1. Put/ Call 112%.
2. Fear and Greed 45 (versus 97 not long ago).
3. Media accounts of the coronavirus appear to have switched from assurance to fear.
4. There are now headlines calling for a -10% correction.
I think it's time to buy.
Today's reversal lacks conviction. Trimmed a few positions earlier in the day and closing all remaining positions end of day.
ReplyDeleteOuch.
ReplyDeleteDays like this I am mindful ~karma. There is a great deal of karma in the trading environment, perhaps more than in most. I regret selling on Monday - but I can't spend much time on it. After all, re the latest series of market moves:
(a) I sidestepped a -2% decline.
(b) I captured a +0.7% gain the following day.
To expect that I should have foreseen/ captured an additional +1.8% move today? That's just bad karma, which would ultimately lead to bad decisions and probably a great deal of give back.
By the way. Currently +2.48% ytd. Versus +0.62% for the benchmark I use (VT).
DeleteBought back in today, although I'm staying away from US indexes for now.
ReplyDeleteI was able to reopen positions at decent entry points - VTIAX (Vanguard ex-US) closed up just +0.1% and -2.67% off its January 17 high, FXI (China 'H' Shares) @ +0.053% from Friday's close and -8.4% off its January 13 intraday high, EWZ (Brazil) @ -0.9% from Friday's close and -11.3% off its January 2 intraday high.
Taking profits - back to 100% cash. Now +3.3% ytd, and +1.27% ahead of benchmark.
DeleteTaking a long stance at the close. FXI (China 'H' Shares)/ ASHR (China 'A' Shares) / EWZ (Brazil) / VTIAX (ex-US).
ReplyDeleteTaking chips off the table - a one-day trade that barely moved the needle. I have no take re next week.
DeleteValuations are high. US indexes have benefited from foreign investors moving money into the world's safest economy. Emerging markets may be even more expensive on a risk-adjusted basis - the PBOC has flooded its markets with liquidity for good reason.
ReplyDeleteI'm not interested in chasing momentum here. I may even start looking at bonds ahead of what will likely be a flight to safety.
Still +3.3% ytd and +0.7% ahead of benchmark.
In reverse chronological order.
ReplyDelete12:56 PM (0 minutes ago)
Put/ Call = 1.03. Highest since January 31. Full buy alert.
On Fri, Feb 21, 2020 at 12:13 PM wrote:
Plan to add VTSAX (US)/ VTIAX (ex-US)/ VEMAX (emerging markets) at the close.
On Fri, Feb 21, 2020 at 7:48 AM wrote:
Reopening a few positions/ playing for a bounce.
I'm always be prepared to be wrong.
ReplyDeleteIt's too early for me to lean bullish or bearish into the overnight news. Have a plan, even if it's a bad plan. Here's mine.
Starting point:
(a) Opening indications are for a -3%+ hit to the global markets. (b) I'm currently +3.1% and +2% ahead of benchmark-> thus a -3% open would have me starting more or less flat for the year. That's a good vantage point.(c) My portfolio is diversified. Basically, I own the world market (VT/ VTSAX/ VTIAX/ VEMAX) with a slight tilt towards emerging markets. I have a small position in one stock - BABA (Alibaba) - that's it.
Morning thoughts:
(a) Had I not bought back in last Friday, I would be ~+5.5% ahead of benchmark right now (based on extended-hours trading levels) - more on this later.
(b) Global markets will open ~-5% off their 2020 highs. That's in the neighborhood of what I had hoped for in terms of a pullback.
Tactics:
(a) One perspective I might take is therefore the following - how would I handle the trade today had I not bought back in last Friday? (i) I would consider a -5% pullback to be an attractive reentry point-> the equivalent decision for me would be to hold. (ii) On the other hand, if markets recover substantially by the close I would opt for a better entry-> the equivalent decision would be to sell. Being bullish by nature and also someone who likes to see bad events cleared away quickly - I'm hoping for a close at the lows.
