Enjoying the market slide...

I know that is a bit of a strange title for the post, but recall that I have always said that I don't care is the market goes up or down, as long as it picks a direction and sticks with it for a while.  Since I trade on momemtum (using the 40-day moving average), I stand to gain as long as the market (or a particular security) continues to move in the same direction.

In late April and early May, the moving averages told me to get out of stocks and the positive ETF's and then to get into the negative ETF's a few days later.  Now, I had been burned on this type of signal before, as the market just lingered and reversed course a few days later back to the positive.  In this scenario, an investor who doesn't touch their holdings tends to break even but an investor who follows moving average signals (like me) tend to lose as stocks reverse course (twice, in this case) quickly.

This time, I was happy to get out of stocks (at first) and preserve capital.  After a couple of days, though, when it looked like the market would continue to drop, I bought into HBD (to bet against gold bullion), and HSD (to bet against the US S&P index).  Both bets have worked well for me so far, and I got out of the HBD a couple of days ago when the price of gold started to rebound.

One commodity, natural gas, has done well over the last little while, and I have enjoyed some gains in HNU (leveraged, so be careful) as the price of natural gas went up.  Even though it has a lot more room to recover, I think the time of year is wrong for a full recovery so I got stopped out of HNU late this week.

A new way to profit from a market downtown, the US VIX, or volatility index, is also of interest to me.  HVU (an ETF that returns roughly double what the VIX percentage gain / loss is) went into buy territory recently (under $5), so I picked some up.  With the HVU price now at $6.51), the percentage gains have been good.  While I will continue to play HVU, history indicates that the highest volatility is usually later in the summer (July / August), so the market may bounce positively a bit before then.  Either way, my gains in HVU are good enough that I can endure a bit of a slide and still have a profit.

The goal in markets like this is not necessarily to profit (by holding the inverse ETF's), it is to preserve capital by NOT holding the securities that are going down.  North American markets were down 3 - 5% this week alone, so by not holding any of these securities, I have saved myself this money.  That is not counting the 1.4% I actually MADE this week on the securities above, so my effective return is more like 4.4 to 6.4% for this week alone.

By following moving averages, I will never sell at the top of the market or get in exactly at the bottom.  I will, however, benefit from downward moves in the market like we are in now, as share prices (and their moving averages) drop to lower levels.  As stocks recover and pass up through their 40-day moving averages, I will get signals to buy them back, at levels much lower than where I sold them.  This is why my method is much better than the 'buy and hold' method that most (lazy) advisors employ and try to convince investors is the best way to go.  Those that advocate holding dividend-paying stocks through thick and thin should look at this week - overall, investors lost all of the dividend interest return for the ENTIRE YEAR in only this SINGLE week. 

So far this year, I am up 4.4% overall.  This compares to the TSX at -5.64%.  (yes, I am currently beating the TSX return by just over 10%).  This compares to the US S&P 500 at 3.86% YTD.

I am not sure if I will get into the inverse ETF's more or not (the HED, HFD, HQD, HOD, and HXD have also done very well lately) but I will remain mostly in cash and wait for things to turn positive again and jump back into stocks and the positive ETF's.  For now, I am happy to preserve capital and profit slightly from my investments discussed above.

First Post in a Long Time - Mostly in Cash Right Now

While I don't imagine anyone is still reading my blog, since I haven't posted in over a year, I thought I would try to start posting again. With the markets being pretty jittery these days and with the up and down swings seeming alternating, I have been sitting largely in cash for the last few weeks. I am 84% in cash right now, and almost half of that is in corporate bonds with a good yield (and also a good capital return, it turns out).

For the last few weeks, half of the securities I have been in (and out of) have been negative ETF's - they go up when the markets go down. Most of the stocks and positive ETF's that I follow are in 'do not hold' territory - that is, they are below their 40-day moving average lines.

That said, there ARE a few securities that just said 'Buy' on Friday, so I will try to pick them up on Monday if they continue to rise. They are HSD, LIF.UN, PWF, and HBD. You may notice that two of these securities are negative ETF's - HSD bets against the US S&P index and HBD bets against the price of gold bullion.

I am not expecting any major positive influences on the markets any time soon - there is plenty of bad news coming out of Europe, the US economic recovery looks to be slowing, and we are coming up to the 'sell in May and go away' period of the year. I suspect that most of the securities that I will hold over the next few months will be negative ETF's but the moving averages will tell me what to buy (and sell).

