I keep writing new record of myself. I sold FXP at $81.76 today and made a 15% gain in two business days. I have to acknowledge that I sold prematurely, only to watch FXP went as high as $86.46.... I did not expect that kind of movement so fast because when Merrill Lynch issued a warning on larger write down on upcoming earnings report (due this Friday) the stock actually went up. But it didn't happen to Citigroup today.
Intel's report definitely does not help the market tomorrow. I guess tomorrow should be the climax of selling. Thursday and Friday may slow down a bit as some other financials including JP Morgan, Merrill Lynch, Wells Fargo, Washington Mutual, Bank of New York and etc are reporting. But since they are financials, probably their numbers are in Wall Street's pocket. Significant surprise on the downside is not quite expected.
I also need to acknowledge that my previous prediction of 2008, specially on the Chinese stocks that I have been talking about, are being violated. I would put all those stocks on hold, or be more aggressive, sell them at a good time to cut back long position. I may want to get out from FMCN for now to try to minimize the loss. As well, I'm still looking for chance to unload my HFU in Canada, as I was wrong on financials having a rebound last week. But glad that I didn't initiate a big position.
You may still hear people saying we are not going into recession. Again I want to emphasize, it doesn't matter. If there are a large number of investors do not believe the market is going up, they will sell, and their transactions will show on the graph. In a downtrending market it's easy to pick a stock to go down than to go up. This is what we call "Don't fight the trend".
I probably have not mentioned my thoughts on solar energy stocks, but I really want to say, I know many solar energy stocks are going to come down with the market, because the market in a whole is going down and as well, these stocks have had crazy runs that their 20-day EMA significantly outpace the 200-day EMA. Same story to dryship stocks earlier in 2007. Too bad I do not want to short individual stocks.
Tuesday, January 15, 2008
Thursday, January 10, 2008
FXP the fourth time
Got into FXP at $70.73 again today. I missed out the good opportunities in all TWM, SKF and SRS in the beginning of this year. I expect the rebound will not hold for very long, so I started to initiate a small position on it.
As said, markets these days are very fluctuate. Things move so fast during a day (look at CFC). I don't want to gamble too much. So I'll play with ETFs instead of individual stocks.
As said, markets these days are very fluctuate. Things move so fast during a day (look at CFC). I don't want to gamble too much. So I'll play with ETFs instead of individual stocks.
Tuesday, January 8, 2008
Markets didn't wait for me
Only a few days ago when we headed in 2008, I still saw articles here and there predicting a strong equity market this year. Just a few days I wonder if those people change their view.
I already became bearish since November, became more bearish by end of 2007. As you see I'm not perfect. I did not correctly predicted a sub-prime blew up in August, but at least I tried my best conservatively to recoup some of my losses by trading TWM and FXP.
When a recession comes or big fall of market, you will start to see articles about what sectors and what stocks are defensive. Let me tell you (again), due to the current invention of short ETFs, you should not bet on yourself you can find a stock that can go up well in a down market. You should simply hold some cash and make use of the short ETFs.
I am a bit scared by the market these days, swing too much and too fast. Otherwise, I should have got myself some short ETFs and making money to offset some of my loss on the mutual funds and closed-end funds I have. I already have some ideas what to buy and when to buy, just that the market moves so fast that it didn't wait for me......
Anyway, I was wrong on the direction about Canadian financials as well. Nothing falls in a straight line, so at least I believe I stand a chance to recoup some of the loss before I cut loss. I'll see.
I already became bearish since November, became more bearish by end of 2007. As you see I'm not perfect. I did not correctly predicted a sub-prime blew up in August, but at least I tried my best conservatively to recoup some of my losses by trading TWM and FXP.
When a recession comes or big fall of market, you will start to see articles about what sectors and what stocks are defensive. Let me tell you (again), due to the current invention of short ETFs, you should not bet on yourself you can find a stock that can go up well in a down market. You should simply hold some cash and make use of the short ETFs.
I am a bit scared by the market these days, swing too much and too fast. Otherwise, I should have got myself some short ETFs and making money to offset some of my loss on the mutual funds and closed-end funds I have. I already have some ideas what to buy and when to buy, just that the market moves so fast that it didn't wait for me......
