Stocks v Metals

Stocks finally went up today. I didn't think I'd ever see that again. The metals are essentially a safety play and they went the other way. If you came to the table late it's probably a very good idea to not let GLD, or whatever it is you're in, to run too far against you. Remember you can always go back in - later. 

My PGM and SLV positions got taken out today. I'm now only left w/ a position in the gold futures market.  Reviewing my SLV position, it worked out pretty well. I initiated based on my first model signal back on January 20th at 11.15. I added on (2x) to the position  and got stopped out around the 13.60 area. This is a trade that will completely collapse if the stock market were to take off from here. If Obama's speech is favorably received tonight, and stocks move higher overnight and tomorrow, my Gold position will be taken out as well. That's fine. I want to be among the first ones out. None of that believing stuff. Pure numbers. . My philosophy is to not let too much of those profits get away at this point. This is a base hit. A double at best. No jumbo sized profit. It is what it is.  If the trend in the metals reasserts itself, fine, I'll get my signal and start all over again. I don't have to concern myself with a collapse w/ me in it and worst of all giving back my gains. 

Last night, what I could tolerate of Craemer (about 3 or 4 minutes) I heard him going off about how great Gold is. He may very well do it for the unteenth time, getting his followers in at the top. Follower - those that believe that Cramer actually knows something. He's just like you and me and doesn't know squat. Again if stocks take off (I'm not saying that they will) but  it's clear that Gold is going to get crushed. 

I aslo got knocked out of my PGM trade for a small loss after the hard stop was ratcheted  up to just below break even. That ETF was performing very poorly after I entered. 

There was a really nice trade to be had in the ES (mini) futures today. Nothing better than a trend up or down day for that vehicle. Quite frankly, I've had more than my share of Down days and don't want anymore for the time being.   This contract has the potential to be really explosive - for and against. This is a very dangerous trading vehicle for someone who can't get out of their losers fast. Trust  me on this one. This little old mini has the potential to take everything you got if you mess up with it. . If you suffer from  loseitis , stay away from the futures. Period. 

Anyway, in the ES, the first buy signal came in at around 10:00 (1/2 hour) time frame. that got subsequently stopped out. Got another sig around  the 12:00 (1/2 hour) time frame and gave it another shot. That one took off. After they take off the idea is to start ratcheting the stops up. Now. Do I take my profits or let em go? How many times does one have to get knocked in the head before they smarten up  a little? In my case its one more time, because I'm letting it go. Again if the Obamamister is well received this could really turn into something nice. Otherwise I lock in around 12 mini points. Factoring in the earlier lose, the net is around 6 mini points. There was a decent trade in the AUD as well today using the same principals as the ES. That one's gone. The currency markets have really sucked  and been really erratic. I've been getting stopped out of almost everything there of late. 

Don't be surprised if the markets crash tomorrow.. That's been the pattern for several months now. 

Welcome to The Jungle

This week is as bad as they get. Down, Down, Down -- w/ no let up in sight. Undoubtedly, he Value Mavens (who I personally don't think very highly of) still  have an excuse for everything. But does anyone listen to them anymore? Doubtful. I think the Value Gang  blew whatever credibility they once had. The problem is that the value investing methodology has a gaping hole in it. You get crushed on the downside. Obliterated! There is no doubt about it; rule #1. An investor must have an exit strategy when things backfire.  Value investing doesn't offer a way out.  It's built on the premise that the investor made a correct judgment in guessing the company's true value. If you get it wrong, good luck. So therefore during bad ass recessions, depressions, or flat out end of the world scenarios, value investing will lead you straight into the poor house. And that's what is happening now. Does anyone doubt that this thing can't go any lower. I have no idea where this massacre is going to end, but Dow 4900 is a possibility in my book. As is Dow 6900, Dow 5900 or Dow 2500 - I just don't know.

Year to date, in what 7 weeks, the Dow is -16.1%, DJT -15.1%, Rus 2000 -17.5%, Value Line Comp -24.9%, SPX -15.7%, and NYSE Comp -16%. I mean this isn't a bad dream, this is our worst reality. It's hard to believe, but it is! Welcome To The Jungle!!!!!

And you're going to listen to these kooks about dollar cost averaging, CNBC gibberish (Craemer and Fast Money) undervalued blue chip names, cash flow value gobbledygook, govt watching your back. Forget it... All you've got is you and so far the only safe place has been cash. Something that Buffett riled about in some crazed NY Times piece where he opined about following a hockey puck and robins in spring. What the hell was that about? 