That's really all I have at the moment. I may change my perspective several times during the day, but obviously I'll need to arrive at a final decision by the close.
I'll be taking all positions off end of day. My best guess places my closing balance about where it started the year - it's like being given a second chance to start the year flat. In light of what we now know (the uncertainty introduced by COVID-19), I feel better sitting on the sidelines awaiting a more attractive entry.
ReplyDeleteThe DJIA suffers another triple-digit hit. I was targeting SPX 3140 as a bounce level.
ReplyDeleteThe SPX not only hit 3140 - prices have managed to undercut (as low as 3123) and recover above (now 3142) that level.
Reopening VTSAX (US)/ VTIAX (ex-US)/ VEMAX at the close.
The SPX has reversed to 3119 as I write this - but it doesn't change my stance. What I give up in terms of an 'undercut and recover' trade I will make back buying into panic. There are no guarantees in trading - be ready to act on patterns, but also be prepared to be wrong.
DeleteShorted VXX today at 23.67. Extreme panics don't last long...
ReplyDeleteIn reverse chronological order:
ReplyDeleteFri, Feb 28, 3:05 PM (17 hours ago)
It certainly feels like a green close!
(a) My portfolio closed the day off -0.53% - compared to the -3% that global markets were threatening earlier in the day.
(b) The Nasdaq did in fact close green!
(c) Although ASHR (China 'A' Shares) closed red, FXI (China 'H' Shares) closed green.
(d) After hours futures for the SPX/ DJIA are +20 points/ +200 points higher, which places the SPX in green territory.
Now -3.93% ytd and +4.74% ahead of benchmark. Not a bad place to be at the end of a harrowing week.
On Fri, Feb 28, 2020 at 3:32 AM wrote:
DJIA/ SPX futures declined an additional -677 points/ -100 points (even more relative to 'fair value') overnight. At their lowest points, we were looking at an additional -2.5% hit. I think that's a washout, and we're fortunate the selloffs occurred outside the regular session.
My plan? Stay the course. I can handle another -2.5% - but I don't believe it will come to that. Currently, US markets look to open off -1%. The indexes will once again be opening in the hole, and (once again) I assign high odds that they'll close in the green.
Markets are not unlike life - there are rules to follow that keep us out of trouble, but not ones to be blindly followed. We use common sense, good judgment, and know when to make exceptions - we also recognize the role that luck plays. My 'process' tries to incorporate/ assimilate all of it in real time. I'm currently off -3.4% ytd - and I expect to be better off by market close. Sure, I could be wrong - but I'm playing the higher-odds scenario.
On Thu, Feb 27, 2020 at 3:04 PM wrote:
Taking stock.
(a) Decline from all-time highs. Most broad indexes now off between -11% and -13% over the past two weeks. I'm off -6.7%.
(b) Year-to-date performance. SPX -7.6% ytd. VT (world index) -8.37% ytd. I'm off -3.4%.
Ex-US indexes (emerging markets/China in particular) have outperformed the US this week. That and the fact that I side-stepped one of three 1000-point drops in the DJIA is why I'm relatively better off.
What now? We've had three failed bounce attempts. I expect to see one that holds tomorrow - however, even then it's likely that lower lows lie ahead. This is how the stock market works - we either ride the ups and downs, or we do our best to manage them.
Reading through media reports + commentary, here's what I see as the consensus:
ReplyDelete(a) Markets rally, then retest the lows (not necessarily successfully).
(b) The worst is not over.
My take:
(a) The consensus view is likely to cap the relief rally many are hoping for, and/or prevent the retest many others are hoping for.
(b) The worst is unlikely to be over for COVID-19 - but has the worst already been priced in?
Reverse take:
(a) Many traders will be thinking exactly what I'm thinking, which may result in no rally at all (and a continuation of last week's decline) and/or yet another V-shaped recovery.
(b) The outbreak begins to noticeably recede, and/or an effective treatment is discovered.
