LOL!'s Market Timing Newsletter

[LOL!]

A slew of quarterly dividends posted to my accounts this morning, so I have some cash to invest. The problem is that I like to buy things that have dropped somewhat and everything I have bought recently and/or own has gone up modestly in the past few weeks.

I have to decide if I hate holding cash more than I hate buying something on the uptick.
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[aja8888]

A slew of quarterly dividends posted to my accounts this morning, so I have some cash to invest. The problem is that I like to buy things that have dropped somewhat and everything I have bought recently and/or own has gone up modestly in the past few weeks.

I have to decide if I hate holding cash more than I hate buying something on the uptick.
294

I was once told it's better to buy equities on the way up rather than on the way down. As a general rule. it seems hard to practice that.

 

[NW-Bound]

Even when stocks are rising, they can rise more if the economy is improving. The problem is when P/E is so high, stocks are priced for perfection and hell will be paid if there is any earning disappointment.

I try to find lesser known stocks with lower P/E than the S&P, but with the same or better earning improvement prospects. It is not all risk-free, because smaller stocks do not have the momentum of larger caps, and if the economy stumbles and the big guys catch a sneeze, these little guys get a 105F fever.

 

[LOL!]

I was once told it's better to buy equities on the way up rather than on the way down. As a general rule. it seems hard to practice that.

There is that whole "momentum" thing that is proven, but there is also that whole "value" thing which is supposed to have low correlation to momentum. And momentum works both ways ... things going down tend to keep going down until there is capitulation. I seem to have a decent track record for detecting capitulation when it happens.

I am slightly overweighted in equities and don't need to buy more of them unless they are guaranteed to go up quickly in the short term.

 

[NW-Bound]

In 2016, last year, my total return was 8.9%, out of which 1% was from the premium of covered calls. I was able to choose strike prices high enough that most of the calls expired worthless, and saved me the trouble of buying back the stocks, as I did not want my cash AA to go even higher.

This year, I already got more than 5% return YTD, but have collected only 0.2% in covered call premiums. The market shows sign of topping out, I guess. The buyers do not pay that much for call premium, unless I pick strike prices low enough that the chance of losing the stocks is high. And so, I have not been able to make as many trades.

Perhaps I should go for lower strike prices, and if the calls get exercised, let the stocks go and raise my cash level. Then, I will be able to pat myself on the back for having more cash when the market tumbles.

 

[LOL!]

I made some trades today, but I'm not feeling good about them:

1. Sold AGG (total bond index) to raise cash, but it was trading at the high it reached back in February if the two monthly dividends are taken into account, then ...

2. Bought IJS (small-cap value) here at the end of the day. IJS was trading about 2+% higher earlier this morning on payroll news, but really flagged at the end of the day to close about 1% down. This might be the lowest close of 2017.
022

If IJS goes up by at least 2% later this week (jobs report?), then I will sell it.

From a Yahoo news report:

The Dow posted its largest intra-day downside reversal in 14 months in Wednesday's session after shedding a gain of more than 198 points to end near the session low, which was a drop of nearly 50 points.

 

[LOL!]

And things were looking good at the market close, but then the $#it hit the fan.

 

[COcheesehead]

And things were looking good at the market close, but then the $#it hit the fan.

Buy when the cannons are booming.

 

[LOL!]

^But of course! It is helpful that some dividends show up overnight, too.

 

[LOL!]

I expected better jobs numbers and no cruise missiles today. So instead of nice pop, we get a subdued, yet still positive, market. It seems everything is up a tiny bit, except for IJS. But there are few hours to go, so anything can still happen.

I have received some dividends today and want to put them to work. They are not large enough to even mention the single-digit share trades. Otherwise, I'm just carrying on.
507

 

[LOL!]

If IJS goes up by at least 2% later this week (jobs report?), then I will sell it.

IJS hit the gain-of-2% trigger point this morning while I was out for a walk and dropped back down. I will be paying more attention the rest of today to see what happens with an eye to still selling if IJS goes back up.
919

 

[LOL!]

So I come back from a walk and see that IJS is slightly up while the similar VBR is slightly down while total US market is down about 0.5%, so I immediately sell the IJS bought last week for a gain of about 1.7%. And IJS drops immediately thereafter to get in line with other US stock ETFs.

It is not valid, but since the money to buy IJS came from a bond fund and will go back to a bond fund, I treat this as making 1.7% on bond fund money in a week.
161
But, I had to pay a short-term trading fee for this sale. While it's the first commission I've paid since I can remember, I don't regret it.

