RFMD Breakout 2/24/14

I have to thank a friend of mine who brought this stock to my attention… He mentioned how good the fundamentals were but the stock  (RFMD) had still not popped. He bought a bunch and made a ton of money when it rose a little, and then bought some more. . Hope he does not quit his job now because of the profits he made. My plan was to use the technicals and get in each time I got a buy signal and exit on the sell signal. I had a modest position at the last entry signal. Then I missed the add-to signal shown by the small arrow up. I should have gone in with a market order, but instead placed limit orders that did not take. Shoulda woulda coulda… Got my second entry signal Friday on the drop. Put in a very modest add to…. And it popped and took me up with it…20% jump.. Nice…sometimes it all comes together…

See chart below.

Active Trading vs Passive SPY Returns 2/23/14

In my last post I was asked a great question…

“How does the rate of return of your active trading approach compare to the rate of return of an unmanaged index like SPY with dividends reinvested? How do the annualized rates of returns compare on a 1, 3, 5 and 10 year basis?”

This question has a simple answer but requires some explanation… The S&P500 (Exchange Traded Fund to trade S&P500 with ticker signal SPY) has way too much volatility for my stomach. SPY’s returns can be very nice and beats most fund managers but I cannot accept a 30% loss year after year during a major recession. It is possible that by just using SPY and selling calls on SPY one could beat SPY. Or I could beat it by trading SPY with technicals like my ICE trading system on SPY… but I also worry about what happened during 911 and the likelihood of an overnight event where the markets would open up with a 20-25% loss when I am heavily invested in SPY. Unlikely event for sure; but the way I handle that eventuality is not fully investing in the stock market. I keep my powder dry which also produces less returns. When ICE turns negative on SPY (and it is  negative – see chart below – blue bubble is an EXIT sign against the previous Up signal) I pare down on my 401K drastically. See ICE system on SPY below.

Trading returns are a function of technicals, money management tools and our own psyche. I believe I have excellent trading systems. I am very cautious on money management which reduces returns as my psyche is conservative. What people who want astronomical returns don’t realize is that high returns typically require higher risk of loss… that means in chasing a high return like 20-30% the account could see drops of 20-40% at some time or other. Most people want the high return but would fire their fund manager after a 15-20% drop…I prefer to use a system more like the Ivy portfolio by Faber and Richardson using 5 sectors and tactical asset allocation… this is known to yield about 10-11% returns on an annual basis with loses of no more that 3-4% in any year over the last 25 years of back testing…That suits me much better than the volatility of SPY. So in a year like last year, it will fall well behind SPY’s returns. This has been frustrating for me – I admit, even though I know the reasons.

I  manage my 401K with my current and last employer, and also a few R/IRA accounts that are with brokerage firms. I use the Ivy portfolio system and options on my R/IRA accts. My 401K system is a monthly momentum system riding the fastest movers but when ICE says down on SPY, I am out of there…. and sitting on the sidelines in a fund that returns 1%. ICE may generate a false signal but we cannot forget that the market has been up 4-5 years now and is likely to see a significant drop at some time …I do not want to be riding that down. In 2008 I was flat in a very down year… and that will be again my goal next time around.

In order to spike my returns on my R/IRA acct, I have taken about 16 stocks, developed very quick in and out trading systems and am following it to generate higher returns. Stocks in this pool are diverse like AES, CL, F, GD, HOG, HOV, HRS, KO, NAV, NUGT, PFE, RFMD, SU, SNDK, TAN and X. Still not fully engaged in all these; just some as I am still not satisfied with some… my expectation is higher returns with this but I expect this list to narrow later this year. I am starting small with this for 2014 and sharing “use” with the Ivy portfolio system in my R/IRA acct and typically only 30-60% invested.

I believe the big money and returns are elsewhere and not in the equity markets… and I have my eye on it. No – I do not trust the Forex markets.  But I am developing a very active trading system on Nasdaq 100 e-mini futures…  I am currently very active on my job which involves advanced engineering management of innovation type projects. I have limited time to developing this.. but it is always on my mind as I could easily beat SPY returns making just an average of 6 pts a day on Nasdaq 100 e-minis…My long tem goal is to trade this aggressively with only 10-15% of my account while the rest remains in a safe state… more along the lines of what Taleb would suggest… the key to that is finding a safe managed futures trader. I hope that will be me one day. 

