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Archive for December, 2011

Posted by Martin December 31, 2011



2012The old year 2011 is coming to its end and it is a time to review the old year and make a resolution for the new year 2012.

Reviewing the old year I must admit that it was a very successful year. I finally was able to get closer to my dream – trading for a living. I am not out of the forest yet and trading for a living yet, but I am trading and that’s what makes me satisfied.

Of course, my trading is not on my own, but under a trading coaching from a professional trader. When you take a look at my trading performance, it is not perfect yet, but I can see a huge difference from previous years. I started my coaching four months ago and I was able to recover my trading balance of 2011 year and end up flat. I hope that next year I will be able to finally make money and recover my account.

My other accounts such as Lending Club also performed well. Thanks to my rules of selecting debt notes and eliminating potential bad notes. During the year I slightly modified my rules of selecting new notes by adding another filter to my original rules described in this post “Lending Club“: length of employment more than 4 years” and to my bad notes eliminating process described in my “How to avoid default notes when investing with Lending Club” I added one more rule: When the FICO score suddenly drops very low (to 500 or lower) I sell such a note even though it is still current. These rules helped me to maintain my annual return at 12.53% (an improvement from 12.47% last year, see in my post “My goal with Lending Club“) Also my goal of generating income from Lending Club improved from 15% to 43%. Although I am following all the rules when investing with Lending Club, I have only one note which may potentially get default and overall improving results.

On my ROTH IRA account I have the same results as last year. I didn’t have much time to pay attention to this account and I am following my rules. I still will be dividend investing in this account and also small portion will be used for trading to boost income which can be reinvested.

As far as this website, I am working on a new image and hopefully upload the new website soon. It will also change some stuff such as categories and the way I am reporting the new and exited trades.

I would like to wish happy new year 2012, success, love, health and good trading or investing results. Let the new year be better than the old one and all your dreams may come true. Celebrate the New Year 2012 safely and see you next year!

Happy Trading in 2012!

Posted by Martin December 21, 2011

Wacky Trading today

SPX opened lower on worries over the Europe (like we haven’t heard about it previously), then technicals got in, mainly Oracle’s bad results and pushed the market (SPX) all the way down to 1230. That looked scary! At least for me since two days ago I reversed my bearish outlook into bullish and I started seeing nice profit in my SPY long calls. And today morning this gains were vanishing again!

Isn’t that frustrating?!

Then news about Yahoo! and Bank of America deal pushed the market back up and SPX closed with moderate gain. Technically it is a good sign, keeping the market in positive territory for upcoming Santa Claus rally, which now looks more realistic to happen. From historical perspective it should start on Monday next week and last the whole week. In average such rally should bring a nice 1% profit.

I am expecting the market to push towards 200 day MA and maybe even above it. If that happens I should see nice profit on my SPY calls.

I am looking on undertaking couple more bullish trades, but currently my broker is holding my money (I deposited some cash and when trading non-marginable securities he holds the money for three business days), so I have to wait. Tomorrow I should be able to open new trades.

Hopefully the market will sustain its short term bullish momentum and I will be able to ride it up. As soon as we hit 200 day MA, I start using tight trailing stop loss, because overall market outlook is still bearish. I have seen some traders expecting SPY to go as low as 118 level in January. The reason would be worsening data from the US and possible break up of Euro zone, which is IMHO inevitable. So trading this market can be quite dangerous and hard… and very frustrating!

Let’s see what Mr. Market brings us tomorrow.

Happy Trading!

Posted by Martin December 20, 2011

Is Santa Claus Rally undergo?

As I wrote yesterday, we could break down thru the support or bounce back. The market was oversold and there were no significant negative news to push it lower, however because of Europe, there still was a risk of going lower.

It seems like we are bouncing instead. The SPX surged 2% up at opening and it looks like it will be marching higher. Will this be the rebound? If so, we will see a Santa Claus rally.

But more important than Santa Claus rally would be that the market is making a new higher low. If the market creates a new higher low, we may expect it going back up to 200 day MA and most likely break it above and create a new higher high. That would signal that we are in a new bullish trend.

I am going to take that risk and this morning I reversed my bearish trade in SPY into a bullish by buying calls. Let’s see what Mr. Market has ready for us.

Happy Trading and Merry Christmas!!!

Posted by Martin December 19, 2011

Today’s trading

Today's trading

The trading was a bit quiet today, however the market tanked due to banks. I also think it was partially due to European crisis as well. Recently in Germany a poll was taken and it revealed that more than 50% Germans wish to go back to Deutsche Mark rather than staying with Euro. More and more people are not willing to rescue the Euro zone anymore although politicians are still playing the same tune. However, in the next election Mrs. Merkel can be gone and then everybody will be surprised how quickly the entire Euro zone breaks down.