 

[LOL!]

And for the record, IJS is now higher than when I sold it earlier today. It dipped more than 0.5% since I sold and completely recovered and then some. And IJS hit my 2% trigger too late a moment ago.

OTOH, large cap US is still down, but recovering, so I used the proceeds from selling IJS to buy VTI (total US stock market). If VTI is up more later today, then I intend to sell some VFIAX (large cap US) to restore my asset allocation.

 

[LOL!]

I didn't play today as well as I could have, but I didn't hurt myself too badly either.

The best play after selling IJS would have been to buy it back within 30 minutes at the low of the day. I could've done that in another account by selling some AGG and buying IJS. I would've had no commissions on either of those trades. IJS closed up about 1.2% from that point.

OK, I didn't do the best play. Instead I bought VTI which gained about 0.3% from when I bought it and sold VFIAX at the end of the day to keep my asset allocation of US large caps where I want it to be. The selling of IJS gets my asset allocation to US small-caps back to where I want it to be.

Since the purchase of IJS last week though, I did better than if I had done nothing last week and my portfolio asset allocation is back to where it was before that purchase.
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Thanks for following along. Didn't anybody else do any "day trading" today?

 

[NW-Bound]

In 2016, last year, my total return was 8.9%, out of which 1% was from the premium of covered calls. I was able to choose strike prices high enough that most of the calls expired worthless, and saved me the trouble of buying back the stocks, as I did not want my cash AA to go even higher.

This year, I already got more than 5% return YTD, but have collected only 0.2% in covered call premiums. The market shows sign of topping out, I guess. The buyers do not pay that much for call premium, unless I pick strike prices low enough that the chance of losing the stocks is high. And so, I have not been able to make as many trades...

I have not written any more covered calls, but the ones expiring in April look like they will drop out-of-the-money, and get me another 0.1% portfolio gain. It's not a lot of money, but when you live on 3 to 4% of portfolio, every bit helps.

My bet on the S&P dropping, made back in early March, looks like it will make me a tiny bit of money, which is not enough to get me a fancy steakhouse dinner for two with drinks. It does not conclude until the option contract expires April 21st, but it looks like the gain will be small. I will have to buy the filet mignon at Costco to cook at home instead of eating out with that gain.

 

[LOL!]

It appears that I sold IJS on the right day. Now I have some cash from my double-trades yesterday to invest. I just don't have the guts or need to invest it, so unless something tanks quite a lot more this afternoon, I will sit tight.

I will be traveling the next couple of weeks, so good luck to all you market timers until I get back.
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[krldrummerboy]

LOL! Curious why you trade small vaule using IJS. VBR appears to have better returns, lower ER, lower commissions (assuming you use VG)....... Are iShares in general superior to other ETFs?

 

[LOL!]

I own VBR as well, but it is not as volatile as IJS, so for trading I prefer IJS. Both IJS and VBR trade commission-free at TDAmeritrade if one follows the rules.

But to follow the rules, you have to hold shares for 30 days, so sometimes it is useful to own both simultaneously but 30 days out-of-sync. For instance, I can buy BND and sell AGG within the 30-day period. Or I can buy IJS and sell VBR.

In addition to the above, I want to be tax-aware. I've sold all the VBR in my tax-advantaged account and do not want to sell the VBR shares held in my taxable account (shares were purchased in April 2009, so they have huge gains).

My point is that for short-term ownership periods I choose which ETF based on other things besides better returns, expense ratio, and so on. Also note that performance numbers mean doodly-squat to me because they are computed from end-of-day prices. Since I trade intra-day and only when things are volatile, the end-of-day prices have been as much as 4.5% different from prices I have received. So such differences are much larger than any published performance differences.

But let me ask you this: What were the total returns of IJS and VBR for 2016? Which one was better to own in 2016?

I don't think iShares are in general superior to other ETFs. I own mostly Vanguard ETFs.

 

[krldrummerboy]

Thanks LOL!
I don't know which would have been better in 2016. I was simply curious what your motivation was after I compared the YTD returns of both. I enjoy reading this thread, but, I dont intra-day trade. I would probably be fired from my day job if I tried, and should probably get back to work, now

 

[NW-Bound]

This morning right after market open I jumped in to grab some shares of an ETF to add to my existing position. Then, I immediately wrote an out-of-the-money covered call for this lot, with expiry in May. If it gets exercised, I will have a gain of 9.8% in about a month.

