This morning my attention is drawn to a number of bullish
headlines. A good example: https://www.marketwatch.com/story/five-important-reasons-why-a-stampede-into-stocks-may-be-just-getting-started-2017-11-04.
It's really not a good thing, in my opinion. As you
know, I'm always trying to front-run the crowd in terms of sentiment. So
let's lay out the bear case.
(a) Ten-year government bond yields are at
2.33%: https://www.bloomberg.com/markets/rates-bonds/government-bonds/us.
That's undoubtedly a multi-year high. When it crests 3%, it will become a
real headwind for stock prices.
(b) Also at a multi-year high is margin debt: https://www.advisorperspectives.com/dshort/updates/2017/10/27/a-look-at-nyse-margin-debt-and-the-market.
Margin debt is the equivalent of pressing one's bet at the craps
table.
(c) Market valuation. Jill Mislinski
offers compelling scatter graphs that compare valuations to both bond yields
and inflation: https://www.advisorperspectives.com/dshort/updates/2017/10/27/a-look-at-nyse-margin-debt-and-the-market.
Whether we view current valuations as 'excessive' depends a great deal on how
'exceptional' we think current market conditions are.
(d) Lots of anecdotal data. I'm not
hearing much from short-sellers on Twitter (instead, I'm hearing a great deal
from momentum traders). I don't have access to real time data on short
interest in the broad indexes, but I'm betting it's at multi-year lows.
Volatility (VIX) not only at all-time lows, but at record-setting stretches of
all-time lows. Bitcoin prices.
Not saying the market can't go higher. In fact, I
think it does. Just advising that we should temper our expectations.
My trading sucks. Got stopped out of SPWR three times on the way down, and completely missed its rebound. Also, completely missed the rebound in EMES. Instead, tried to bottom pick AKS (at $4.64) and CBMX at $7. AKS is now at $4.35, while CBMX is at $7.03.
ReplyDeleteThat makes two of us. I keep trying to time a pullback, and there really hasn't been one.
DeleteMy bitching yesterday helped a little -- today CBMX hit my sell limit at $7.5 for the shares I added at $7. :)
ReplyDeleteMy next sell limit is at $7.80 for the shares I purchased at $7.50. And then I'll only have the share lot that I reloaded at $7.80 after selling it at $8.00
DeleteThe sell limit at $7.80 has just been hit. OK, I remove my complaints about CBMX. :)
DeleteMy last sell limit is at $8.2 for the shares I purchased at $7.8.
Rotated a part of that money into AKS at 4.29, as the downside momentum seems to be over for it. I am hoping that the uptrend in the steel ETF SLX (and in X for the last few months) will lift even the crappy boats like AKS.
ReplyDeletePlaced a sell limit at $4.69 for this lot.
DeleteWhere I left off is where I'm reopening positions in VTWSX (Vanguard Total World Market) and VEIEX (Vanguard Emerging Markets). VT/ VWO (the ETF equivalents of VTWSX/VEIEX) currently trading down -0.32%/-0.64%, essentially back to November 2 levels.
ReplyDeleteHere's my take:
(a) Bears have been wrong the entire year. They've been taken to the wood shed and no end in sight to the rally.
(b) Entirely unforeseen is another group that's been wrong-> value investors! Growth stocks have been spiking at the expense of 'value' stocks (which have been trending down!).
(b) Sidelined investors, unless willing to buy at all-time highs, have been denied entry. Most are sitting in cash.
All of the above represents the market at its best-> maximum frustration.
Opening or reopening side positions as listed below:
(a) EWZ (Brazil) reopened this morning around 39.3x (as it turns out, a little early->the intraday low print was below 39).
(b) HIMX (Himax) on its pullback to 10.5x.
(c) X (US Steel) was reopened on Monday around 27.2x (also early). Currently 26.95. Probably headed for 30.
USO seems to be extended now, so I just sold a little more BTE at $3.40 out of the shares I purchased a while ago, probably at around the same price. I just want to have the option of reloading them once BTE drops back below $3...
ReplyDeleteAfter a slow start, all three US indexes are now green. Emerging markets are showing the best gains, however.
ReplyDelete(a) EWZ (Brazil) +2.9% to 40.28, recouping all of Tuesday's losses. (The iBovespa itself is up +2000 points.)
(b) EEM (emerging markets) +0.5%.
(c) VT (world market) +0.22%.
(d) X (US Steel) +1.2%. Basically back to my opening basis.
(e) HIMX (Himax) flat.
Reloaded at $7.35 the shares of CBMX I sold at $7.80 and placed a buy limit at $7 to reload the shares I sold at $7.50.