It's not the virus itself that is the problem, of course - it's the fallout. Entire countries and/or regions on some form of lockdown, which leads to disruptions in supply and decreases in demand. This will take several months to resolve.
Not much more to say until trading resumes on Monday. When gaming the behavior of large numbers of people, it can get complicated! I have a series of bad plans/ good tactics in place - we all make plans when taking a road trip, but it's only when we start driving that things begin to fall into place.
2nd_ave, have you read the latest article from James Kostohryz:
ReplyDeletehttp://seekingalpha.com/article/4328593-global-recession-is-now-certain-sparked-deep-china-recession
What is your take on this?
I'll be honest, David - I have no interest in reading anyone else's take right now. As for me-
ReplyDeleteIn my opinion, we have a successful retest - but not necessarily the last retest.
Few people seem to believe in this rally, with many betting on further downside via puts. Exactly the kind of market that encourages me to remain long.
I agree regarding the price action -- S&P made a higher low yesterday, and a higher high today. I bought some May $24 puts on VXX today at $3.95.
ReplyDeleteSorry for the late notice, but here it is in reverse chronological order.
ReplyDeleteTaking a contrarian position can pay off when I'm right. However, when it becomes apparent that I'm wrong (at least over the time frame of the trade) then I take losses quickly. Just another way of saying I stop arguing with market direction at the point of my stop loss.
Now -2.53% ytd and +5.08% ahead of benchmark.
On Thu, Mar 5, 2020 at 12:43 PM wrote:
Closing all positions end of day. I've decided to cap my losses here at ~-3% ytd (note that this means the benchmark will close ~-8% ytd - I would definitely be capping losses at that point). My portfolio closed a bit lower last week, but this time around I'm less convinced markets move higher before moving lower.
On Thu, Mar 5, 2020 at 10:27 AM wrote:
The bright side? The selling over the past two weeks is some of the most intense we've seen since 2011. The market is in the process of carving out a bottom, and I expect to see a strong/ durable rally at some point. Rather than try to time the market at this point (which seems impossible based on traditional timing measures) - it may be easier to simply recognize that it's a good time to buy.
On Thu, Mar 5, 2020 at 6:51 AM wrote:
Not really surprising that we're pulling back this morning. I'll note two things:
(a) Shanghai + Hong Kong closed up +2%. That's a major divergence.
(b) We may be seeing a stair-step retest.
I'm putting some cash to work in the trading account - picking up a little SPY/ QQQ on the -2% pullback.
Diving back in.
ReplyDelete1.Fear and Greed=5.
2.The long bond (TLT) up >+5%.
3.VIX up +29% to 51.11 (earlier 54.39), eclipsing last Friday's high of 49.48.
Reopening VTSAX (all US)/ VTIAX (ex-US)/ VEMAX (emerging markets) at the close.
Checking in earlier than usual today. In reverse chronological order:
ReplyDeleteRetesting the morning lows - I'm not so sure the retest succeeds.
On Mon, Mar 9, 2020 at 10:11 AM wrote:
I'm viewing my options from as many angles as I'm able to come up with.
Midday, VT (the world index) is trading down -6.4%. Should it close in that area, I have the option to 'lock in' one of two things:
(a) I can lock in a +8% lead over my benchmark by moving all remaining cash into VT.
(b) I can lock in a -7.7 ytd loss by cashing out.
On Mon, Mar 9, 2020 at 7:59 AM wrote:
As it turns out, the DJIA declined as much as -2046 points within the first thirty minutes.
So what's the right move here?
(a) What's the real contrarian move? Is it to buy the panic - or is it in fact to recognize that we are now in a bear, in which case the right move would be to exit on a bounce?
(b) Based on past experience, I already know that regardless of what I do today (buy, sell, or hold) - I will at some point feel it was the wrong move. Why? The extreme volatility will do that -> large swings up/down will make any decision look alternately good/bad in rapid succession!
The right decision may then come down to this: am I willing to hold/trade positions during a period of high volatility?
