LMP Feb 2015 Update with Hedge Ideas

Below is the signal overview based on Ivy Portfolio Method.

• SP 500 : $SPY (Risk ON) OVERRIDE
• MSCI EAFE (The Most Famous International Index) : $DEM (Risk off)
• U.S. 10-Year Government Bonds : $TLT (Risk ON) 
• NAREIT (U.S. Real Estate Index) : $VNQ (Risk ON) 
• SP GSCI (Goldman Sachs Commodity Index) : $DBC (Risk off) / $GLD (Risk off)
• US Dollars: $UUP (Risk ON)  

Over
Overall, the LMP returns about 22% over the last 14 months. In the charts below, the lighter color Moving Average is 200 Day, which is very close to the IVY Portfolio setup.

HOWEVER, I want to override the signal this month. As a derivative strategist I believe it is time to hedge portfolio. 

This is a market making me uncomfortable. I made the following trades.

1. I closed out $SPY Friday. I will discuss this in another post.
2. I park all my $SPY proceeds into $TLT. I also created a collar on my $TLT holding, that is to buy a put to cover the downside and financing it by selling a higher strike call. That is a hedge to the downside.
3. $VNQ options are not active, so I decide to switch to IYR which is iShares Dow Jones US Real Estate Index Fund. I still like Real Estate investment. It provided close to 35% return last year. I will closely monitor it in 2015.
4. $UUP is doing well. The actual % holding drop to 38%. It is still very close to my 40% target rate. I don't feel I need to do rebalancing. There could be small fluctuation. Since options are cheap, I can buy 1 side at any time.

Recap, now my LMP holding is 40% $TLT with collar, 20% $IYR, 38% $UUP and 2% cash. The portfolio pretty much gives away upside. I am using small money to trade   

   

a pack of oil related charts

Here are couple charts on OIL and related trading products.

This is /CL 4h chart from yesterday. I see a bullish cross and indicators turning bullish.

This is $ERX hourly. I see MACD RSI both showing bullish divergence. I believe it is pointing 52.

Below are 2 charts from fehro:
$USO gaps and trend

$WTIC EOD showing a hammer.

fun fact: There is never a down year ending in 5 thru out human history

And here’s a fun fact: 2015 of course is a year that ends in a 5. For what it’s worth, going back to 1905, the stock market (as measured by the Dow until 1925, and then the S&P 500 thereafter) has never been down in a year ending in 5; with the average return a whopping 32% (and only two years without double-digit returns).

http://www.schwab.com/public/schwab/nn/articles/Levitate-More-Market-Mood-Swings-in-2015

TWTR charts from me and my friends

I see a bullish setup. I am playing for 43 then gap fill at 46.5, and I am hoping for 52.5 hit before summer.

Charts from my friends:

fehro: TWTR daily fwiw.. just under 50d.. possible channel resistance.. volume not huge.. yet..



BullBear52x: It's on a buy. need this breakout to fly higher.

MNKD daily setup

What I have:
1. multi-test 5 level
2. series of higher lows
3. diamond breakout.

What I need:
1. continue the demark count
2. get out the dark cloud
3. register a RSI buy signal either today or tomorrow
4. take out previous high at high 6s
5. take 7.25 VWAP

Time frame: before March expiration
Measure: 7.25/5.64 = 28%

Market watch and CNN money 2015 list

When I search online, I found 2 more lists.

Marketwatch List: It is compiled from 3 newsletters. 

1. Buy back letter: 10.8% annualized returns since March 2000, compared to 3.8% annualized for the Wilshire 5000 Total Market Index, according to Hulbert Financial Digest. picks: YHOO, AAPL
2. Motley Fool Insider Value: 14% annualized over the past 10 years, compared to 8.4% annualized for the Wilshire 5000 Total Market Index. picks: ICON, LL
3. Investment Quality Trends: 11.1% annualized since March 2000, compared to 3.8% annualized for the Wilshire 5000 Total Market Index. picks: CVX, XOM, COP, HP, IBM, T

CNN Money - 7 top stocks to buy for 2015 - QCOM, GOOGL, WWAV, SEAS, AAPL, FB, TSM

Barron's 10 Favorite Stocks for 2015

Barron's posts a favorite 10 list every year. The list has a good tracking record.

2011: trailed the benchmark index, falling 7% as the S&P dropped 2%.
2012: gaining 17% against a 12.6% rise in the S&P.

2013: gaining 35.2%, nine percentage points better than the S&P 500.

2014: gaining an average of 18.1%, compared with 15.7% for the Standard & Poor’s 500 index. US Airways, now part of American Airlines Group(ticker: AAL), and Intel (INTC) led the pack, returning 133% and 51%, respectively. The worst performer was Barrick Gold (ABX), which lost 31%.

1 small thing to mention is Barrons changed publish date from first week in December to last week. The performance data may be slightly different.

In the 12/27 issue, Barron's wrote:

Two themes to watch next year are how consumers will respond to low gasoline prices and how investors will fare if the Federal Reserve raises interest rates. But these play only peripheral roles in our picks, because we’re more interested in good stocks than good themes.
Don’t expect stock gains to come easy in 2015. In three years, the S&P 500 has risen from a humble 11.7 times next-four-quarter earnings estimates to an ambitious 16.5 times. Shares look likely to rise in tandem with earnings from here, and the estimate for earnings growth next year stands at 8%, according to FactSet.
If there are any themes to our list, they are hidden strength, overblown fears, and underappreciated growth potential.

I second this observation. I believe 2015 will be a stock picker's market. Active manager will eventually get a chance to keep their job.  

Here are the list and brief reasons. General Motors (GM) and Bank of America (BAC) are doing much better than their decimated 2014 profit statements suggest, and most of this year's bad news won't repeat in 2015, sending earnings soaring with or without growth (likely with). David Copperfield once made a jumbo jet disappear, but Boeing's (BA) magic trick starting next year will be to collect billions more in free cash than it reports in earnings. Speaking of magic, American Airlines Group (AAL) shares have doubled in 2014, but the carrier's valuation has shrunk. American and Micron Technology (MU) aren't getting nearly enough credit for profound improvements in their industries.

Google (GOOGL) and Royal Caribbean Cruises (RCL), meanwhile, have more growth potential than investors have priced in. Fluor (FLR) can soar if oil rebounds—and do just fine if it doesn't. Macy's (M) is an e-commerce whiz disguised as a 156-year-old department store. Gilead Sciences (GILD) is, well, complicated. But its shares look cheap relative to even bearish assumptions. 

Barron's link
Barron's: Our 10 Favorite Stocks for 2015