The world is changing right under his big brained nose and he can't see it -- that's what's going on imo. Listen I don't have the big brain that the old goat in Nebraska was blessed with. But the one thing I've got is flexibility and the ability to change. Being cemented to one way of thinking or some  ideology is the kiss of death in investing.  Right now I don't give a damn about earnings, cash flow, dividends, moats, good deals, or undervalued buys. All I care about is price. That's right price...... Why? Price doesn't lie. Price determines the bottom line and that's all that counts as far as I'm concerned. Not some pie in the sky theory about what's going to happen in the future. If it's going my way, great. If not, it gets tossed and fast. That's what's keeping me alive in this wreckage. If I had listened to those nuts and continued buying up the cheap merchandise, where the hell would I be. Probably out in the street w/ a can in my hand, while those clowns in mutual fund land keep skimming from their investors. 

The law of averages may have finally caught up with Buffett. Only time will tell of course. His portfolio of stocks like WFC, BNI, GE (p), MCO, COP and just about everything else is getting crushed. His very own BRKA is in the crapper too. Where's Mr. money bags now? I ask, why isn't the old goat buying back his own shares ? Aren't they a great bargain? He loves it so when other managements buy back their shares at discount prices to "intrinsic value" (i.e., intrinsic bullshit). He calls it a prudent allocation of capital. Where's the master allocator now? I guess its the old Buffett double talk again - do as I say and not as I do. BTW - I wouldn't read that 900 lb Snowball book, about Buffett for anything short of saving my life. 

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My week started out slowly. Pretty much broke even on Tues and Wed. I knew Tues was going to be real bad after Europe and Asia got hammered on Monday (we were off for the Prez holiday). And it did. In my last post I mentioned that 85% of what I'm doing is systematic... it's probably more like 75% systematic and 25% discretionary. I'm a real convert to the systematic thing. I've known about if for years. In fact I was a big Richard Dennis fan going as far back as the 1980s. But for what ever reason, I could never get it right. The Wealth Lab program from Fidelity gave me the system building part .  Once I figured out how to 1) put on the positions, 2) get out of losers and winners, 3) how much to bet per trade, 4) and keep my dang opinions out of it -- I started relying on it more and more. I really like the "keeping my crazy thoughts out of it" What the hell am I some sort of a genius? Hell no. Just go with the flow. My mantra is that the market knows more than I do, not I know more than the market. 

I started building my models a few years back. They aren't all that complicated. Simply put they place you on the side of a budding trend. That's it. Most trends don't work out. Only about 38% of the model signals turn a profit. The rest are losers. A very smal % of that 38% deliver jumbo sized profits. The idea is to catch one. There will be a few if we ever get moving the other way. 

My discretionary trading is based off of price and tape reading. No indicators, per se. Thursday was horrible. I bought in on a few plays and everything just kept going down. One of my worst days of the year. But I cleared out all trades by day's end. I don't want to hold any of this garbage (especially if they are going against me) overnight. Yes that what these stocks are now - garbage. Flicks on a screen. Pieces of paper. Nothing more.  Thursday I took a hit of 2.4%. That's a pretty big one day hit for me. I was feeling real crappy that night. I usually don't take this home with me anymore. When I was less experienced, I would have trouble sleeping and my bad trading would bring me down  overall. I'm generally past that and sleep great now a-days. I come in Friday, and it's more of the same shit. Down Down Down. This sucks. Good thing I got out of those losers Thursday because instead of going down 2.4% it might be 5% or even more. I was really starting to feel down, depressed - almost like crying but with out the tears. Like shit if you know what I mean. Nevertheless I saw an opening Friday on HIG (yeah that sewage that's going down the drain). I hit it at 6.20 but got stopped at 5.97. Life as usual in my fucked up trading world where you lose moneyat work (I'll save that one for another day). Any how, now I'm feeling even worse. But for whatever reason (it probably has to do w/ my years of doing this and just sticking w/ it) I kept watching. I put on some BRKB at 2260, went back to HIG at 5.93, and but on a big slice of HCBK. It had the look of one of those capitulation moves, after a week of nothing but down, when the Dow hit -200 or so. Long story short I caught it just right and had my best week in a long time. I really killed the market on Friday.

Does this make me a great trader or some sort of brain. No!! Not what I'm trying to say. What Im trying to say is that the market doesn't give a shit about you, your portfolio, your ability to pay bills or your future. Our emotions often get in the way of something good happening. Basically stick to your game plan and ride with the punches through thick and thin. If I threw up my hands in disgust, shut the computers off, and walked around the mall or something, I wouldn't have had my best day in several weeks. I mean Friday was big and just as amazingly "it came out of no where when I felt my lowest".  

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On the systems front -- I got stopped out of my GOOG, Soybeans and Sugar trades. Soybeans was a loser from the start. Sugar was a break even. I moved the stop up to break even after Sugar was profitable. I try not to allow something that was profitable for several days to reverse into a loser. I thought GOOG could turn out to be a big winner but it reversed and was a small winner. If the market shows strength, GOOG is going to be one of my go to stocks on a discretionary short term basis until I get another model signal. 