Markets Up - 2/15/14

The markets have once again shown remarkable resiliency and surged up after a brief pullback. Some of my signals showed up mid-week but I was unable to post on my blog then. It has been a hectic week for me; including being stranded in Detroit for a night because of bad weather in the South… imagine that.

Dow Jones 30 is pointed up. So is the Nasdaq 100, and even Gold Miners ETF NUGT looks like it has some life. I have been entering long as directed, except I do think we are starting to top out based on stochastics. Trying to second guess the market with an indicator like stochastic can be disappointing and although I have entered, am far from fully invested. I purchased IYR again, SPY and also NUGT. Still riding high on RFMD… which is up around 20% from my entry point. My position is relatively small, so I am not looking to retire from that trade! Besides, till I close the trade, it is simply profits on paper. I had a brief chance to add to, tried a couple of buy orders using limit orders that did not take and chose not to chase the stock. If it pulls back, I will add to my position. If I get an exit signal, I will get out immediately… in fact I may take some off the table next week…

I am still holding some put positions on SPY that are now underwater… insurance that is costing me right now..

401K Choices for the Month 2/8/14

Time to make my monthly choices on my 401K… first I look at the S&P500 and see what it says… and currently the chart for SPY is still pointing down. That means I am going to stay conservative with minimum presence in the market. I am still staying in the Fidelity Div Intl fund. The only reason I am in it is because of the painful 2% redemption fee the fund (Fidelity) charges if I don’t stay a minimum of 29 days. I have just crossed that threshold and will be looking to pare down further.

If one wants to be more aggressive an follow my monthly momentum system by itself for putting monies into the top moving funds, then in my current employer’s choices the picks would be: Fidelity Large Cap, Fidelity Div Intl fund, Fidelity fund. Fidelity Blue Chip Growth is also a valid choice behind these three. I am only in Fidelity Div Intl however and looking to pare down as SPY is pointed down. If SPY points up again, these are the funds I would go back into.

In my previous employer’s 401K fund choices, one would be in Domini Social Equity fund, TRowe Price Intl fund and Fidelity Div Intl fund. I am again only in the Fidelity Div Intl fund. 

Here is what that chart looks like for the Fidelity Div Intl fund…

What perks up, can turn South 2/3/14

“IYR and VNQ (Real estate ETFs) are showing upward signals. In my Ivy Portfolio selection I am currently in AGG (Bond fund) and now will put money into IYR (Real estate fund) at market open Monday. “

That is how my last post went. But sometimes what perks up turns South in a day.

Today we had a big down day. Dow Jones 30 was down over 300 pts and major indices like the S&P 500 (SPY) and QQQ all turned downwards over 2%. Unfortunately the IYR turned down as well and my trading system did a fast turn around from up to down. Yes, I purchased some IYR this morning at market open but tomorrow, I will be selling it at market open and closing my position. Why? Because I will follow my system even if it means it turns tail in a day.

In the end I believe we need to cut our losses quickly and hold on to our winners.

What is Perking Up? 2/1/14

January 2014 has been a down month… some stocks have dropped as much as 10% from its 2013 highs. The major indexes are down 4-5%. Emerging markets has been showing weakness even earlier. My decision to buy some SPY put options early January has been profitable so far. Put options rise in value when the underlying drops. I am also pared down on my 401K.

Meanwhile Fidelity lectures me for pulling out of funds without being invested in it for more than 29 days. I am still stuck in a Fidelity International fund because they will penalize me 2% in redemption fees if I pull out faster than 20 days. Frustrating. This is why I will never own a Fidelity investment account outside of my company 401Ks. I know friends who will never pull their money out despite getting warning signals… it is hard to get rid of the 4 years of upward euphoria we have been enjoying. It seems unlikely the market is likely to crack. And instead just keep climbing forever…but

I follow my systems and they have flashed exit signs on many of the major equity indexes. So what is perking up?

IYR and VNQ (Real estate ETFs) are showing upward signals. In my Ivy Portfolio selection I am currently in AGG (Bond fund) and now will put money into IYR (Real estate fund) at market open Monday. See chart below for IYR. I am out of the 3 other sectors, US equity, International equity and Commodity funds.