LOL!'s Market Timing Newsletter

[LOL!]

I read that bit of financial porn over the the weekend. My thought was simply, "Great! I don't mind rebalancing into equites after they drop. Besides, all I want to do is outperform my benchmarks. And since 2016 was great and 2017 has been good so far, I have some room to have to losses without worry and still outperform my benchmarks."

But you cannot ask about thoughts without providing your own thoughts.
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[LOL!]

It's been a little while since the last trades AND the portfolio has hit another hard rebalancing trigger yesterday on the upside as well as an all-time high value, so I was looking to sell about 1% of the portfolio in stocks today. I saw that VBR (small-cap value) was up a little bit and that IJS (also small-cap value) was down. They should both at least go in the same direction, so with almost everything thing trading lower, ...

This was enough to compel me to sell some shares of VBR worth about 1% of total portfolio value this morning. It is trading down about 0.2% from the sell price.

I don't have plans right now for the cash, but since I hate holding cash, this will probably go into a bond ETF at some point. But bond funds closed about 1% lower than I last sold them for earlier this month and they don't seem to offer any value right now. Maybe I'll buy some VCSH (short-term corporate bond index) in the near future? I'll post the trade when I do something.
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[LOL!]

I used about one-third of the cash raised yesterday to buy shares of VCSH, the short-term corporate bond index ETF. This trade gets rid of an annoying message that my portfolio is "out-of-balance" with too much cash and not enough bonds, but otherwise makes no material difference.

 

[LOL!]

Finally! The market timing move I made last week actually saved me some money. It's in the 4-figure range as of now. Of course, the rest of the portfolio will be down tens of thousands of dollars today, but so what? The benchmark is going down, too.
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[LOL!]

I've missed some great intraday (day-trading?) opportunities in the past week, so today I think I am going to tip my toes into the water.

First, I will say that despite today's 1.3% rise in the price of VBR, it is still trading below the price I last sold it at and the VCSH I bought is trading higher and paid a dividend.

So, what are my plans? I intend to sell some IJS (small-cap value) or VSS (small-cap foreign) in one account and buy it back in another account at a cheaper price*. My portfolio won't change at all, but I hope to scalp a few hundred dollars doing this. Or maybe I will lose a few hundred dollars.

*Or buy IJS or VSS first and sell it back at a higher price.

OK, here goes!
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[LOL!]

OK, first parts of trades are working nicely. Sold AGG at higher than it is trading now in anticipation of using proceeds to buy IJS after it drops. Sold IJS, too, so I hope there is a before-the-weekend dump.

Update: It doesn't look like IJS is going to go down, so I am not going to buy it back right now. Instead I just used my cash to buy shares of BND which is similar to AGG since both are trading down about 0.3% from when I sold AGG. What that means is that day trading didn't work for me today, but the portfolio has about the same total amount of money it would've had if I had done nothing.

Update 2: OK, the math is in. I cost myself $72 by trading today. Blech!

 

[LOL!]

Update 2: OK, the math is in. I cost myself $72 by trading today. Blech!

Look at that. I made back the $72 and then some in the first 15 minutes this morning.

 

[LOL!]

It is time to reverse the trades. IJS has dropped enough after selling it last week plus bonds are up after buying last week. Some time later this afternoon, I intend to sell bond ETFs and buy shares of IJS. Let's see how low it can go first.

But did sell AGG shares a moment ago to raise cash to buy.
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Update: Ended up buying IJS in the afternoon. I probably bought too much, so I will have to trim back on any hopeful gain.

 

[LOL!]

Today's action deserves an update. This morning my IJS trades were all in the black, but now that it has dropped more than 1% since then, they are all in the red.

 

[NW-Bound]

Several of my out-of-the-money covered calls became in-the-money and were called last month. It looks like the ones for Feb are about getting there as well. That means the bull market is stronger than I expected, both for the general market, meaning the S&P, as well as some of the sectors that I had a position in such as semiconductors.

By definition, one makes money when this happens (selling high), but then it takes him out of a hot rising sector. Now, what do I do with the cash? It's a small portion of the portfolio, so is not that important other than telling me that my expectations were not sufficiently high, or that other players are a lot more bullish than I am.

So, I just bought back some semiconductor shares and immediately sold a covered call again. If it hits again, well, I will make more money (but not as high as if I held on to the shares and wrote no covered calls).

