I like today's action in EEM (emerging markets). The ETF retested the August 5 closing low of 39.05, then quickly rallied >+1% above it on high volume.
I plan to reopen VEMAX (Vanguard Emerging Markets) at the close.
Also opened a small position in EWH (Hong Kong).
Addendum:
Addendum:
What happened today?
No capitulation, no panic. No complicated technical indicators.
In my opinion, what happened was much better! Institutional fund managers apparently decided valuations in the EM sector were compelling and started buying.
We can't know ahead of time when the buying starts. In fact, expecting a continuation of the downtrend I closed a position in EEM this morning way below the highs of the day. Instead, we close with bullish 'outside days' on high volume in EEM/ VWO/ IEMG, all of which closed up > +1.2%.
There was no point front-running the trade last night - last night it would have been a high-risk gamble. Paying up for the trade today? Not a problem - it's now an attractive play, and we can consider the higher price an insurance premium. (I had a bit of luck at the close - VEMAX [Vanguard Emerging Markets] closed up just +0.48%, and I reopened the position at a -4.6% discount to my last exit in late July.)
Talk about bad timing.
ReplyDeleteBarring a last-minute rally, I plan to close all positions end of day. At times like this, it's all about psychology. Let me run through a few points.
(a) I'm likely to end the day between ~ +7.5% and +8% ytd - maybe worse. I was happy with that last month, and I'm even happier with it today!
(b) The goal right now is capital preservation. If you're focused on catching a dead cat bounce...it's the wrong goal.
(c) Trying to second-guess my 2860 decision is a bad idea.
(d) A lot of traders seem to think today's selloff is unexceptional. OK, that may be true. -3% selloffs are routine. I don't look at it that way. My goal is to keep my portfolio balance near all-time highs, and to the extent possible I want to avoid 'riding out' any declines.
If the SPX rallies in the final minutes to >2860, I'll change my strategy.
In reverse chronological order:
ReplyDelete12:27 PM (0 minutes ago)
Nice midday flush in the SPX to 2825 - I think that ends the current correction. Reopening a position in BABA (Alibaba), which reported impressive quarterly results and is apparently unaffected by the trade war.
On Thu, Aug 15, 2019 at 8:19 AM wrote:
I'll offer several reasons we're likely to see an upside move over the next few days:
1. Put/Call this morning was 170%.
2. CNBC broadcast a second 'Markets in Turmoil' episode last night. One episode is generally good enough for a bounce - two episodes within a week even better.
3. TRIN >3 yesterday.
4. High anxiety on the part of global fund managers based on the amount of protection taken out.
5. An inverted VIX term structure (another measure of anxiety - when inverted, anxiety levels in the options market is much higher today than it is in the future).
No guarantees, of course. The markets could plunge at any time regardless.
On Thu, Aug 15, 2019 at 7:34 AM wrote:
Reopening a position in CGC (Canopy) on its -18% two-day decline. I guess earnings disappointed.
On Thu, Aug 15, 2019 at 7:15 AM wrote:
I plan to begin scaling into the S&P500 via RYSPX. This allows me to take advantage of the 0.8% differential between yesterday's closing prices for SPX versus VEMAX.
No regrets bailing out at yesterday's close - the risk of another gap down was high. I would say that 7/8 out 10 times the market will bounce, but it's the other 2-3 occasions that can kill your portfolio (which is how I managed to outperform by a wide margin last October through December).
Added a few China positions in the premarket session. With ~50% of the trading account invested, now 90% invested.
ReplyDeleteDo I regret having exited Wednesday? Yes and no.
(a) The odds of a gap-down open the following day may not have been high - but neither were they insignificant. Recall that I was able to sidestep the majority of two brutal declines in 2018 (late January + October->December) by exiting immediately on selloffs that led to continued declines.
(b) That said, sure - I'm not thrilled to be buying back in at premiums to my exits.
(c) However, I was able to mitigate the discomfort by switching from emerging markets to the SPX on Thursday. There were three advantages to making the switch: [i] I'm now invested in a safer sector, [ii] recall that the SPX declined -2.91% on Wednesday, whereas I took only a -2.09% hit on VEMAX, and [iii] I was able to buy back in to RYSPX at a very small premium (~0.3%). I was able to trade in a Camry for a Lexus which suddenly became affordable!
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