Sunday, September 20, 2015
9/19/15 September Rally?
Seasonality will be a headwind next week, with the second half of September normally a good time to head for the sidelines.
However, Thursday's late reversal + Friday's unexpected selloff succeeded in forcing many weak hands to stop out. Put/Call ratios remain high, and my sense is that most investors are positioned for further downside.
The invisible hand that guides market forces may have transposed the seasonality template a few clicks, decreeing A-flat this year rather than C. Not many believers in a rally right now.
My take?
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TOF- I think it would be smart for a portion of your investment $'s. I've also know quite a few people who have done this and wound up broke.
ReplyDeleteI've never done it because my regular income is also from that sector.
DeleteMark - Any idea what those people did wrong? I think it depends on the location. In my scenario, you get a steady stream of students coming in every year and the houses I'd be looking to get are right next to campus. My friend has several properties and he said every one of them has been rented out for full every year. He said one group of kids rented out one house one time and tried to get out after a week and sued him for trying to get out but he stood his ground and took them to court. He said they ended up settling out of court for 50% of the year's lease plus the lawyers fees and then he rented it out again and actually made money.
DeleteOne sector I'm very interested in is the miners. I've been watching these guys fairly closely lately and I'm seeing lots of big volume coming in on up weeks, as well as positive divergences in RSI. Check out HMY and EGO, two that I'm interested in.
ReplyDeleteI could envision a scenario where gold falls further but miners don't.
DeleteThe mining sector has been in a very long bear market. Contrast this with energy which has only been in a bear market for 10-11 months.
I'm thinking the same with regard to global stocks. Developed countries fall further, but emerging markets do not.
DeleteOther miners that look good:
ReplyDeleteAKG
AUY
BAA
GFI
GORO
IAG
Still going through these.
What really piqued my interest was this comment from Peter Brandt:
Peter Brandt @PeterLBrandt Sep 15
@mjv611 I have become very disinterested in Gold and Silver. Trend remains down, but the bear market is VERY old.
Think about that sentiment...
A lot of them sure are cheap. Very tempting to start building a position.
DeleteWe're considering diversifying into income property as well. We first looked around the Folsom Lake area, including Granite Bay and El Dorado Hills. But the large inventory of foreclosures + new developments were a red flag. Now we're looking more closely at Davis, a place we've become familiar with via soccer tournaments. UC Davis almost guarantees steady demand from students. So I think college towns are the way to go.
ReplyDeleteThe problem with bears is they're always picturing a scenario where all hell breaks loose. On the rare occasions they're rewarded (US 2008, China 2015), they continue to think it gets worse. So they never participate on the upside.
ReplyDeleteTOF, Keeping an eye on MMYT, you haven't mentioned it lately but it's not doing terribly at the moment.
ReplyDeleteTOF, Real estate, can be interesting but renting can be challenging and has its problems so expect this. You are aware that it is much easier to get into than out of and when/if you change your mind you cannot press a button and be out.
ReplyDeleteThe best way to ensure good profits is to make them when you buy. Said another way, try to buy at a 20% discount to the market. Patience and looking at many properties or someone who has to sell due to changing circumstances is key.
The idea of student rental housing is appealing, but I would say own your own house first. FWIW
TOF- I think it was a lot of different reasons. Probably the one underlying thing I can think of was the difficulty getting out if needed.
ReplyDeleteAs a general comment, I do find that stock opportunities are getting easier to find.
ReplyDeleteFor a while there, I would look at a lot of stocks and dismiss them pretty quickly based on either valuation or business prospects or extended charts. But now, when I look into ideas, I find many more of them to be pretty good possible buys. Many of the things we are talking about here are quite interesting.
Usually when this happens, I find the market will move into a bull phase fairly soon.
I think housing is a great way to diversify income. I do think the key is being close to a good school, preferably with high tuition and supply constraints (the latter of which you can only determine if you really know the area). There's always the potential for a big developer to come in and swoop up a block and build a high rise apartment building and flooding the market with supply. This is something that is very important to consider and what I think is the biggest risk. You also have to keep an eye on what the school is doing in terms of housing...are they going to put restrictions on off campus housing for younger students?
ReplyDeleteCP - Yeah MMYT is definitely on my watch list. But there's one thing I've always kept in mind with the market: if the market is below the 200DMA and its trending down, I have to keep risk low. I have no idea how long we could remain in such a scenario. Could only be for a short period of time or it could be for very long. No one knows. But it has kept me somewhat out of trouble in the past.
Yeah miners are definitely cheap man. I'm not great in this space so I'm going to have to go off of chart setups moreso than others.
Another route that you could go is buying a REIT focused on college housing. There are only 3 of them publicly traded:
ReplyDeleteACC
CCG
EDR
My biggest positions are in the precious metals and
ReplyDeletegold and silver miners. I continue to hold substantial
positions in the shares of the Sprott Physical Gold Trust
ETF (PHYS) and the Central Fund of Canada (CEF), a
closed end fund that holds gold and silver. I sold the
position in the iShares Silver Trust ETF (SLV) last month
and moved the proceeds into several of the miners listed
below. I hold physical gold. I hold large numbers of longterm
LEAP call options (expiring in 2016 and 2017) on the
iShares Silver Trust ETF (SLV). My biggest gold mining
stock positions are in Agnico Eagle Mines (AEM), New
Gold (NGD), GoldCorp (GG), Alamos Gold (AUQ) and
Detour Gold (DRGDF).