 

[Sunset]

I was doing the covered call thing with CAT, after all they have been dropping revenue/profit for 5 years in a row.
Of course the stock skyrocketed past my covered call and kept going.... I missed out on quite a few thousand of profit.
Still unhappy about it...

 

[NW-Bound]

Yup. The lesson I have learned is to not be afraid to buy something back if your forecast turns out to be too pessimistic. If there is a new development after you have sold your option, the new better prospect of the company should now be factored in.

 

[LOL!]

Speaking of losing money ....

Today everything ends up except for those IJS shares I bought. They really tanked today early on, but recovered mostly by day end. I know everybody wants to see me lose my shirt on this, so I bought more IJS at the close today. To get the money, I decided to sell VSS (small-cap foreign) rather than bonds, so that my overall equity allocation did not go up.
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[LOL!]

Now this is the way it is supposed to work. I started unwinding IJS a moment ago now that everything is in the black. I have some bills to pay, so I sold in a taxable account instead of the account I had been buying in this month. The gains are offset by previous tax-loss harvesting, so no taxes on this sale.

I intend to sell VSIAX (small-cap value like IJS) if things hold up to the end of the day. This is tricky because I want to avoid the $20 commission I would get by selling IJS in the tax-advantaged account that I have recently been buying it in, but I want to get back to my desired asset allocation. So I write the idea here to make sure I go through with it: Sell VSIAX and buy VSS, but in another account, sell VSS and buy AGG or BND. This would effectively unwind my earlier "sell AGG and buy IJS" after gains in both AGG and IJS, but shifting around assets in different accounts in order to avoid fees and keeping bonds out of Roth IRAs.
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[NW-Bound]

Darn, the market is going crazy again, and my options are deeper in the money. The covered shares are good as gone.

When these options get exercised, my cash AA will go up some more. Too much cash, what to buy? I can feel greed coming on now.

 

[LOL!]

I have been so focussed on not losing my shirt with my IJS trades that I have not been paying much attention to the rest of the stock market. Part of the reason for this is that I just compare my portfolio return to benchmarks such as VSMGX (LifeStrategy 60/40) and VWENX (Wellington 66/34) both of which are underperforming my portfolio YTD by significant amounts.

I made the incorrect assumption that things like Total US Stock and Total Int'l Stock market were doing poorly, but the reality is quite different with the following YTD returns through yesterday:
3.33% VTSAX Total US
4.91% VTIAX Total Int'l
5.72% VFSVX / VSS (small-cap foreign)

-.17% IJS
1.74% VBR (small-cap value)

The US small-cap value asset class did so well in Nov-Dec that it took a breather in January compared to other equity asset classes.

At least I sold VBR when it was high (today it is finally trading above what I sold it for) and bought IJS low. But I also sold DGS before it had a nice run-up. YTD the small-cap emerging markets DGS is up 9.45%! I'm lucky I held on to most of my shares.

With these big 6-week performances for equities, I am surprised by the following returns YTD through yesterday:
2.44% VSMGX LifeStrategy Moderate Growth
1.65% VWENX Wellington

Of course, the bonds that these balanced funds have in them have not done much, but they did better than IJS year-to-date.

OK, that's just an observation, now back to trades:

I don't want to be too greedy here, so I will continue today with selling a little bit more IJS and VSIAX with the cash going to pay bills and make some Roth IRA contributions when the trades settle next week.
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[LOL!]

Portfolio hit the top end of rebalancing band on Friday, so with today's further climb, I sold some shares of VTI (total US stock market) and will buy shares of VCSH (short-term corporate bond index).

Yes, it is certain that I will miss out on further equity gains by having less equities, but I also will reduce risk in my portfolio. Anyways, I've missed out on plenty of gains in 2017 already because I've sold too soon, so I am used to it.

As noted many times, all I want to do is outperform my benchmarks or at least not fall behind them by much.

Furthermore, this past weekend I decided that I would not buy anymore US Total Bond Index shares, but would only add to Short-term corporate bond index going forward. I may even sell total bond index (AGG, BND, etc) and buy VCSH on days when total bond index shares rise more than what I expected. I have enough accounts and free trades that I can actually day trade between AGG and VCSH without paying commissions and without paying taxes. I will try to restrain myself though.
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[NW-Bound]

This market came back near the end. It is stronger than I imagined.

I have 4 options expiring today. The one on a consumer staples stock stays out of the money. One on a semiconductor ETF is slightly in the money. These are good calls on my part.

