Oct 16

Short-Term(ism) may not be a bad thing

There is an interesting article in CNBC today that talks about a lot of things but mostly risk and reward. The article is┬ámore concerned about protecting one’s downside and how you can do better than inflation rate to be moving in the right direction. But do people (individual investors) really look at things in such a dispassionate way? The primary tendency is if you are bullish you buy and when you are nervous or (more likely) the market has tanked fear comes over you and you sell.

There are several downsides to taking a short-term approach to the stock market:

  1. You are liable for short-term capital gains
  2. You have to monitor the market on a regular basis

But you are unlikely to get caught in a “black swan” situation.

If you start with the premise that you don’t know what is going to happen to the markets tomorrow, you have a more “hands-off” and “mind-off” approach to the markets.

The premise for The Alternate Trader model is to stop predicting the market. To really believe that there is no way to know what is going to happen tomorrow. And let your behavior be completely driven by what the market tells you.

Oct 16

Markets on downward trend

The markets have been in a downward trend since my last post here couple of weeks back. I went long put options on the SPY and the IWM. I did not buy the SPXS and TZA as I had originally planned for as I wanted to define my risk and play a short-term trade.

The move down on the SPY has not been significant since my bearish trade. However, it has trended down. The move down on the IWM has been a little more pronounced and it could be the signal for the broader market to go down as well. I have November puts on both which are showing healthy profits as of now. I may close these and roll over into December puts if the trend is maintained.

To be noted is the fact that XLF is distinctly bullish while XLK and EEM are neutral. So, there is some risk that marjet reverses trend and starts getting bullish.

XLE is broken. XLU is bullish and XLI is bearish.

The VIX just trended up today again but is still low under 17 which is higher than where it has been for a while but still lower than what we would call a bear market.


Oct 16

Market commentary for October 18, 2016

The market looks somewhat mixed. The main signals seem to be towards the bearish side with SPY and IWM trending low. There is some good news from the quarterly results from the banks and financials though which is likely stemming the tide a little.

But overall the market seems to have more chance of going down than up. So, I may take up a stance along those lines in the next day or so.

SPY: Bearish since last Thursday October 13; I should have got in with a bearish trade that same day. I will likely buy SPXS today

EEM: Just about touching the bearish line; should watch for the next few days

IWM: Really in bearish territory; I should go long on TZA

XLE: Very choppy; cannot make a judgment

XLU: Has been severely bearish; now trying to come up a little but still in bearish territory

XLI: Almost in bearish territory

XLF: Strangely trending against the wind a little; looks like in somewhat of a bullish trend probably due to the good results from the banks and financials recently

XLK: Neutral but looks like breaking soon

Oct 16

Trade Update on SPXS, ERY, EDZ and FAZ

I sold all my positions on SPXS, ERY, EDZ and FAZ for a net loss of 3%. Lesson learned is get in when the model tells me to get in and don’t wait. In this instance I wavered and waited. Not that I would not have lost some money. I still would have. But I would have disciplined towards my principles.

Oct 16

Market Trends and Trade Status on SPXS, ERY, EDZ, FAZ

Overall the market looks like in neutral territory. However, I have a bearish bet at this time and it does not look like the chances of the downward trend that I am hoping for may pan out. The chance only seems to be 50% at this time – not something I like to bet on. So, the prudent thing for me would be to get out of the market and wait for a definite trend to develop.

SPY: looks neutral but also looks like will break in some direction quickly; there is danger that it will break in the opposite direction that I am positioned – I am positioned in a bearish stance; perhaps I will reduce my exposure or get out completely to see which direction the market breaks and then take action

EEM: very much same as the SPY

XLF: clearly very volatile; best for me to get out

XLE: has turned bullish; I need to get out from my bearish bet