What we saw last month with the miners was
capitulation – the kind of panicky capitulation that occurs
at bottoms and that hasn’t been seen in stocks for decades
because the Fed hasn’t allowed it. The Fed steps in to
support sinking stocks and bonds. One day they won’t be
able to intervene. For those who need support holding on to
their battered positions, I suggest reviewing the recent
quarterly reports and conference calls. While the current
low price has put some miners out of business (none of
these) and the viability of the entire South African gold
mining industry in jeopardy, you’ll find really good
operations with relatively low cash costs and “all-insustaining”
costs. They can withstand current prices (and
lower, if need be). I have smaller-sized positions in
Yamana (AUY), Pretium Resources (PVG), Franco
Nevada (FNV), Aurico Metals and Primero Mining (PPP).
I also added a new position – NovaGold Resources, a
Canadian-based gold miner with a major development
project in Alaska. I own the Market Vectors Junior Gold
Miners ETF (GDXJ). I own a significant position in silver
miner Hecla Mining (HL) and a much smaller position in
First Majestic Silver (AG).
I hold a significant number of GoldCorp long-term call
options and a smaller number of short-term Agnico-Eagle
call options. I added to both last month. As has been the
case for some time, I retain large cash reserves, mostly in
near-zero interest paying bank accounts and money market
funds. As noted last month, I moved some cash reserves
into short-term New Zealand government bonds.
per Fred Hickey
From 4 AUG edition
DeleteVW on sale 20% off this morning on the EPA decision.
ReplyDeleteThis is the perfect example of not buying during a downtrend. I thought this looked really cheap last week. During a downtrend you really have no idea how low it can go. The flip side is you can miss really panicky bottoms. I wonder how big of an issue this is though...do they cut the dividend? I'm more interested buy usually theses crises mean there's no rush to get in, just like with GM, BP, etc
Delete*im more interested BUT...*
DeleteWould've been a great short on the news from last week when it didn't move much.
DeleteBXE - Sinking again, Mark where's that LOI we discussed?
ReplyDeleteWho will make the automated coin operated MCD hamburger extruders? That's what I want to know. Plastic injection molding machines are made by MCRN
ReplyDeletePLUG - There's a wild ride. Have you guys researched the hydrogen vehicle yet, specifically where the H2 will come from and how it's made?
ReplyDeleteI guess we could use purified zinc at some temperature to remove oxygen from water and liberate hydrogen. At a cost.
I'm not going to even pretend to be able to give a coherent response.
DeleteBillings did this in 1965.
Deletehttp://www.drrogerbillings.com/projects/hydrogen/
WMT, so its back to where it broke out in APR 12. It pays 3% has earnings compare to AMZN and is off -30% from highs.
ReplyDeleteDefinitely on my watch list.
DeleteCP, for you, BXE
ReplyDeletehttp://seekingalpha.com/article/3460736-bellatrix-exploration-the-next-peyto
AAPL accelerating efforts to get into the electric car market. Horrible decision. But that's what companies do when they have limitless cash.
ReplyDeleteI wouldn't be surprised to see UVXY go to $200.
ReplyDeleteGot cut off...meant to say I wouldn't be surprised to see UVXY go to $200 if we take out the lows from August 24th. Still a long ways to go but I would imagine that would result in a really skittish market.
DeleteI think a drop in volatility is more likely in the near future (hence my trading position in SVXY). And when it does drop, I doubt VIX will shoot up to 50 if we break August 24th lows -- the opening drop on that day was a very rare event...
DeleteSounds right.
DeleteThe DJIA currently +138 points, which is really 'not good enough.' Nothing but bearish setups on most charts.
ReplyDelete(a) GPRO (GoPro) -8% today. An excellent example of the risks inherent in single stocks. Today's selloff can be attributed to a negative Barron's article that appeared last weekend. The only way to manage single stock risk is diversification. Currently bidding 32.25. I exited immediately this morning pre-market @ 33.60 for a manageable -3.4% hit on a small position. Could have exited at a better price in the regular session, but I've generally done better taking the 'sell now, ask questions later' approach to single stocks.
(b) Crude oil +3.5%, yet oils flat.
(c) EEM not moving at all. Another red flag.
(d) TLT (long bond) off -1.54%.
All in all, a disappointing showing for bulls. Moving to 100% cash end of day. I just don't have enough of an edge here to place capital at risk overnight. It's all about risk management right now.
UVXY is tanking after hours so the market could be setting up for a gap higher tomorrow.
ReplyDeleteGotta wonder if sentiment isn't getting pretty washed out. The one thing that keeps me less bearish is we are still above the lows from October. Well, that and I also don't think we have seen a euphoric state yet.
ReplyDeleteBut then again we did rally 17% from the October lows to the 2015 highs. This same thing happened in the 1980 rally to new all time highs in the S&P 500. The market then dropped about 30% to set up the 1980's bull market.
China PMI on Wednesday will be a major market mover:
ReplyDeletehttp://www.cnbc.com/2015/09/20/china-pmi-japan-inflation-singapore-taiwan-data-risks-to-asia-markets.html
Keep this on your radar if you're looking to trade anything here. My suspicion is if we get to 1990 I think it would be a good spot to try a short. Maybe SDS. Also there's been a lot of chatter about something big going down on 9/23. I think its a silly hoax but it matches up with China PMI.