The rest, one on a semiconductor ETF and another on a biotech ETF, got deep in the money. This means these sectors are stronger than I expected and I got them sold too soon.

These options getting exercised will raise my cash level by less than 1%. Not a whole lot here, but it tells me that some sectors have a lot of momentum. What to do?

On Monday, I will watch for pull back, and decide whether I should buy them back. If I do, will write a call again immediately to hedge.

 

[COcheesehead]

This market came back near the end. It is stronger than I imagined.

I have 4 options expiring today. The one on a consumer staples stock stays out of the money. One on a semiconductor ETF is slightly in the money. These are good calls on my part.

The rest, one on a semiconductor ETF and another on a biotech ETF, got deep in the money. This means these sectors are stronger than I expected and I got them sold too soon.

These options getting exercised will raise my cash level by less than 1%. Not a whole lot here, but it tells me that some sectors have a lot of momentum. What to do?

On Monday, I will watch for pull back, and decide whether I should buy them back. If I do, will write a call again immediately to hedge.

No trading Monday.

 

[NW-Bound]

OK. Then I will hold.

 

[NW-Bound]

This market is roiling nuts!

That ETF that got called away from me with the expiring option gave me a 12% return in 2 months. Yet, it is now at more than 10% above the strike price. It means if I did not write the option, I would have gained more. Nuts!

So, I bought it back, even at that higher price, and immediately wrote a call option which, if exercised, would give me 9% gain in 2 months. Less reward, but at a reduced risk.

Maybe the semiconductor industry is reliving its 1998-1999 years. Intel just announced a new fab costing $7 billion, to be built a few miles from me. Yesterday, my son came for a visit and fretted that he might not be able to afford a home like he wanted if he kept delaying. Said there's talk on the Web about Phoenix becoming the 2nd Silicon Valley (Phoenix has always been called the Valley of the Sun). Lot worse traffic jam to come.

 

[harley]

I'm pretty sure the second Silicon Valley was either Reston VA (outside DC) or Boston, depending on which city's paper you were reading. Phoenix would have to be the third or fourth Silicon Valley. Or, since they were calling Reston Silicon Valley East, Phoenix could be Silicon Valley SW. Or something.

But it is good for people already owning homes when there's a big boom in tech companies. Not so great for those just starting out.

And I agree, the market is nuts right now. I'm just hanging on, selling a few of my long time losers as they slide past my sell price. As far as I can see, there's nothing out there that's a buy right now. I don't do options or anything like that, just straightforward market timing.

 

[NW-Bound]

Options are useful to me in two ways. First, if the market is flat the option premiums give me a bit more in income. Options gave me another 1% in return last year, yet I did not write options on all my positions, only on the most economic sensitive ones which have higher volatility. Secondly, it is a way for me to mark where I think a stock should be in the future. Later, at expiration I can look back to see if my reading was correct.

Last year, most of the contracts expired worthless, meaning the market was really not as good as other traders thought. They lost, and I won. This year so far, the market is hotter than I expected. They won and I lost (I still make money, but they make more).

 

[NW-Bound]

I shorted the market today. Yes, siree Bob, I sure did!


OK, OK, it's not as grand as I made it seem. I was willing to bet that the market will pull back some after this long climb. I would not sell everything of course, just some so I can later pat myself on the back that I can buy it back cheaper. I wanted to sell something, but looking at my stocks, I could not find a scapegoat. In my highly biased opinion, my stocks are better than the S&P (they have been lately).

So why didn't I sell the S&P? That's what I did, even if I did not have it. I shorted the S&P, but only to less than 0.5% of portfolio. Watch the S&P level of 2263 today. If it drops 1%, I will gain enough for a dinner for 2 at an expensive steak house.

Hey, just a game, and it is cheaper than going to Vegas (if I close out the short quickly if the market moves against me, meaning going up).

 

[LOL!]

I just sold a chunk of AGG since it has gone up since my last post to the this thread. Some (not all) of the equity funds that I sold are trading lower than when I sold them.

I have no intention of buying more equities right now, but I am following through on my plan to move some money from total US bond funds to short-term corporate bond index fund. The VCSH I last bought is up already more than 0.5% in less than 2 weeks and AGG is up even more. Bond funds are not supposed to change this much in 2 weeks.

I intend to buy either BND with the money from selling AGG, but after BND drops below 81.20 or VCSH if it trades below 79.80. Note that all of these will go ex-dividend next week, so I will take that into account, too.
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