The metal positions are all working. SLV is going real nice and stops have been ratcheted up. Every day SLV goes higher so do my stops. No way I'm getting caught here if it reverses, I'll be out pretty fast with a decent profit but not anywhere near a home run. Remember - my goal is to make profits not ride trends. Winners ain't going to be turned into losers. Period. PGM (platinum ETF)  stop has been moved up to small lose territory from the original volatility based location. GOLD futures going good with stops ratcheted up accordingly. 

Lastly I was short LCJ (live cattle). I got a signal a while back and put on the position using some discretion of where and when to get in ( I do that some trend followers don't).  A volatility hard stop was placed and at first it almost got hit for a loss. When the market plunged so did live cattle. I covered for a nice profit I used discretion to cover. Why? Why not let it run it's course you may ask? I noticed that live cattle was correlated to the stock market. The Dow Shot up so did LC, and visa versa. I've got enough exposure to stocks, via my earlier comments, so LCJ was acting as a nice hedge that gave me a nice gain. Side note - a lot of times I will remove some of my profits on these trend trades and let a smaller amount ride. Sometimes, I remove it all. It depends. The pure trend follower waits for a signal (price movement against the trend) to exit. I do that also but not always. I'm using a purer approach w/ SLV and Gold. 

My only new systems initiation was in UUP. 

GOOG, SLV

Two up trends  positions. Positions are added incrementally as the trend advances. There is always a hard stop placed, intially based on volatility, then advanced as positions are added. 

 

 

A new initiation late last week was PGM.  Only time will tell whether they work out or not. I don't give a crap how % rates, the stimulus plan, the dollar, or anything else for that matter affects the price of these metals. All I know is that my proprietary models provided buy signals -- so I bought a little. That's it. Same for GOOG. I already added on three times in small increments. If it breaks down into the 340s rather than climb higher, my hard stops will be hit and that will be the end of it. No emotion, no hanging on what they are bringing to market, no conference calls, no BS to cloud my thinking.  This is trading by the numbers. Very systematic. You know exactly where you're getting out so I don't have to worry about GOOG dropping to 100 w/ me in it and watching it the whole way down. 

Alive and Well

I'm still here  trading everyday to make my living. That's because I'm a pro and not one of these amateur hacks that used to flood the bloggospghere, CNBC, and every other media outlet w/ nonsense and drivel. 

This has been brutal but it is what it is. Rome is falling. The good news I suppose is that this dreadful bear market has eliminated a lot of the mooches from the trading ranks. I most say that there were some real retards out there giving advice and blogging about a subject that they knew very little about -- Trading. A few of my friends got wiped out and are looking for work. Why'd they wipe out? They thought they knew something, thought certain stocks were just too low and wouldn't go any lower (bargains?), and worst of all they failed to bail out and even added to losers. One fellow thought that the government would save the day. 

What separates me from the hacks? Smarts.. No... they are probably smarter than I am. Three things, 1) I cut losses, 2) position sizing, and 3) I know that I don't know anything!

Me -- I've made some changes the past few months as I have done for the past 25 years. Persistancy is important as well as a glutton for punishement. A couple of things. Value investing is out -- I knew it was garbage 10 years ago but for some reason couldn't completely let go. I think I'm finally there. Value investing is horseshit because it leads you to believe that you know something when in fact the market is making you look good when things are working. These jokers who preach value investing, cash flow, etc... in reality don't know squat -- that's clear. A fact!  The downside will kill you. Value investing is just another name for cycle investing. Buy when the stocks go down and hope that the market bails you out.  These guys reading annual reports are wasting their time! Plus they got no, nada, exit strategy. You gotta have one or these markets will take everything you got.  It also requires a faith in these companies which I can no longer trust. The managers, executives and boards are a bunch of corrupt conniving whores. Not the kinds of folks I want to invest w/.  Do you want to place your money with Jeffery Immelt with the hope that GE will turn it around. I don't. This decade has convinced me that these stocks are nothing more than pieces of paper. I no longer care what they make, whose running it, what their earnings are, what their projected cash flows are, moats --- none of that bs. I care about one thing -- whether the stock is moving -- Up or Down. I have no allegiance to it, no annual reports, no conference calls (I don't believe what the bozos say anyway). 

I'm   about  85% committed  to trading the trends. Last year I developed 4 wonderful models that provide objective trend following signals. Two models are based on varying breakout time frames, and  the other two use moving average signals. I run them through Fidelity's Wealth Pro Lab which is a fantastic program. I also trade the futures this way. I also developed a intraday  model for trading the futures on a very short term time frame. Catching those bursts in the Bonds, e-minis, currencies. Very little thinking - just following. In essence hitting the micro short term trends (minutes, hours to a few days). I try to keep my opinions to a minimum and just follow the signals. I use hard stops and that's it. What I'm doing is very systematic. This is where my trading future lies until I quit after the next bull market. Dow 20,000 - 25,000 is when I quit and do somthing else. 

A couple of nice trends I caught recently  include SLV and GOOG. On the futures end I put an initial position this morning in soybeans. I've got a long position in sugar and gold and a short position in Live Cattle.