The European Union didn’t agree on lending money to IMF. Funny part was that originally this was a German proposal to back IMF up with 200 billion euros, but then Germany said, that it will add money to IMF only if others will. The USA already refused to participate on this risky adventure, so Germans said they won’t participate either. At least, for me this is a good news. Europe is naively thinking that by borrowing more money they will rescue their debt. Sucking healthy countries into this mess will worsen the situation not improve. It is like when you owe a lot of money that you are no longer able to pay back and the solution would be to borrow even more money to pay the original loan back. Will this solve your debt situation? Of course not. I wonder who else will be willing to lend money to Europe as a whole.

So today’s trading was quite mediocre in terms of volume, but the drop was significant. SPX dropped by 1.17% today. It is however quite normal having such volatile market during holidays. Most of the investors or traders are out of the market for vacation, so with low volume the market will be more volatile.

Nevertheless I decided to take a few trades:

I decided to close my Citigroup trade and move on. I didn’t manage this trade very well and missed a few good opportunities. I got out last week, but wanted to re-enter. Upon today’s price action I decided to give this stock up and close it with a loss. Maybe later I may re-enter when financials finally show some strength. But when looking at the mess in Europe I think this sector will remain beaten up (down). As soon as more issues come up from Europe, banks will be the first who would suffer. There may be some short term bounce, but I am not sure if I would participate.

On my short term SPY put position I will keep a very tight stop loss to take advantage of the downtrend and get out as soon as the “Santa Rally” starts. Well, if it starts at all. There is too big pressure from Europe which may push investors away from stocks to avoid surprises over the holidays. So instead of buying, they may be selling.

I decided to play TLT bearish vertical put spread. I saw this trade on MyTrade analyzed it and I liked the outcome of the trade. so I decided to open a position in TLT.

Same with SLB.

Well, let’s see where the market takes us over the holidays. At this point, it looks like we may go all the way down to 118 level (on SPY). We slightly touched 120 level ($120.03) today. Tomorrow we may see a little bounce, or if the weakness continues, we may go to the next major long term support which is on 118 level. We can also go even lower to 116 per share if there will be enough pressure. We will see whether that happens or not.


Click to enlarge

Happy Trading and Merry Christmas!!!

Does the market resume its downtrend?

We are technically still in bearish territory. When you look at where SPY (for example) is trading (or you can also take a look at SPX), it is still trading below 200 day MA. It however knocked on that resistance several times (which may be a sign of a break thru sometime in the future).

So shall we chase this rally, or is this rally a fake?

It looks like a regular correction or consolidation to me. I still think this market will correct all the way down to 50 day MA (circa 1200 level) and then we will see. I am expecting a bounce at that level.

What can however destroy this beginning of a rally? A bad news from Europe. Although politicians were trying to kick the can further down the road this morning a German chancellor Angela Merkel said that she wasn’t willing to invest a cent into Euro debt crisis any more. That has sent the market lower.

Will the Euro zone collapse?

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However, if you take a look at VIX.X you can see, that is collapsed from its high levels and lost about 20%. The market is not that much concerned about the European crisis as it was before. Is it a sign that all the crisis is already priced in? Possibly.

So what can send the market lower? It would be a collapse of the entire Eurozone. Is it likely? It is. In my opinion Europeans are not able to find consensus. The EU is a union of a different nations, languages and moral. And I understand it. A recent poll in Germany showed that Germans are no longer willing to support those nations who weren’t responsible in their fiscal policies. And once again, it is understandable. And you know this situation yourself in our country when our social welfare system is sometimes too generous to people who do not deserve it.

Pushing this “forced solidarity” towards the countries who irresponsibly spent the money they didn’t have can be a political suicide for Angela and possibly even for Sarkozy, although he faces a different problems than the German chancellor. He plays about saving his own country. In my opinion, Germans are better off surviving this crisis on their own than France.

And so far all deals about financial policy within Eurozone is something, which may work well inside the group of countries which are still well and relatively healthy, but what motivates Greek, Italy, and Spain to accept such policy at this time? I guess nothing.

As soon as investors realize this, they will no longer trust politicians and the market will tank. Unless they come up with something solid. Even break up of Eurozone may be a solid solution, which will shock the markets, but not for long unlike this long lasting death with unpredictable results.

This morning I messed up my stop loss and got out of my long Put position on SPY I had. So I decided to wait for the market to recover the morning’s decline to step in, playing the FOMC meeting.
Looks like this was a good move. I bought back when the market was back up at $1245 and now the market turned back down on results of FOMC (making nice profits on this turn around).

Happy Trading!

Posted by Martin December 12, 2011

Even the EU leaders admitted they were surprised of the rally

Yesterday I have read an article in The Guardian that even the EU leaders were surprised of the Friday rally:

“We were quite surprised that the markets reacted as well as they did on Friday,” EU officials said on Sunday. “We thought they would really tank and there’s still this legal uncertainty hanging over the deal.