ReplyDeletePlaced a sell limit at $7.75 for the shares I purchased today. Let's see for how much longer this money pump will keep working. :)
DeleteThe DJIA, SPX, and NDQ all printed new closing highs. The DJIA is up +29% since Donald Trump was elected President exactly one year ago. Is it fair that he (indirectly) claims credit for the rally? I think so. In my opinion, US indexes have gone up in a straight line on low volatility largely because of investor anxiety re the Presidency. Trump represents disruption, uncertainty, and unpredictability. Most investors responded by lowering allocations to the market. As the indexes rise, they're perpetually left behind, under-invested and trying to catch up. As a result, the indexes continue to climb, with even the smallest of pullbacks being bought. It's probably the best of times to be long!
ReplyDeleteThe Nikkei plunged -500 points from its intraday high. But you had to be there to feel it. The index spiked +469 points prior to closing 500 points lower, for a daily change of just -45 points. Still, the action tells us something-> for latecomers to the phenomenal multi-week rally in Japan, it was a bull trap.
ReplyDeleteThe DJIA opens down -100 points, SPX -14 points and retesting support @ 2578.
I can't predict the close, but my opinion right now is that the opening selloff is a major plus. We need a sentiment reset.
In the meantime, I closed HIMX (Himax) on the opening pop to 11.0x (earnings beat). It appears I may be able to reopen the position around my original basis of 10.5x.
The perfect selloff.
ReplyDeletePretty convincing selloff, which is what we needed. The media has decided to attribute the selling to news about a delay in corporate tax cuts to 2019, but personally I'm always reluctant to assign 'reasons' for market moves.
How do I know the selloff was convincing? Near the intraday lows, it convinced me to close positions in EWZ (Brazil) and X (US Steel) before prices dropped below my opening basis points. On the other hand, I also decided to rotate the funds into BABA (Alibaba) around 182.2x , which brings my basis in the stock to 185. Currently trading @ 184.19. Both EEM (emerging markets) and VT (the world market) are off about -0.7%.
I don't think Bears have what it takes to kill the uptrend. The SPX is well off its intraday low of 2566 (now @ 2581). The DJIA has recovered from an intraday selloff of -254 points and now trading off just -118 points. It's another forty minutes to market close-> I wouldn't go as far as to say US indexes will close in the green, but today's decline is a perfect setup for further gains into year end.
CBMX hit my buy limit order today at $7.00. Placed a sell limit at $7.40 for this lot.
ReplyDeleteBought a little more CBMX at $6.50 and placed a sell limit at $7 for this lot.
ReplyDeleteMike -- what is troubling CBMX? Is the merger not going through? Or will the payoff be much less than $8 per share?
I did some research myself and saw that CBMX shares will be exchanged for INVT shares. If NVTA will be at $9.49 at the time of exchange, each CBMX share will be worth around $8. Currently, NVTA is below $9.49, and CBMX is below $8 by about the same percentage. Their stock moves look almost identical over the past month. So it is time to start watching NVTA instead...
DeleteNVTA is growing its business. Its stock price is experiencing a pullback now, but it is likely a temporary phenomenon. Placed a buy limit for a little more CBMX at $6.
DeleteLooks like CBMX stopped trading. Let's see how my shares will be exchanged...
DeleteSmall declines in EEM (emerging markets) and VT (world market).
ReplyDeleteI'm willing to give this market a little more room, but not much. Capital preservation > capital gains right now.
Late post>
DeleteAt 1130 am, we have ninety minutes remaining in the regular session and anything can happen. However, I sense an imminent turn in investor sentiment. Good gains year-to-date. Switching to capital preservation/ risk off sounds good. Both VEIEX (emerging markets) and VTWSX (world market) will be taken off at market close.
I see VT closed at the day's high. That's certainly a positive. Not sure what's bothering me, but I have no regrets about cashing out.
DeleteBoth EEM and VT reversed off their lower Bollinger Bands early this morning. The SPX printed an intraday low of 2557, and has reversed to 2567 (close enough to 2570 for me). I'm not certain the indexes reverse in a 'V,' but betting against one has been to the detriment of Bears all year. The smart bet is on a continuation of the pattern. It's hard to believe the pattern has persisted this long. Perhaps that's why it continues to work. My take is that we will indeed see another 'V.'
ReplyDeleteReopening BABA (Alibaba) @ 181 and EWZ (Brazil) @ 38, both near the day's highs (but still below the prices at which I closed on Tuesday morning.
Will reopen both VEIEX (emerging markets) and VTWSX (world market) at the close.
As remarkable as the 2017 uptrend has been, what's truly remarkable? The fact that investors continue to mark the beginning of the current rally at March 2009.
ReplyDeleteAt the very least, investors in the US are overlooking the 2011 Crash. There was a bonafide -21.6% decline in the SPX from May to October.