If anyone IS still checking out my blog, I would be very interested to hear what you are doing (investment-wise) and which securities you hold or are looking at buying.

Mid-February Update

Well, the markets are sailing along and all is good. All the stories for the last little while have been about the impending correction and it hasn't happened yet. That said, we are bound to have at least a 10% correction soon, although it may not come until May or June, as the typical summer slowdown sets in (last year, April was weak).

For now, I am up 2.1% YTD, so I am on target so far of my 2011 goal of 1% return per month. The overall markets have done better than that but I am never fully invested so my returns are a bit lower (and easier to stomach the ups and downs).

Currently, I am just over 60% invested overall (I was as high as 80% invested in early February). I currently own CP, FTT, G, HBU, HFU, HGU, L, LIF.un, PBN, PGD, PWF, SNC, T, THI, and TRP. There may be more stocks that I will be looking to buy next week as well, but I haven't looked at the moving averages yet this weekend. Monday is a holiday so there is no rush.

I will admit that the thought of a significant correction soon is a bit worrisome but I can't let it make me abandon my investment strategy (or I would have sold everything months ago, and missed out on the recent gains). For now, I will stay the course and just make sure I have stop losses in place for my largest positions.

First Month of 2011 is in the Books

Even though the US stock markets have had a good month, the Canadian stocks weren't quite as possitive for me. For January, I am down slightly (-0.24%, so I am pretty much even). I am currently about 65% invested, so I own quite a few equities but I still have alot of cash on the sidelines.

I currently own BCE, BIN, CCO, CLS, COS, CP, ECA, FM, ENF, HFU, HXU, HSE, MBT, PBN, PGD, PMZ.UN, REI.UN, RUS, S, SC, and T. I am up in all but five of these securities at the moment, and only one of them is down more than $100 total since I purchased it (SC, as it dropped $2 per share when it was announced their CEO would be leaving the company).

I was up on CCO the last couple of days so I just doubled the position today. I have decided that I not only want to sell stocks if they start to go down but I also want to buy more of a stock that is moving up nicely. That means that my initial purchase of a stock is meant to be the first half of the position and the stock performance will determine if I purchase the second half or simply sell the first half. It is naive to think that I will buy stocks and they will always go up right away so this protects me by not investing the full amount. This also makes it easier to invest larger sums of money as my portfolio grows, as I never want to own more than 20 or 25 securities at the most.

For tomorrow, there are a few stocks that are nicely in 'BUY' territory - HQU, AGU, LIF.un, and MFC. I will put in stop buys tonight and pick up any of these stocks / ETF's that continue to rise in the next couple of days (I put my stop buys in for two day expiries now, so I have to do less updates). Oil has had a nice run lately and HOU and CNQ both went into BUY territory today but I wait until the second day in buy territory to buy so I will have to wait on those. I already own HSE, ECA, COS, and PBN so I am already well-positioned to benefit from higher energy prices.

Another Year Wrapped Up

Well, 2010 is now officially in the books. I ended the year with a 7.7% return for the year - below my original goal of 1% gain per month but ahead of my revised goal of 0.5% gain per month. I finished behind the 2010 gains for the major indices (TSX, S&P, NASDAQ, etc.) but I only averaged an investment rate of about 50% for the year (with the rest in cash at any given time, ready to deploy), so I had an easier time sleeping at night than if I had all my cash invested and had to put up with the big market swings all year. I finished 2010 near my high for the year (up 8%), which I hit on December 30th.

Going into 2011 (Canadian trading to begin on Tuesday, January 4), I am 33% invested with the rest in cash. I currently own ARE, BIN, HSE, OCX, S, SC, TRP, and YLO. For Tuesday, I am looking at more securities that are in BUY territory - HNU, BBD.b, COS.un, ECA, LIF.un, PWF, and QBR.b. I am also looking at CCO, which is already in HOLD territory and the outlook for uranium looks positive for 2011.

I will also deposit $5K into my TSFA account on Tuesday, to get the money in there as soon as I can. It will be the third year that we are eligible to contribute to the TFSA and the third year that I have done so. My original $10K is up to $12,760 so I have over a 25% return so far (I am am sure there are many people with better TFSA returns, but I am happy with this). I know I won't be able to keep this up every year but after 20 years of putting money into the TFSA I hope to have a tidy sum there to augment my RRSP and cash accounts.

