Sunday, April 24, 2011

follow up to "where is the market going"

First off, beware what you read on blogs. Case in point, I mentioned in my previous post that Canada did not have much debt as a country. Not true, I decided to check on that, and Canada has debt that accounts for over 50% GDP, one of the highest debt ratios in the world, and I see that its citizens are over extending themselves in real estate, with many articles talking of a Canadian RE bubble and collapse. Amusing. I just talked with someone who is involved in pink sheet Canadian REIT's, but he is obviously a high risk taker. Boy, bubble signs and worth looking into, might be a parabolic rally brewing there to catch, but I have not looked into it yet. I still hold firm on my disdain for Celine Dion.

The head and shoulders is still in play on the SPY, and the dollar continues to fail, so this is very bullish for the markets. Game still on, but really, we are still in a range, and choppy trading should be expected. I still am sticking with my earnings gap plays (daytrading, bread and butter low risk trades) and silver/gold swings.

On Thursday silver traded WITH the dollar throughout the trading day and UP off of flat gold, first time I have seen that. So silver is starting to show some signs of a parabolic move. How long it will last I have no idea, but as long as the dollar plunges, and as long as silver outperforms gold and the miners, it is the place to be. This is great validation for me on my trading strategy, as price action dictated SLV (or AGQ) as the place to be, and that is where I placed the majority of my metals trade. I am still looking for rotation to gold or the miners, so we will see. The lesson over and over and over again is: ONLY PRICE PAYS, watch the price action. Not what you think, not what the blogosphere is ranting about, not what Cramer is calmly telling you, not what your broker/co-worker/neighbor says who is convinced its all about solar. Price, price, price.

Saturday, April 16, 2011

Where is the market going

Short answer: We are still stuck in a range, and until we break up and out we are still in the chop zone, but...

Long version: ... we are at a bit of a decision point. Let's start with the S&P chart (SPY)

2 things, the obvious inverse head and shoulders pattern and the moving averages. I don't actively seek out h&s's, and the market could flick this pattern off like dandruff, but everybody must be talking about it (not been following twitter or doing much blog reading as of late). It makes for a bullish scenario. Also, the market managed to get above the 2 MA's, the 20 and 50, so this should act as support. We lose these averages on Monday and I am immediately cautious.

Since I am now spinning silver dubs on my Datsun B210, I take great interest in what the dollar is up to, as monetary policy drives the markets. I use the UUP for a quick read (check the vol on UDN friday, probably nothing, but), and then the EURO as my main benchmark. Why the Euro? In my mind it is the most 'like' comparison. Pound, country too small; Yen, govs are fighting to break it (trade on); Canadia, too solvent and Celine Dion; etc. Right now the charts are coiled up, with a move coming. More weakness will likely send the markets up and the metals with it. Which way? Ultimately, USD down, markets up, but I am only concerned with my next work week, and it could go either way. The dollar is certainly due to bounce, but it also looks like it is about to fail in a big way, and maybe now is the time, driving a fat rally in the markets, and sending metals parabolic. I give this a 20% chance of happening this month, 50% chance of happening this year. I'll trade it when I see it.

How else to figure what the dollar is going to do, and thus the market? I almost never trade on Fibs, but no matter where I took a shot for the Euro/USD, things really lined up. Here is one shot, check it:

So if the Euro breaks up here, off we go to the races, especially in PM's. If SLV goes to $100 my wife says I can bring over a Russian 'exchange student' to polish my dubs daily. She'll be at the spa getting a rubdown from 'Sergie'.

Wednesday, April 6, 2011

Trying for more dividend

I have been watching for some more high dividend entries. ARCC and AINV have gone well, and it is nice to get the monstrous check when the >%10 (annualized) divvy comes out.

It seems that many retail traders ignore the price on these, shop for them by yield, and think as long as they don't sell, they will just be collecting the dividend. I don't agree with that, and trade them on price action alone, hoping for equity gain as a cushion before I think of letting it go and let the checks come in.

I am slowly building this portfolio. These can really blow up in your face. Look at the long term charts. It does not mean much if you are collecting 10% but have lost 20% in equity. Once you get a couple and can put in a break even stop loss a few points below current price you can start adding more. It's a great way to park cash (once you are safely in with a cushion) and get some good return in a low return environment. Even if ultimately you get stopped out at break even, you made a good return while your cash was tied up.

The REIT's have been issuing more shares, so that is a potential land mine to look out for. You can limit buys to those with recent issues. Also pay attention to when the dividend dates are, as the stocks normally take a big gap down on these, and sometime slip even more. I like to buy a week or more after, and not close before, to see how things shake out.

With ARCC, it has been tough to look at the equity gain, and just sit back and take the check without taking profit, and exposing yourself to a round trip and getting stopped out. My solution for this is to buy double size and scale some out on the way up, so I can scratch the profit itch, and also reap the dividend.

I am no dividend stock wizard, so if there is some angle I am missing... let me know!

Here is a list to work off of, stocks yielding >10% and trading over 400k shares average per day:
get me div!

On watch are IVR (~17%!!!), ANH , BGY, among just a couple others. I was in PSEC but got bumped out and it has since run up (bummer, this one pays monthly!). I go over the charts of these every month or so to see how things are coming along. Can't remember the last time I saw a screaming technical setup. You just have to kind of find what you can get, really a reason to get in with a clear stop, as most of these charts are choppy ugly or slow steady movers one way or another. My ARCC and AINV entries were resistance breakouts within a range, and did retrace a bit, so I do give them more room and time than most things I trade.

Friday, April 1, 2011


No really, here, but quiet on the blog front due to life happening. I have taken some swing (about to become long) positions, most notably YCS, which is short the Yen. I have tried this trade once before and got stopped out in short order, but this one has gone well, getting in on the string of almost-doji days at 15.40 . I have sold 1/3 of it already, but this is a long term play, and I think now is the time as governments seem to have agreed to do what they can to devalue the Yen and stimulate the economy there. This is a good fundamental play, and I will look for another technical entry to add more. Check the long term weekly FXY chart for the potential in this trade.

My only other current swing position is a smaug-like horde of SLV and DGP that I have been entering over the past two weeks (on top of my core SLV stake from last August). I think these will execute next week, or I will get stopped out if they break down through the 20 and close there. If they move up I plan to hold on to these a very long time, hoping a C-wave scenario plays out in PM's, a possible outcome that cycle style traders are hot on right now. Silver has been outperforming gold, but I dropped a little SLV for DGP in case they swap roles. Things tend to stay the same, so likely this move is not the right one, but I made the move anyway.