, but I know that it can go farther than most people believe it can and the top indicator continues to trend higher. I am expecting to add my long when S&P 500 getting close to 1,600.

Why exit Real Estate

Plan for this week:
With the Q2 earnings season winding down and nothing major on the economic calendar in the coming days, the stock market may simply be lacking in catalysts. After last week’s mixed economic data, it is hard to tell direction. The uncertainty comes from Friday’s soft jobs report. Normally a miss expectation job report should lead the market down a lot. This is going to be offset by the possibility of the tapering event. The bad part here is the report failed to throw up any evidence of improvement in the economy, it wasn’t bad enough to stop the Fed from contemplating the ‘Taper’.

Again, I think the overall market is efficient at this moment. Investors seem to be hoping that everything will continue breaking out in favor of stocks.  This week is going to be earnings driven. Good earnings will drive up. It has played out that way lately since people believe improved economic growth and stronger corporate earnings will offset higher interest rates.


This week's ER schedule is not very exciting. The research I subscribed gives me 14 shorts vs 4 longs. I am going to trade couple. If I have time I will post here.


--------------------------------------------------


I received a question on why I exit RE even though the signal is still positive. I found a chart from Kimble which explains it pretty well. This is not a good time to invest in RE for a prudent investor like me.

LMP Aug 2013

The 5 IVY portfolio components are 

• SP 500 (Risk ON) 
• MSCI EAFE (The Most Famous International Index) (Risk off)
• U.S. 10-Year Government Bonds (Risk off) / USD (Risk off)
• NAREIT (U.S. Real Estate Index) (Risk ON)
• SP GSCI (Goldman Sachs Commodity Index) (Risk off) / GLD (Risk off)
• US Dollars / UUP (Risk ON)  

There is no change from last month. In the charts below, the lighter color Moving Average is 200 Day, which is very close to the IVY Portfolio setup. 
In my last post, I posted a quick note from GS on bond yield. There is no doubt the FED is going to tape the money flow very soon. In the near future, they can reduce bond purchase and increase interest rate. Currently in the market, it is widely expected September is the month it will start.
Nevertheless, USD is going to go up, and everything priced in USD will have a hit. Bond and commodity are obvious. Real Estate is a hidden one. International market maybe slightly different. If they can grow faster than USD appreciation, the stock will advance. I however do not see that at this moment. In the CFA book club, I was keeping on talking about China data and commodity correlation. China growth rate will not go lower, but it is just nominal. Screw it. The real situation is not good. They need at least another couple years to figure out what to do and fix the damage on negligence from last administration. 
 
What should we do? Again this is a million dollar question. This is what I do:

• 20% in cash, (if USD is going up, things will be cheaper in the future. I want to keep some cash to buy things later. Does this one smell like the problem in Japan? I will follow the 12 month signal on this one.)
• 20% in gold and silver miners, (refer to earlier posts of my view on precious metals. It's cheap now. It will be stabilized. )
• 20% in SPLV the SP500 low volatility ETF, (Refer to my view on volatility. It has return of only 15% YTD but good enough for me.)
• and the rest 40% in short term trading. (It's chasing Alpha time. Let's do it.)

Dodge and Duck

The market makes me uncomfortable. I am trying to lower my Beta today. Couple things I am doing, selling calls on couple high beta stocks as I discussed earlier. Then I did a beta weighting again and trying to use ES shorts to reduce my portfolio beta to 0.
This is a long process. I will definitely get the job done by COB today.
Over the weekend, I will update the LMP signals.

Before lunch addition: something is going on causing lost of info.
Hope this will work.

ER play for tomorrow 8/1

Thoughts on Earnings

Here is a list of stocks that are going to release their Quarterly earnings tomorrow.

UPL:

It is an earning beat plus short squeeze play. Current expectation is set to be 42 cents on revenue of $235 million. The current short interest is extremely high at 22.8%. This stock has been trending sideways for the last two months. A high-volume move above the upper end of its recent range post-earnings could trigger a big breakout trade for shares of UPL. I expect an EPS of 45 cents and meaningful beat in revenue. The projected price range on Friday is $1.

Trading plan:

Sell Aug 21p for 0.40

This is not a high volatile stock. I don’t expect parabolic movement tomorrow, thus a covered put short strategy is used. Long stock also works but I want to keep my exposure low at this moment.

Breakeven at 20.60. Max gain 0.40. Max loss 20.60.

  

AIG

AIG is expected to post a smaller profit for the second quarter as compare to last year’s net income of $2.33 billion, or $1.33 per share. The question is how much is the decrease. Analysts, on average, expect adjusted earnings of 86 cents per share, and $9.21 billion in net premiums written, according to FactSet.
Insurers like AIG collect premiums from customers and invest that money into bonds or stocks. Higher interest rates boost their earnings. Other than the monster tornado that struck Oklahoma in May, the insurer likely benefited from fewer major weather-related catastrophes in the U.S. this year. AIG is going to make less income from bond portfolios due to increasing yield and tapering expectation. Doesn’t matter how I plug my numbers, I still believe the chance AIG reports income less than $1 per share is really low.
If the earning is greater than $1, AIG has good chance to test 52 week high of 47.68. Projected movement is 46.57.
Trading plan:
Long 8/2 46c 0.72
Short 8/2 47c 0.40
Breakeven at 46.32. Net position is 0.32. Max gain is 1.00. Risk reward ratio is 1:3.
 

SYNA

Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Synaptics's revenues will increase 66.3% and EPS will grow 129.6%. The average estimate for revenue is $228.8 million. On the bottom line, the average EPS estimate is $1.24.

Earnings whisper is $1.38. I am expecting even more than that. SYNA should have no problem to be at 42. My problem is I cannot find good options to trade it.

I will simply short 38p to collect the premium of 1.20.

LNKD

Last year I said Linkedin makes sense, facebook not. Eventually FB crawl back to the IPO price of 38, while LNKD is a little bit more than doubled here. Tremendous user growth and diverse revenue streams are why people are paying such a high price for this stock. The different ways LinkedIn makes money make it different from any other social media company. LinkedIn also scales extremely well. The bigger the talent pool, the more companies will come to hire. This in turn draws in an even bigger pool.

I think it will beat the expectation, but I don’t have a plan yet. I will listen widely tomorrow for trading plans.