On Sun, Mar 8, 2020 at 7:59 PM wrote:
SPX futures are trading 'limit down,' which in this case means -5%. A few real-time thoughts:
(a) I'm wearing a seat belt in the form of full diversification (it's usually individual stocks that are responsible for wiping out accounts).
(b) I have an air bag in the form of a +6.7% lead over my benchmark (a major psychological advantage).
(c) I have a small airfoil in the form of a 20% cash position (which limits further losses to 80% of market declines).
All of the above makes a major decline manageable. For instance, a -7% decline on Monday will leave global markets down -16.25% ytd - whereas my portfolio would end the day off just -8.1% ytd. (If I further subtract the -8.1% loss from my 2019 gain of +13.22% - well, that would leave me with a gain of +5% over the last fourteen months. More or less right in line with the performance of my pension plan!)
What if markets decline just -2%, or even close green? To be honest, I would probably close my positions. Why? Probably not enough panic to set a durable low. A -2% decline would leave me -4.1% ytd (alternatively, +9.12% over the last fourteen months), and I can live with that while waiting for a resolution to either Covid-19 or the oil shock.
On Sun, Mar 8, 2020 at 5:01 PM wrote:
Most indexes are signaling -4% to -5% gap-down moves. SPX futures are @ 2821 (not a typo). If that holds into Monday morning, it would place my portfolio at an additional -3.2% to -4% (@ 80% invested) ytd loss at the open (or a total of -5.7% to -6.5% ytd). That's manageable. The question is whether to add to positions. That decision will depend on the price action tomorrow.
I'm leaning towards closing all positions end of day.
DeleteWe've hit Desolation Row. I would consider buying here.
ReplyDeleteIt may be early, but I think it's time we turn our attention away from the headlines and instead look ahead to the recovery from Covid-19 +/- the tremendous amount of monetary and fiscal stimulus that will be unleashed.
Off another -8% to -9%.
ReplyDeleteWhen global stocks fall in tandem, stick with the best. Buy American-> buy SPY.
A little perspective: the market is back to where it was a year ago.
2nd_ave, what do you think about *actually* buying American, AAL that is? They don't hedge their fuel costs and should benefit greatly from a low oil price, once the panic is over...
ReplyDeleteI picked up some GDXJ at the close, as I think it will skyrocket after all the liquidity injections, just like it did after the 2008 crisis. The only difference is that now GLD has barely budged from its 5-year highs, and so the price discrepancy is EXTREME.
ReplyDeleteAs I thought more about your advice, I think you are right -- there is no need to bother with individual stocks or sectors at this point. SSO will double if it gets to previous highs, UPRO will triple.
ReplyDeleteJust placed a buy stop order on SSO at $94/$95.
My buy stop limit order on SSO was triggered at $95. Placing a stop on it at $88. Also, placing a stop on GDXJ at $25, just below my purchase price.
ReplyDeleteThe SSO order was having hit. Placing a new buy stop just above the recent intraday high, at 89.75.
ReplyDeleteIf the low of $87 holds on SSO now, and it will now rise above the previous intraday high of $89.6, then it will be a higher low relative to the morning low of $86, meaning there is a good reason to go long and place a sell stop at $86.
ReplyDeleteSo I re-entered SSO today right after being stopped out, then sold my GDXJ at a small loss because GLD was crashing, and moved that money into SSO. My cost basis is 90.86. Placed a stop below today's lows at 84.5. I think there is a good chance that today was THE bottom intraday. The price over the past 2 days shows wild swings up and down in place -- a classical bottoming pattern!
ReplyDeleteMy take on the coronavirus pandemic -
ReplyDeleteThis is just an opinion, and not grounded in fact – but is it possible that in fact millions of asymptomatic people are infected with the virus? With drive-through testing sites opening soon, we may discover that both the incidence of symptomatic infection and the fatality rate are far lower than currently estimated. I recall reading reports that up to 5 million residents/visitors left Wuhan prior to the lockdown – many of whom were likely infected. It’s also human nature that many of those infected and also symptomatic will hide or downplay their symptoms in order to continue working. So I think widespread testing is crucial – if only to reveal the true extent of the problem.
