SPY Gives a Down Signal 7/31/14

Markets got whacked today.... think it was the biggest down day this year. My trading system on S&P500 (SPY) gave an immediate exit signal so I will start paring down immediately. I know I can get whipped around but I need to follow my systems. The Dow Jones 30 (DIA) system had given a down signal a few days back. Would have been nice if I had acted on it but complacency in the markets has set in. Today all 30 stocks in the Dow Jones 30 showed down. That is unusual....Still, the moving averages are all in healthy positions. The only problem is markets can drop 10% before people get around to reacting to it.

Here is the chart on SPY

Trading Successfully Short Term 7/20/14

If it is too good to be true, it’s not true... I know enough of trading to know what is real and what is not.
I cannot predict whether the market will go up or down other than either take a chance on a pullback in an uptrend hoping it will continue, or hold on to the tail of an existing trend till it is no longer your friend. Technicals give you fewer losses, and also reduce your upside.

I did back testing on NUGT and found with a shock that all 25 odd trading systems of mine failed to make any money... never had that before. NUGT is a Gold Miners ETF and is very volatile. It moves 5-8% in a day, so it is not for the faint hearted and be wary trading it with any amount of monies as it can move quickly against you.

Typically I get 40% to 100% of the trading systems are profitable based on past back testing. So what I did was take my worst system, largest loss, and flipped the buys to sells and sells to buy... now it looks good... trading successfully is a challenge under any circumstances, and more so when we do it part time. Successful short term trades are best entered when you don't feel like entering...  throw logic out. But keep an entry and exit rule.

401K – Moving on Up 7/5/14

My ICE system on SPY gave a second Up signal as pointed out in my last blog post along with a chart. This means stay long in my 401K choices for me.

My current employer’s 401K plan analysis shows that the top 3 to be in are WFA SPL MidCap VL. Spartan GLB XUS ADV, Spartan 500 Index ADV. The S&P 500 is showing good momentum, better than other funds.. MidCap is also showing strength.

In my previous employers 401K fund choices, the top ones to be in are Lazard Emerging markets, Domini Social Eq, Allianz Sml Cap followed by Fidelity Growth Co. Cohen & Steers Realty still looks Ok; but lagging a little.

A Dividend Paying Strategy for the Rich 7/5/14

Last week ICE gave a second confirming Buy signal on SPY. That does not make the signals stronger or predict the future any better than one signal but it is clear the direction remains up. The Dow Jones 30 seemed determined to break through 17,000 which it did. Next S&P 500 is at 1,985 and headed for 2,000. Nasdaq 100 is at 3,923 and is moving like a magnet towards 4,000. These things will happen.

People who like to enter the market when it is low; but actually don’t are in a real bind. The market has run away from them and any drop will always seem not big enough. A 10% drop in the Dow Jones will still keep it above 15,000. Is that low enough for someone to get back in? Or would you feel that it will go lower before getting in?

I am working on another project. Last year I listened to a Wealth Manager speak at our local AAII (American Association of Individual Investors) meeting. He spoke about how he managed this rich lady’s account. He put all her money into 15 high quality stocks that paid good dividend (around 3%). All the lady needed was the dividend money. 3% is certainly much higher than what a bank would pay (<1% now). As the stocks increased in value over the years, her dividend increases and keeps her ahead of inflation. She did not care whether the stocks went up or down but obviously she has done real well in the last 10 years and her dividend has grown. My thoughts were to add solid technical systems on these stocks and put some money into these stocks for the long haul. I still cannot tolerate seeing my capital shrink during recessionary times and therefore I will need to have trading systems on them. This weekend I have been back testing my best systems and deciding which ones need to go on which stock.

Here are the 15 stocks: ABT, COP, INTC, KO, JNJ, MDT, MMM, PEP, PG, PFE, SYK, SYY, UTX, WMT, and XOM. Also shown is a chart on PEP with my trading system on it.