Even more glaring is their disregard of the brutal 2015-16 Crash in global equities. How brutal? The median SPX stock fell -25% (albeit the index itself declined only -15%). The Russell 2000 was down -27%. The Nikkei tumbled -29%. Emerging markets dove -40% (China plummeted -49%). In my opinion, the global decline in 2015-16 was worse than that in 2008-9.
This morning's action feels like 'the real deal.' The market loves to take off right after traders have moved to cash and/or loaded up on puts. Yesterday's put/call ratio came in at 0.74-> the highest since November 1. The DJIA is up +180 points, SPX +20 points. EEM (emerging markets) up almost +2%, EWZ (Brazil) up almost +3%. BABA (Alibaba) +2.4%. Even VT (world market) is up +0.9%. If I hadn't reopened yesterday, there's no way I would be chasing this morning.
ReplyDeleteI did reopen a position in ASHR (China 'A' Shares) @ 31.30 (the Shanghai Composite was the only major Asian index to decline last night). Also reopening a position in X (US Steel) @ 26.9x on morning weakness.
As I had expected, the oil sector did pull back. Instead of reloading BTE under $3 after selling it at $3.40, I decided to buy some XES at $15.21.
ReplyDeleteNice bounce in the oil sector today. Placed a sell stop limit order for my yesterday's lot of XES at my entry point -- $15.20/$15.10. Hoping that this week marked another higher low for XES and it is now on the way to recent highs at $16.50 and above...
ReplyDeleteAlmost got stopped out today!
DeleteWhy was GDX up today by a smaller percentage than GLD??? I sold some GDX $23 puts a couple of months ago for $0.77 each, and I hoped that they will expire and I'll pocket the whole of $0.77 per share. But now the shares will be assigned to me... Well, maybe GDX will jump above $23 on Monday and I'll sell these shares, pocketing MORE than $0.77 per share. :)
ReplyDeleteNope. GLD gave up all of its Friday's gains, and so did GDX. Will have to wait a little longer for GDX to get back up to $23...
DeleteMy last lot of AKS shares was purchased at 4.28 and I had a sell limit order for it at 4.68. It was triggered this morning at 4.88 -- nice. :) My next sell limit is at 5 for the shares I purchased at 4.68.
ReplyDeleteI just noticed that my CBMX shares have been converted to NVTA shares their total value now is the same as I would have had from my CBMX shares if they were worth $7.25. Since my last purchase of CBMX was made at $6.50, I just sold a little of my NVTA and placed a sell limit for more shares at $8.5 (which would be equivalent to 7.33 on CBMX)
ReplyDeleteI looked closer at the NVTA chart over the past 5 days and noticed that it is making higher lows and higher highs. So I decided to move my sell limit to $8.65, which would be equivalent to $7.5 on CBMX (for the CBMX shares I purchased at $6.50). And then I placed another sell limit at $9 (equivalent to $7.80 on CBMX) for the CBMX shares I purchased at $7.
DeleteStraight-up vertical action in Chinese indexes. FXI/ ASHR both +2.9% with no intraday pullback. The inclination is to sell into a +3% gap up that follows +1% gains the day before. I don't think so. Momentum plays tend to move farther and faster than we can imagine. (For Trump dissenters, they already have.) Just because we're at 52-wk highs is not a reason to sell. Speaking of which, all three US indexes printed new all-time highs today.
ReplyDelete8.60 is close enough to $8.65, and so I figured I'd give myself a sure present for Thanksgiving and just sold at this price the CBMX shares I purchased at $6.50 (equivalent to 7.50 on NVTA).
ReplyDeleteHappy Thanksgiving, Everyone!
GDX is close enough to $23, but its chart gives me a feeling that a major thrust up is coming, so I'll hold off on selling it...
ReplyDeleteYou may be right.
DeleteNo further gaps up today tells me momentum may be fading. Of course, no one really knows whether it picks up again on Friday.
ReplyDeletePlan to close VEIEX (emerging markets) and VTWSX (world market) end of day. Based on current prices for EEM and VT-> one-week gains of +3.84% and +2%, which is extraordinary for broad-market indexes. My experience has been that 'extraordinary' market performance will reverse in the short term prior to further gains.
China indexes tumble-> back to bullish on China.
ReplyDeleteThe Hang Seng and the Shangahi Composite are now -1.7% and -3% below last week's highs. That may be all the consolidation needed. Making the following trades pre-market:
(a) Reopening ASHR (China 'A' Shares) around 31.4x (-2.9% discount to Wednesday's exit).
(b) Reopening FXI (China 'H' Shares) @ 47.4x (-1.7% discount to last Wednesday's exit).