Anyway, I was wrong on the direction about Canadian financials as well. Nothing falls in a straight line, so at least I believe I stand a chance to recoup some of the loss before I cut loss. I'll see.
Sunday, January 6, 2008
The shortfall of ultra long and short
I like to apply idea to realistic situation other than on paper only. After all, you want to make real money profit, not paper profit.
I emphasized the use of ultra long and short ETFs. I want to make sure they are effective and how would they affect actual trading and profit in real world. Therefore, I did some very simple test using make up numbers.
Note that ultra long and short ETFs search for 200% exposure to a particular index on a day-to-day basis. Some articles emphasized the tricky part of day-to-day basis. However, this is not the important point in here, they went the wrong way.
The most important issue for the ultras are the leverage minus cost. What I mean is, when the index goes up, an ultra long ETF should produce roughly less than 2x, and when the index goes down, the ultra long ETF should lose roughly more than 2x. That is due to the cost and management fee.
I tried to produce a graph of a series of make-up returns. I initially assume the index loses 2% in 1 day, then gains 1% the next day. It flips between -2% and +1% for about 32 days. Then the pattern changes. It flips between +2% and -1% for about 70 days. The index produces approximately 19.4% in total. If we assume the ultra long produces exactly 2x exposure, the ultra produces approximately 39% at the end of 102 days.
Using the ultra actually compounded the effect. Therefore, if the index has been negative for a while, it takes more effort for the ultra long to catch up in performance. As you would see, while the index is slightly positive, the ultra long is still negative. But if the index continues to rise, eventually the ultra long picks up the speed and surpass the index. Conclusion, to hold an ultra ETF for long time, you have to make sure that you are making the correction directional bet. If the index takes longer than you expect to go to your direction, you have to expect to hold the ultra ETF longer to realize the compounding profit.
Now however if I change the exposure to 1.9x your direction and 2.1x the opposite direction, the picture totally changed.
If I use exactly the same index return pattern as above, assuming the ultra long only goes up by 1.9x when the index goes up, but the ultra long goes down by 2.1x when the index goes down to reflect the costs. Not very surprising, the ultra long actually underperformed the index by 0.02%.
Now if you believe this kind of exposure makes more sense than simply 2x. What you need to do is 2 things:
1. market timing matters. Just that you think the index should go up over a year, it doesn't mean you can earn more by using ultra long. Due to the imperfect 2x exposure, you better time the market carefully.
2. trade in and out. If there is no tax, sell into strength and buying back during pullback always help the performance of an ultra ETF. Given the compounding effect against you, I guess even after you consider the tax effect you will still find trading in and out helpful.
I emphasized the use of ultra long and short ETFs. I want to make sure they are effective and how would they affect actual trading and profit in real world. Therefore, I did some very simple test using make up numbers.
Note that ultra long and short ETFs search for 200% exposure to a particular index on a day-to-day basis. Some articles emphasized the tricky part of day-to-day basis. However, this is not the important point in here, they went the wrong way.
The most important issue for the ultras are the leverage minus cost. What I mean is, when the index goes up, an ultra long ETF should produce roughly less than 2x, and when the index goes down, the ultra long ETF should lose roughly more than 2x. That is due to the cost and management fee.
I tried to produce a graph of a series of make-up returns. I initially assume the index loses 2% in 1 day, then gains 1% the next day. It flips between -2% and +1% for about 32 days. Then the pattern changes. It flips between +2% and -1% for about 70 days. The index produces approximately 19.4% in total. If we assume the ultra long produces exactly 2x exposure, the ultra produces approximately 39% at the end of 102 days.
Using the ultra actually compounded the effect. Therefore, if the index has been negative for a while, it takes more effort for the ultra long to catch up in performance. As you would see, while the index is slightly positive, the ultra long is still negative. But if the index continues to rise, eventually the ultra long picks up the speed and surpass the index. Conclusion, to hold an ultra ETF for long time, you have to make sure that you are making the correction directional bet. If the index takes longer than you expect to go to your direction, you have to expect to hold the ultra ETF longer to realize the compounding profit.
Now however if I change the exposure to 1.9x your direction and 2.1x the opposite direction, the picture totally changed.
