Market wants to break out 5/26/14

The market wants to breakout, my bones say. It has pushed its head above the sideways range it has been bound by. But I don’t follow what my bones say and without my ICE buy signal on SPY, I will stay out on my 401K and only trade individual stocks like GD, SU, TAN, CL and look towards trading NASDAQ e-mini futures (NQ) using a daily system. That is likely to move a lot more. Even 1 contract of NQ can move $1,000 on a daily basis… and I will only be watching it end of day. The charts do not show any real signs of breakdown yet. But one can make a lot more money on NQ when the markets fall...

I have been reading a book called “Timing the Markets”. I will write about it after I finish reading it. Interesting theories combining the November – April buy stocks and sell in May, along with Presidential election cycles, as we are now in mid-term. Research done by Vakkur. I was surprised to find that we have not had any down years during an election year cycle over many past such events. I will have to do some research on this myself. Combining the two with technicals and loading up sounds very attractive.

SU has now given a down signal and I have an open sell order on limit for my Call options for Tuesday. Today is Monday, memorial day and a holiday. I will buy put options and look to trade the down side on it, although I don’t expect a reversal as it made such a strong mover upwards. But mine is not to question and follow my signals.

See chart on SU below.

Next I have a sell order on GD which I have been trading in and out. Fairly frequent signals and it has done quite well. See chart on GD.

Finally I have a trade active again on RFMD. Just got in. Also see a buy signal on TAN and I will go ahead and place a trade on that as well for market buy tomorrow morning.

I missed taking advantage of the upward momentum from the Indian elections. After Narendra Modi (NAM) was elected, the Indian markets have been on a tear upwards. There is a lot of hope that he will fight the lethargy and old school thinking that had pervaded the previous Government.. 

401K Monthly Analysis – A Sideways Muddle 5/11/14

The S&P500 (Exchange Traded Fund known as SPY) has been muddling sideways for over 2 months now. Longer if you consider a small movement irrelevant. The Dow Jones just established a new high but the Nasdaq 100 continues to show weakness keeping SPY balanced sideways. There are two possible outcomes. Up or down. Which way will it go? My chart on SPY still points to an exit long, or down, so that is the stance I will continue to take. That means I am exited MY ENTIRE 401K funds and sitting in money market type fund.

Meanwhile my monthly 401K system still wants to keep me in various stock funds. In my current employer’s 401K top of the list is Spartan 500 Index, then Fidelity Eq Income and Fidelity Large Cap… interestingly those are some of the ones that are contributing to making Dow Jones 30 stocks hit its record highs.

In my previous employer’s 401K I see a more aggressive selection. Topping the list is Cohen & Steers Realty, then Domini Soc fund, followed by Vanguard Inst Index. Lazard Emerging markets is also perking its head behind these.

Such is the story on momentum based fund selection in our 401K. Me – I will sit out till the weather clears. It is cloudy. No storms yet. The clouds may very well clear or maybe not. I set up my rules and follow them.

Making Big Money 5/4/14

How does one make big money in the stock market?

George Soros’ Chief Technical Analyst was asked the question that since he figured out the trades for George, what was the difference between him and George Soros in trading? After all George was following his direction regarding the currency trade that almost brought the Bank of England down. The answer given was George had a lot more “Kahunas” then he had. In other words George was a much bigger risk taker. In order to make big money, one has to take more risks and put more money down on the table. That goes contrary to what I want to do, as I am not a big risk taker. Therefore even with my great technicals. I make small amounts of money as I take small risks..

Here are a couple of examples of stocks that have done well that I trade. RFMD is the first one. I made a modest amount of money on it. I missed the re-entry signal and after placing a couple of limit orders, did not manage to get in. Meanwhile an associate of mine purchased $75,000 of RFMD and rode it up from $5.50 to $8.65. His trade netted him over $45,000 and he is still in it. The risk he took was that this trade was on an account that was about $95,000. His position sizing suggested a significant risk, although I should point out he had thoroughly checked out the company;s fundamentals and felt he was on solid ground. I am back in it with a small position again based on technicals. Incidentally the trading system I am using is simply a MACD with a 9 exp moving average cross. See chart below.

The next trade I am in is SU. This is a company that makes oil from sands… the latest energy craze. In this case I saw that there is very good option activity on the stock. So instead of risking capital by buying the stock, I purchased straight call options. Call options increase in value as the stock goes up. Back in March I purchased June call options at a $34 strike price. The price has shot up from $33 to $39. My call options are up 400%. I made decent money but not obscene money. Why? Because I did not buy a very large number of call options. I am still in this trade but the old adage goes “No risk no gain”.. I remind myself that the rich got there by taking large risks at some time in their lives. I feel I cannot do that with our portfolio as I am obligated to provide funds to my family when I am no longer here….the downside of making lots of money is losing lots of money…