(c) Reopening EWZ (Brazil) @ 40.2x (-1.3% discount to Wednesday's exit).
(d) Reopening a partial position in EEM (emerging markets) @ 47.2x (-1.5% discount to Wednesday's exit).
At 1215, US indexes are mixed: DJIA +27 points, SPX and NDQ in the red.
DeleteEmerging markets indexes have extended their declines-> EEM to 47.03 (-1.41%), FXI (China 'H' Shares) to 47.17 (-1.61%), and ASHR (China 'A; Shares) to 31.02 (-1.63%), The only position in the green from reentry is EWZ (Brazil), which is off -0.22% since Friday's close but up +1% from my opening basis.
VT (world market) has given up all of Friday's gains to trade @ 73 (-0.34%).
I think it's all positive action, and markets are poised for further gains. I plan to reopen both VEIEX (emerging markets) and VTWSX (world market) at the close.
Got stopped out flat of XES today at $15.26. Should have taken a small profit while I had it. When XES did not follow USO up on Friday, I just knew the next move will be down. I should learn to act on my hunches...
ReplyDeleteWell, XES has recovered somewhat, and the 1-month chart still suggests the possibility of a higher low made today relative to Nov. 15. So I just placed a buy stop limit order on XES at $15.50/$15.55.
ReplyDeleteLate posting of comments made around 1245 pm this afternoon:
Hey, the DJIA is up another +95 points! That's not the problem. The problem is that both the Nasdaq and emerging markets are off -1.5%. That's a major change in character. VT (world market) currently off just -0.3%, but that masks the major destruction underway in FAANG stocks (for instance, Amazon, Alibaba and Facebook are all down around -4%).
I'm taking off all positions either now (EEM, EWZ, FXI, ASHR) or at the close (VEIEX, VTWSX) for an estimated hit of -0.7% for the day. I may even end up below Monday's closing balance, but my cardinal rule is to take losses immediately when sensing a market turn.
I did end up below Monday's closing balance, albeit just barely. Should I have sold into Tuesday's euphoria? It's easy to say 'Yes' in hindsight. But we never trade after the fact, and given the same setup next time I'm unlikely to change anything.
DeleteNote that the SOX sold off -4.4% today, giving back all of November's gains.
I plan to reopen positions in both VTWSX (world market) and VEIEX (emerging markets) at the close.
ReplyDeleteMy reasoning is pretty simple: had I not closed both funds yesterday I would continue to hold today.
The DJIA was up +387 points at its intraday high, while Brazil's iBovespa and most of Asia declined -1.5%. The divergence is striking. I'm hearing media comments saying that tax reform is now priced in, and once an agreement is reached investors will sell the news. I would agree that it's a perfect setup, but those types of setups have not worked in 2017. My take is that we'll see the opposite scenario. Markets will accelerate to the upside on the news.
One thing we've all noticed in over thirty years of following the markets-> the most violent moves occur in the ninth inning of any bear or bull. I think SPX 2860 is in play, and it may only be a matter of weeks.
(An interesting side note is that had I held all positions yesterday [not only VTWSX and VEIEX, but also ASHR, FXI, EEM and EWZ), I would be in the red right now. In that sense, even with the DJIA currently up +300 points and the SPX +0.7% I don't 'feel' like I'm chasing anything!)
XES did a good job stopping me out on Tuesday and then taking off. Glad I jumped back in at $15.50 via the buy stop order I set for it. What's even more impressive is that it has moved up yesterday and today despite oil being down. Maybe it is just trying to confuse traders...
ReplyDeleteYou can't ask for better action than we had this morning.
ReplyDelete(a) DJIA -1.44% (-351 points!) at the morning low. SPX -1.6% (-42 points!) at the morning low. Completely unexpected out-of-the-blue retests. Both declines also take care of unfinished business in the form of gap fills.
(b) FXI (China 'H' Shares) and ASHR (China 'A' Shares) bounce off their lower Bollinger Bands.
(c) Even VT (world market) plunges -1.2% to 72.67 (a level last seen in mid-November), kind of a global shakedown.
Do all indexes close in the green? I don't know, but I wouldn't bet against it. Good to sweep up all the trash as we head into the best month of the year.
All right, just sold at $16.44 the XES shares I purchased at $15.50. It wasn't meant to be a long term position -- I was just playing the pullback from early November. Now XES is back to the same level, which acted as a strong resistance for the past 6 months.
ReplyDeleteAKS has also hit my sell limit today at $5.00 for the shares I purchased during its pullback at $4.69. I had a feeling it would behave just like X a few months ago -- crashing by 20 pct and then steadily moving up...
ReplyDeleteFor those of you with Amazon Prime, I recommend watching 'Fearless.' Another great British crime miniseries.
ReplyDelete