If I use exactly the same index return pattern as above, assuming the ultra long only goes up by 1.9x when the index goes up, but the ultra long goes down by 2.1x when the index goes down to reflect the costs. Not very surprising, the ultra long actually underperformed the index by 0.02%.
Now if you believe this kind of exposure makes more sense than simply 2x. What you need to do is 2 things:
1. market timing matters. Just that you think the index should go up over a year, it doesn't mean you can earn more by using ultra long. Due to the imperfect 2x exposure, you better time the market carefully.
2. trade in and out. If there is no tax, sell into strength and buying back during pullback always help the performance of an ultra ETF. Given the compounding effect against you, I guess even after you consider the tax effect you will still find trading in and out helpful.
Friday, January 4, 2008
sold FXP
Sold at $82.70. Made a profit of approx. 11% from $73.50 about 2 weeks ago. I made myself two records. Trade the same securities 3 times within 2 months, and made profit all 3 times. I guess if I can keep up of that kind of good work I can retire very soon.
Unfortunately I'm not that smart, therefore, all my other holdings dropped today. But almost all of my holdings I'm going to hold them for a while purposely, so the drop today doesn't bother me too much, unless it really drops very badly.
In the meantime I would not go to any individual stock, unless you want to go short. Given the expansion in ETFs these days I guess individual investors should learn how to make use of them in any market environment. These months mark a sequence of down days of market, under this kind of market, it's easier to pick a stock that will go down than a stock that will go up.
Today may mark the end of some strong (tech) stocks uptrend, we'll see how it plays out later. But all strong stocks like AAPL, GOOG, BIDU, AMZN, VMW, ISRG and FSLR dropped by quite an amount. That may mean the downward pressure starts bringing the strong stocks down too. But instead of trying to bet on the supposed-to-be-strong stocks, as I said in last paragraph, a better trade is to bet on stock that will go down. But if you don't want to short individual stock, ultra short ETFs are a good way to go.
As I said yesterday, XLF either rebounded or made new low today due to the job report. It made new low. If we would take this as an example. Wait for a rebound and when XLF hits the 50-day EMA, buy some in SKF. If you would like to play the rebound as well then you have to make a guess of when XLF will bottom in the short term and buy some UYG.
Anything, current strategy should be, bias to the downside. Good luck.
Unfortunately I'm not that smart, therefore, all my other holdings dropped today. But almost all of my holdings I'm going to hold them for a while purposely, so the drop today doesn't bother me too much, unless it really drops very badly.
In the meantime I would not go to any individual stock, unless you want to go short. Given the expansion in ETFs these days I guess individual investors should learn how to make use of them in any market environment. These months mark a sequence of down days of market, under this kind of market, it's easier to pick a stock that will go down than a stock that will go up.
Today may mark the end of some strong (tech) stocks uptrend, we'll see how it plays out later. But all strong stocks like AAPL, GOOG, BIDU, AMZN, VMW, ISRG and FSLR dropped by quite an amount. That may mean the downward pressure starts bringing the strong stocks down too. But instead of trying to bet on the supposed-to-be-strong stocks, as I said in last paragraph, a better trade is to bet on stock that will go down. But if you don't want to short individual stock, ultra short ETFs are a good way to go.
As I said yesterday, XLF either rebounded or made new low today due to the job report. It made new low. If we would take this as an example. Wait for a rebound and when XLF hits the 50-day EMA, buy some in SKF. If you would like to play the rebound as well then you have to make a guess of when XLF will bottom in the short term and buy some UYG.
Anything, current strategy should be, bias to the downside. Good luck.
Thursday, January 3, 2008
HFU
The title is not short hand of some coarse languages, don't worry. It's the Canadian Financials ultra long ETF I bought today at $17.03.
I know the overall market did not start with good upward moving in 2008, but with strong oil and gold, Canadian market did go up 2 days in a row, how surprising.
But, the financials did not follow the index. HFU is now sitting at a price very close to the lowest set in November 2007. I did not commit all my money, just a first dip to test the water. I think given that Canadian banks have less problem related to credit crunch (but still there is ABCP problem) as their US peers, Canadian financials should have some short term upside potentials.
We'll see how it plays out.
My FXP battled to go up passed $80. I guess I'll liquidate it if it hits somewhere like $82. I guess I'll take a look at the market before it opens tomorrow (as US is reporting job data tomorrow before market opens) and see should I put in a limit order.
