Tuesday, August 5, 2014

It's Not Easy

I am big fan of Stocktwits, I uncover a tremendous amount of great information there, and I get a many good ideas of the traders, investors and generally good people.

That said, let me rant just a bit:

 I bristle when anyone says making money via any particular trade is easy, or simple, or a no-brainer (at least unless maybe it is coming from Carl Icahn.)  Nothing about the market is easy and even if the person gets the trade right, it’s not because it was easy.

If I see someone call a trade easy, I figure they are arrogant, a newbie, or both.  Experienced and savvy traders don’t call anything about the market simple.  

Monday, August 4, 2014

The Bull Market is Intact!

Sorry for the hyperbole in the title.  Neither I, nor anyone else knows if the bull market will continue another day.   This post is a follow up to one I wrote on the weekend.  In that one, I looked at the $VXX performance after it had gone up by 15% over three days. 

For the last three years, every time the $VXX met that criteria, it dropped back on the fourth day.  Nine out of nine.

What does that have to do with the bull market?  In a discussion on Stocktwits, another member @allgoodtrades remarked that we were in a bull market, and the $VXX wouldn’t continue to spike like it did in 2011.

And lo and behold, what happened on August 4th?  The $VXX did drop, a substantial amount, actually. Ten out of ten now.  Leading me to conclude the bull market is intact, the SVXX should keep dropping and all is right with the world. 

OK, that’s a stretch, and I intend to remain cautious. But from this indicator, I see no reason not be optimistic, or upbeat, about the market.
Nothing in this post is meant to be a solicitation to buy or sell any security.  

Saturday, August 2, 2014

It Works until it Doesn’t

I recently owned some $VXX puts and sold them on Friday.  It was a sort of continuing trade over the last few weeks of puts and short positions which I finally closed out.

$VXX is the iPath S&P 500 VIX short term ETN.  The VIX is a measure of volatility in the market.  Simplistically, the VIX generally goes up when the overall market is falling, and vice versa.   

In response to an inquiry, I had a civil discussion with @allgoodtrades (Gavin) on Stocktwits about where the $VXX was going next.  He thought it would fall, and I was concerned about it spiking higher if there was a correction (crash) on Monday, August 4th.  I was staying on the sidelines.

Gavin challenged me to look at the chart and find another time in the last three years where $VXX rose as much as it did in the last three days.  It’s very hard to see that in a chart, so I ran the historical prices in Yahoo! Finance.

Over the three days ending 8/1/14, $VXX went up 15%.  In running the numbers, I found nine times where the $VXX went up 15% or more over the last three years, actually a little less than three years, more on that later.

Although this wasn’t as unusual as Gavin thought, I did something interesting.  In each of the nine times the ETN ramped over a three day period, in closed lower on the fourth day.  Nine out of nine.  It’s hard to beat those odds.

The VIX in 2011

Unless you go back the full three years.  In August 2011, the $VXX had a spike that kept on going.  Check out the closing prices from that period.


So, which do you believe?  Nine out of nine times during a great bull market, or the one time when it looked bad for equities?  Do you think the market we have now is the same as the last three years, or are we in for the rough ride like we had in 2011? 

Honestly, I don’t know, but the risk is pretty great, and for me, worth watching from the sidelines. The point is that if you find something that works every time, it’s still not guaranteed to work the next time.  The situation may be different.  It works until it doesn't.

And by the way, the $VXX wasn't around in 2008, but you imagine what would have happened to $VXX or it's more leveraged cousin $UVXY when the market really crashed

Good luck.  We’ll know shortly.  Nothing in this post is a solicitation to buy or sell securities.    

Friday, August 1, 2014

My Investor’s Toolkit

I am not really a technical trader, although I do think there is some benefit to watching the moving averages.  I just think the rest of TA is overdone. 

I am looking for an edge, either the best ideas or news that will allow me to be more proactive.  So, my toolkit is mostly bloggers and news providers.

Listed in the order that I generally use them.

Twitter – I follow all the big name traders, you know, the Fast Money guys, JC Parets, Jon Boorman.  Mostly professionals in the stock biz.  Also TV people like Becky, Maria, Mandy, Trish, Jane… well, you get the idea. 

Stocktwits – I have people I follow, generally not those that I follow on Twitter.  These are mostly amateurs, or hobbyists.  It’s more of a social thing  You can see who I follow there if you click on my name.

CNBC.com – Generally business news and stock quotes.  Works best on my phone, an HTC One, which I don’t recommend. 

Yahoo Finance – More news and quotes.  I also like their charts, which allow you to compare multiple symbols, and are easy for a non-chart guy like me to follow.  I also use the historical price function which allows me to download daily prices to excel and manipulate them.  Did you know it is better to buy Apple on Monday vs. Friday, over time?  I don’t know if that knowledge is worth all that much, though.

There are a few bloggers I follow when I can.  I usually see the entries when they post a link on Twitter, but these I will actually look up:

thereformedbroker.com – Josh Brown
ritholtz.com – Barry Ritholtz
crossingwallstreet.com – Eddy Elfenbein

I don’t care for Business Insider because it’s a bandwidth hog.  I will sometimes read the articles. 

I don’t watch much business TV any more.  If I can, Fast Money and once n a while that Cramer guy. 

Props to 1nvestor for the inspiration