Just now looked at the price at close, and saw that it already moved up close to the striking price, which means if it holds or continues to move up my 9.8% profit is a sure thing. Son of a gun!

Darn, now I regret selling the call too soon. The reason I did that was because I already had too much in this position, so wanted a hedge in case the stock declines. Oh well, as they say, one does not go bankrupt booking a profit.

This is just a small amount of money for a short-term play. The winning is small, not even a 4-figure number, but every little bit helps.

 

[NW-Bound]

Forgot to say that I did the same with a biotech ETF. If the covered call gets exercised at the end of May, I would have a 14.7% gain. This ETF has not moved much from where I bought it this morning however.

Again, I already had too much biotech, so did the call writing as a hedge. The call premium is 6.5% of the stock, so the stock will have to drop that much before I start to lose money. Still not a lot of money here, but I do this instead of going to Vegas. So far, this game proves to be making money for me.

 

[NW-Bound]

On 2/22:

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).

On 2/24:

The shorting of the S&P is currently showing a measly gain of ten bucks! This market is really strong and has not dropped much. I can close it out and take the money to a McDonald. Nah! I will wait a while...

On 2/27:

My bet on the S&P dropping has not worked out. Instead of winning a dinner for 2 at Fleming's Steakhouse, I have lost a "petite filet mignon" so far. Not capitulating and still holding...

On 3/1:

Forgot to do an update on my bearish bet on the S&P. As you may recall, although I have been long the market, I was willing to bet that my stocks were better than the S&P, and shorted a bit of the latter.

The position is small (it's a game), such that if the S&P drops 1% from where I started the bet, I would win enough for a fancy dinner for 2. As one might have guessed, it has not worked out well, and I have lost 2/3 of what I was planning on winning.

This loss works out to be in the order of 1/100 of the gains I have elsewhere since that point, but it shows me that I was too pessimistic on the S&P. Rather than capitulating and closing out this bet and accepting defeat, I just made another side bet using an option. It is such that if the S&P does not rise significantly further from where it is today within 50 days, I will end up being even (meaning I will make money with this 2nd bet to cancel out the loss on the 1st). If the S&P retreats, then of course I will have a net gain. If the S&P keeps going up more, then I will be back to losing the dinner.

Will post updates.

On 4/11:

...My bet on the S&P dropping, made back in early March, looks like it will make me a tiny bit of money, which is not enough to get me a fancy steakhouse dinner for two with drinks. It does not conclude until the option contract expires April 21st, but it looks like the gain will be small. I will have to buy the filet mignon at Costco to cook at home instead of eating out with that gain.

I promised to give an update on this bearish bet on the S&P.

To recap, this was what I did. On 2/22, seeing that the S&P was going so strong, I wanted to make a bet that it would drop (while not willing to sell my stocks). So, I shorted it by buying a bearish ETF.

On 3/1, seeing that my bet was going the wrong way, I wrote an option on the bear ETF to hedge. That option just expired yesterday, Friday 4/21, in the money. So, someone just got my ETF shares.

I ended up making $72, out of a low 5-figure bet. Pretty crummy, eh?

However, compared to the S&P which was at 2363 on 2/22, and 2349 on close of yesterday, that's a 0.6% decline. I capture roughly the same thing, net of transaction cost.

As surmised earlier, I did not get enough for a dinner for 2 at a fancy steak house which would run more than $150, but the win is more than enough to get a prime cut pack at Costco to feed more than just the two of us.

It's quite a bit of work to make that bitty money (while I was losing a lot more on my other stocks), but it was still fun.

 

[NW-Bound]

PS. Forgot to mention what happened to my stash from 2/22 to today.

It declined 0.4%. It looks better than the 0.6% drop of the S&P, but I am only 65% in stock. So, I am not doing better than the S&P at all.

 

[LOL!]

^Who got the quarterly dividend paid out in March?

 

[NW-Bound]

OK, good point. When we are splitting hair like this, every little bit of dividend matters.

Using VFINX (Vanguard S&P 500) as a surrogate, I looked up Morningstar and saw that $10,000 on 2/22 became $9,959 on 4/21. That's a loss of -0.41%, vs. my loss of -0.38%.

So, I am doing worse than the S&P due to my AA of only 65% stock.

I had a significantly bigger drop than the S&P on Friday. If counted to Thu 4/20, I would lead by a hair.