Quite surprise me too is FMCN, which went up 2 days in a row in a down market. I guess people really like its acquisition of CGEN, which is a direct competitor. I guess if resource allows, I can consider VISN as well. VISN's revenue number doesn't look bad.
Nintendo held up very well as well. I guess nothing I can complain about.
Given the market action today, doesn't look very good to QQQQ or QLD. The Nasdaq was holding up for most of the day, only to see it turned red in the late afternoon. XLF is at the November's low already, if there will be a rebound we should see it tomorrow comes with the excuse of the job report, or expect XLF to make a lower low.
I know the overall market did not start with good upward moving in 2008, but with strong oil and gold, Canadian market did go up 2 days in a row, how surprising.
But, the financials did not follow the index. HFU is now sitting at a price very close to the lowest set in November 2007. I did not commit all my money, just a first dip to test the water. I think given that Canadian banks have less problem related to credit crunch (but still there is ABCP problem) as their US peers, Canadian financials should have some short term upside potentials.
We'll see how it plays out.
My FXP battled to go up passed $80. I guess I'll liquidate it if it hits somewhere like $82. I guess I'll take a look at the market before it opens tomorrow (as US is reporting job data tomorrow before market opens) and see should I put in a limit order.
Quite surprise me too is FMCN, which went up 2 days in a row in a down market. I guess people really like its acquisition of CGEN, which is a direct competitor. I guess if resource allows, I can consider VISN as well. VISN's revenue number doesn't look bad.
Nintendo held up very well as well. I guess nothing I can complain about.
Given the market action today, doesn't look very good to QQQQ or QLD. The Nasdaq was holding up for most of the day, only to see it turned red in the late afternoon. XLF is at the November's low already, if there will be a rebound we should see it tomorrow comes with the excuse of the job report, or expect XLF to make a lower low.
Wednesday, January 2, 2008
Crude Oil $100
Crude oil futures finally broke through $100 per barrel, although did not close above it.
Many people think this is really something. Well when oil was around $70 only years ago, $100 is something. But when oil was $99 in November 2007, $100 in January 2008 does not add to my blood pressure.
The first trading day of 2008 doesn't look very bullish. All SPY, DIA, QQQQ, IWM and XLF are all approaching their November lows again. So if they cannot hold that lows, expect another leg down. FXI is coming down as I wish (because I'm still holding FXP). FXI's first support is $160, which is last time's lowest in December, then the next support will be around $150 - the 200-day EMA. If FXI approaches the prices between the two supports I should cover my FXP.
I was so stupid. I didn't know there are ultra long and short ETFs in Canada trade on the exchange. Now I can trade with the ultra long and short of S&P TSX 60, Financials and more indices in Canadian dollar term. I know there will be 10 more coming up on the market. The ETFs I like are the TSX 60 (which is large cap), financials and agricultural. Now I can set up core financial mutual fund portfolio and at the same time, trade with the financial long and short.
My current view is still the same, little bearish for the short term future. Since in a long run China is still a place to invest, I'll wait for chance to go into China mutual funds and CAF.
Many people think this is really something. Well when oil was around $70 only years ago, $100 is something. But when oil was $99 in November 2007, $100 in January 2008 does not add to my blood pressure.
The first trading day of 2008 doesn't look very bullish. All SPY, DIA, QQQQ, IWM and XLF are all approaching their November lows again. So if they cannot hold that lows, expect another leg down. FXI is coming down as I wish (because I'm still holding FXP). FXI's first support is $160, which is last time's lowest in December, then the next support will be around $150 - the 200-day EMA. If FXI approaches the prices between the two supports I should cover my FXP.
I was so stupid. I didn't know there are ultra long and short ETFs in Canada trade on the exchange. Now I can trade with the ultra long and short of S&P TSX 60, Financials and more indices in Canadian dollar term. I know there will be 10 more coming up on the market. The ETFs I like are the TSX 60 (which is large cap), financials and agricultural. Now I can set up core financial mutual fund portfolio and at the same time, trade with the financial long and short.
My current view is still the same, little bearish for the short term future. Since in a long run China is still a place to invest, I'll wait for chance to go into China mutual funds and CAF.
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