Looking back over the last 26 months, I have monthly gains in 21 of those months, I was down in 4 of those months, and I was even for 1. Although I go trade by trade according to the moving average graphs, I do evaluate my performance on both a monthly and yearly basis.

I am still looking to refine my approach somewhat to make the returns even better and to reduce the amount of time I spend on looking at my stocks (even though I only spend 15 minutes per day now). One of the things that I started doing was putting in stop losses to protect gains even when I wasn't near the sell indicator on the graphs.

For January, I plan to ONLY sell when the graphs tell me to and to try to trust the difficulty of getting through the lines to maintain gains. There are many securities that I sold on a gain during weakness that then continued to move up and I never got back into them again. The ETF's for the indices, like HQU, HSU, and HXU are prime examples of this. I made money on them all but I was stopped out of them early and missed subsequent large gains over the coming months. I will evaluate in January how this approach works out for me and report back here.

I wish everyone a profitable 2011 and I hope you had good gains in 2010. If you have any questions or comments, please post them here and I will be happy to respond.

Merry Christmas Everyone

While Christmas is a great time to spend time with family, it is a pretty boring time for stock trading. With the low volumes last week and more low volumes expected for the upcoming week, things can be pretty slow. That said, the hope for a 'Santa Claus rally' this year is high - given that 3 times out of 4 when the markets are up over 10% so far in the year, the markets gain during this week, averaging a gain of almost 1%. With the markets declining last year in the week following Christmas, it has more people optimistic about this year. For me, the more other people are optimistic the more I am pessimistic, as things never seem to happen if everyone expects it to.

My portfolio was up slightly last week, and I am at a 7.8% return for the year so far. I am behind the major market averages but I didn't have to stomach many of the large swings that the market experienced.

Currently, I am about 56% in securities with the remainder in cash (waiting to be deployed). My current holdings are BIN, ECA, HSE, HSU, OCX, PBN, PWF, S, SC, SLW, T, TCW, TRP, WJA, and YLO. There are a few buys for the market open on Dec 28 - ECA, WJA, and YLO that I already own, and I think I will buy some TCM. Thompson Creek has been performing well lately and since I don't own any I will try to buy some next week, since the current price is pretty close to the 40-day moving average.

One more week (3 days, actually) to go, and we can wrap up our returns for 2010.

Less than 2 weeks until the end of 2010...

With the year coming to an end, the evaluation of the returns from 2010 can begin in earnest. Did your portfolio beat the indices? Did you feel confident enough in the markets to leave your money invested through all the ups and downs? Did you take some money out of stocks and put it in bonds instead?

For me, I am at a YTD return of 7.5% so far this year, so I am behind the major indices a bit but I haven't had to stomach much of the roller-coaster ride the markets took (since I am less invested invested in stocks when the market is weak and more invested when it is strong - but rarely ever fully invested).

I didn't buy any fixed income at all - I looked into it but I couldn't find anything guaranteed that would give me more than .5%, even on a $100,000 deposit. So, I decided that it was best for me to leave it in cash, ready to invest in equities when the moving average graphs dictated it.

Right now, I am about 38% invested in equities. They include BIN, HSE, OCX, OSK, PWF, QBR.B, S, T, TCW, TRP and YLO (about half of which I only bought yesterday and today). All signs point to the markets moving upward but I am always skeptical when everyone seems to agree on the direction that the market will take (it usually goes the other way). I will keep following the moving averages, buying and selling as they indicate, so I may very well be buying more equities on Monday.

Most of the ETF's that I follow (for commodities and the market indices) are in the 'hold' territory but I don't currently own any of them since I got stopped out on temporary weakness. This has me re-thinking my practice of putting in manual trailing stops and thinking about strictly sticking to the moving averages to sell. This is hard to do, however, as you often have to watch your gains evaporate before things move back up again.

I started the year with the goal of achieving a return of 1% per month, or 12% for the year, and I won't hit that target. It does look like I will hit my revised goal of 0.5% per month (or 6% return for the year, and I may even hit 8% if the year ends well.

I likely won't post again before the end of 2010 but I may post if I get some time over the holidays. In any case, I will try to post early in the New Year to summarize my 2010 results.