Reported cases in China have declined markedly. It's possible that upside risk will soon eclipse downside risk. In any case - if you were uncomfortably positioned during this week's selloff, consider using further rallies next week to reallocate to a more conservative mix. The markets are likely to rally further, but just as likely to retest this week's lows.
A -12% gap down to start the week? I think the odds of a green close by the end of today's trading session are 50/50, and the odds of a green close by the end of the week are 80/20.
ReplyDeleteDown so long it looks like up. That's my rationale here for a bounce. Traders/ investors are human - they're able to display fear and pessimism for only so long before it tires them out. So I think we see a wave of optimism soon.
ReplyDeleteNot saying the ultimate low is in - but it may be in for the short term.
Some things never change:) This is your old buddy Chris from Westport.
ReplyDeleteHow are you all doing?
No one remembers, huh? Remember the last financial crisis, and the Canadian ass-monkey who threw me of his blog? Hello...
ReplyDeleteHi Chris! There are very few people reading this blog, hence the delay in welcoming you back. How are you positioned now in the market?
ReplyDeleteDear David,
ReplyDeleteYou're going to laugh, but I haven't touched the stock market in three years. What actually happened was, I got really fatigued by the insistent way that stocks I "Liked" would invariably go nowhere, while money-losing operations that I didn't even begin to understand were the big winners. I began writing restaurant reviews for a local paper, then wrote a novel about lost love and cocktail culture called "The Regular" by Christian Hunter available on Amazon, then a few more books. Right now I am working a police story as well as a story about social media. What I came to realize is, success in the market isn't about the perfect entry or exit, it's the day-in day out stomach-churning patience that really eats gnaws away at your sense of happiness and well being, but I have been watching the market for the past couple of months. Fabulous show.
I hope 2nd AVE is also doing well, and his family and yours.
My take on equities is, they will never let their system fail, it's too damn big! So be patient, wait 'till the bodies are stacking up in the streets before going long in a significant way, because that's when the upmove will continue, and it will be a hard trade to make psychologically.
What have you been up to these twelve years? How's Bill Cara?
BTW I never really lost money in the market, my stops were always too close:)
ReplyDeleteI don't know how Bill Cars is doing -- I haven't visited his site after gold's collapse.
ReplyDeleteHaving tight stops is the way to ensure that you don't lose money, and it worked for you -- congrats! I chose a different strategy -- buying undervalued (in my opinion) sectors, and investing more as they became even more undervalued (IMO). This strategy would have worked if my karma was OK. But it wasn't, and as a result every sector that I invested in (gold stocks, oil stocks, ocean shippers) dropped to all time lows, wiping out my investments.
I am tired of this state of affairs, and my wife is even more upset with me. So this weekend I decided to stop putting money into the market and instead trying to accumulate them the old-fashioned way. No sense in playing this game if it is karmically rigged against me.
Good luck in your projects, Chris! And good luck to you, 2nd_ave, in playing this tough game!
David,
ReplyDeleteLooking back, I was extraordinarily ignorant of, and uninterested in the very tech stocks that turned out to be the big winners. For example, I personally had never ordered anything from Amazon until the summer of 2017, my own books. I didn't have an Iphone until right around the same time, so you could say I was a real luddite when it came to tech, and still am. I was buying all sorts of dumbshit stocks that didn't work out (GE, Alcoa, HMY, AUY) the big names from my earlier days, always a mistake.
Finally, I sat in physical gold and silver for twelve years through an entire business cycle with the yellow metal never having made a move. I sold when I began to seriously worry that it was going back to 600, and I still can't think of one single reason that it shouldn't. As long as gold has no earnings (and it never will) it will remain what it's always been, an archaic curiosity, the obsolescent currency of the distant past, a luxury doorstop, and now having said, that watch it take off to the upside like a scalded rabbit just to spite me:)
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ReplyDelete