Another thing is that the deal the EU officials came up with may actually be illegal. So are we seeing a correction to Friday’s irrational investors’ judgment? We will see today when markets close. At this point SPY (SPX) opened 1% lower and one hour later it was trading 1.5% lower. Will this downtrend continue?

On one hand this downtrend may be good for the market. From technical perspective, we needed correction from previous rally and now it may be happening. My expectation is that we will go down to 50 day MA and there we may bounce back up. If that happens, we will be adding a new higher low, which may potentially lead to a new higher high. And that may be a beginning of a new bullish trend.

Happy Trading!

Posted by Martin December 09, 2011

Europa: once again an important “nothing” came out

Here we go again. How many times have we heard the same proclamations out of the European leaders summits? Investors are hoping for leaders to give them a solution and they take every word those politicians say very seriously and – overreact.

So what we have heard so far? Nothing actually. Every day we hear about a new great deal which will save the Euro zone and which actually doesn’t solve the problem, but the meaning is to calm down those bugging investors out there. There is no other solution, just to shut them up.

So what is the “new deal” today? In one word, the Union will now control national budgets and punish those who won’t follow the rules, currently approximate 0.5 GDP budget deficit. How they want to do it no one says. Greece had balanced budget and strong economy until the Union found out that all their numbers were fake. Italians were playing with number too and even France and Germany were twisting them a bit as well. How you want to keep and force the rules when those who made them do not follow them themselves?

Well this is a “great deal”, really! But how does this deal help countries such as Greece, Italy and soon Spain, Ireland and Portugal? It looks like that the only optimists here are Germany and ECB who fight the crisis until their last breath and it slowly gets to the point of their last breath, literally. Their ability to deal with this crisis is limited day by day and their options are shrinking every minute. They know it and they know that soon there will be no ammo to fight it. What will happen next?

Are you prepared for the life after Euro?

As I wrote this morning, it is a pure utopia that European countries would agree on centralized monetary system. The former communist countries who have a bitter experience with centralized economy and who are more prone to more liberal approach will hesitate to agree on something like this and traditional rivalry among European countries such as the trio Britan-France-Germany showed up as well, when British prime minister told the latter leaders “Go figure with this…”

And Ireland? They are claiming that the new agreement must be approved by people’s referendum. Amid the mess in European Union it more than obvious what will be the result of such referendum.

All this clearly indicates that Europe is divided as it has ever been or worse.

But the market (investors) hopes that this new deal once again saves all of us although all these proclamations are just postponing the inevitable.

So how we are doing trading this market?

It is very hard trading the news-driven market. Huge up-trends one day are replaced with huge downtrend the next day. Hard to predict what politicians come up with and whether the market will like it or not. All fundamental and technical analysis is worthless or doesn’t work that well as it typically does. As a small investor or trader it is very frustrating. On one hand your own logic cannot grasp the irrationality on the market which literally breaks all “laws of physics”. If you do not have guts for this the best way would be to stay aside. If you can sustain this mess a bit then watch the market and be buying fundamentally strong stocks which are beaten down by this mess. Don’t spend all your money available, but be buying in smaller portions and look at long term trend (if you find some). As an active trader be selective and relay on technical analysis to avoid emotions (easy to say, hard to do).

Happy Trading!

Posted by Martin December 09, 2011

Market rallies on utopia

Last night, the European leaders tentatively agreed on national budgets controlled by Brussels. I cannot imagine Greeks, British, Spain, Czech Republic, Slovakia or other European countries with historical animosity towards Germany and each other allowing anyone telling them what they should do with their national budgets. Also, the agreement counts on lowering the deficits of each country budget or make budgets with positive balance. If it was that easy, we wouldn’t hearing about European debt crisis at all. The whole deal in Europe, where countries were fighting one another since the year one is a pure utopia. Let’s see, when the investors realize it.

Happy Trading!

Posted by Martin December 08, 2011

SPX turning down

Interesting market these days. I couldn’t believe what I saw. Using common sense everybody could see that this rally is not sustainable, yet the market was rallying. Maybe it is due to a fact, that vast majority of mutual fund managers are under-invested, they missed this rally and they are terribly under-performing. Scared they may lose their job. So they were piling on on every news from Europe. Well as some columnist mentioned they were piling on European rumors rather then news, because the news are terrible.

The premarket data showed nice gains this morning, but soon after opening the market lost all gains based on the ECB chief Mario Draghi speech. Maybe this is the catalyst to more downturn trend.

The market was in overbought territory and due for rebound. I do not say, we will go dramatically down here. All I see is that we most likely pull back to 50 day SMA and that is most likely happening.

Although this market is bearish from longer term perspective, it still is probably bottoming and starting a new bullish trend.

Happy Trading!