Posted by Martin March 02, 2018
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February 2018 trading, investing, results


February is over and it was a very wild month. Very volatile, dramatic, and to some scary month. At the beginning of the month the market corrected more than 10%, then we recovered some but Powell first then Trump with his tariffs sank the markets again.

No matter how scary these moves are, I actually like them because that is how I can make money. Lately I was able to ride this market down as well as up and bring in way over $6,000 dollars in revenue in February and in just two days of March 2018 way over $4,000 dollars revenue.

 
Trading Results
 

As the table above shows, we had a great income in February, most of it in IRA account as ROTH and TD are too small to trade more frequently.

But if you look at our net liquidation values (net-liq) we are down. It is because we still have many open positions which are now losing value. These positions are still well out of the money (OTM) except two or three trades which are in the money (ITM) and will need adjustment in the near future. As the market starts recovering from the mess, these trades will once again become better. And our net-liq will start going up again. And if not, we will adjust those trade to improve.

 

 · Trading activity today

 

As I mentioned above our trading activity today was another great endeavor. When the market tanked in the morning I could ride it down, mostly Amazon (AMZN). When everything changed suddenly (and I do not know why and do not even care why the market reversed) and started going back up, I rode it up too.

A summary of opening and closing trades.
(balance + $2,059.00)

Another beautiful day in the stock market. While others are panicking, we are making money. We brought in another nice $2,059 dollars today.

 
Trading Results
Trading Results

 

 · Dividend stock investing

 

I trade options to generate income which can be used to buy dividend stocks. That was always my goal and dream as well. Make enough income which can be invested. Then I can keep my job income for supporting my family. I use 50% of my options income to buy dividend growth stocks.

Here is a review of all accounts stock purchases made in February:

 
Traditional IRA
Trading Results
 

ROTH IRA
Trading Results
 

TD account
TBD
 

In February we purchased the following shares:

 
Dividend growth stocks

 

 · Dividend Income

 

ROTH IRA dividend income
Trading Results
 

IRA dividend income
Trading Results

 

 · Market outlook

 

I am still bullish but I think the bull market is getting closer to its end. My estimate is end of 2018 or first half of 2019. I believe it will be partially due to Trump’s incompetent and protectionist policy which would kill tax cut benefits and lead to the economy slowdown. But before all this ever happens I believe we will see yet one more all time high and then we may see troubles unfolding. But I may be wrong. I am usually always wrong in predicting the market.

I want to trade the market no matter what it does. That’s my ultimate goal – to learn how to trade the market up or down. Make money no matter what the direction is.

That however requires a few things:

1) Discipline and not over trade. Always have enough money in your account to sustain drops like this one in February and be able to manage your trades, adjust them, and escape bad trades. If you have a small account, trade only one trade at a time, or save more money before you trade.

2) Stay calm. Do not panic. If you are in a trouble, roll your trades away to buy time and then when all is calm, adjust.

3) Do not sell your stocks when they go down. Wait until all is over. Remember why you bought the stocks in the first place. I bought mine for dividends. Then I don’t care what the price is doing. I am not selling for capital appreciation. I am a dividend investor. At the end of any panic or bear market there will be a start of a new bull. If you invested before 2008, sit through 2008 selloff, reinvested dividends, and even bought more shares, your account is not way higher than before 2007 end.

4) If you want to be a bit active investor and trader, learn and study the markets. There is always a lot to learn. Play with your trading positions, simulate your options and way how to roll them, fix them, or adjust them even if you do not do it. But the trading platform will show you what you can do and if you see that your situation is hopeless, learn what else you can do to adjust a trade. For example, you have a deep in the money put spread. That is impossible to fix on its own. You play with the trades and find out that you can roll into calls for a small debit and sell new OTM put spread to offset the debit.

5) If everything goes your way DO NOT BE GREEDY!!! Boy how may times I was guilty of being greedy and opening more trades because everything was great and all trades were winning just to see getting myself in trouble the very next day when the market changed direction.

There are many possibilities to trade. Learn them and find those which work best to you and if you stay calm and never panic, be greedy, base your trades on expectations rather than trading what you see, you will prosper and be consistent.
 




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Posted by Martin March 02, 2018
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Which stock to buy?


Dwarf As I mentioned many times before and it is a part of my strategy, I use 50% of my options trading proceeds and buy dividend growth stocks; dividend aristocrats to be exact.

As Warren Buffett said that he considers diving stocks an investing blessing, every investors who buys stocks to hold them for a long haul must be very happy with current prices of the stock market.

I am really happy about this sell off. Although the portfolio is losing on paper (since the existing holdings are losing value) it is just a temporary state which doesn’t concern me at all.

In fact, my current holdings are still in a positive territory and I am still about 2.5% up for the year. Most of my net-liq drop is caused by my open options positions and since, except about two trades, all are out of the money, I have no troubles with shrank net liq at all.

Now I have a different paradox to solve.

Before, when the stocks were reaching all time highs, investors and I were constantly asking (complaining) which stocks to buy since they were all overvalued (I disagreed with the valuation part). It was hard to choose a stock and buy at a good price.

Now we have an opposite situation.

Almost all stocks except few in my watch list are in a correction mode and thus a good candidate to buy. I made nice money yesterday riding the stock market down to its abyss but not enough to buy all stocks in the watch list.

 
Now, I have to choose.
 

Watch list
 

As of now I am looking at JNJ, OHI, AGNC, and CVX.
 

What do you think? Which of the stocks from the watch list would YOU buy?
 




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Posted by Martin March 01, 2018
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Trump sinks the stocks this time on his tariffs announcement


If it wasn’t Powell, it is now Trump and his tariffs announcement. However, it is all just excuse for large investors and trades to unload and possibly buy back again cheaper as small guys start running in panic.

On this blog I try to advocate having clear head and stay calm. Listen to big investors like Warren Buffett who says days like this when stocks go down it is good news!

And boy it was a great day today!

I actually like days like this… fast selling or steep buying… both great for trading. I could ride this market down, make money doing so, and close some trades (most at gains, some at a loss but well offset by other gains) raise cash, and make tons of money.

All it takes is to have a strategy, plans for every situation and execute that plan.

However, today, I was proven wrong with my expectation of a market being on a trajectory of recovery to new all time highs. Now, it seems that we are going to re-test the 200 DMA before going higher again. However, I am slowly being convinced that this bull market is going to an end by the end of 2018 or first half of 2019. That means I am going to raise cash this year as much as possible to get ready for a wild ride.
 

As a dividend investor I will still keep holding my dividend growth stocks. My selling strategy is only when the stock is removed from the David Fish CCC list (which happens when the company cuts its dividend or fails to raise it). However, I will keep more cash on hand to be ready for more stock buying as they will fall.
 

As a trader I will attempt riding the market swings and its fall but I will attempt to raise cash and ride the slump with less trades than I have now.

 

 · Trading activity today

 

A summary of opening and closing trades.
(balance + $2,844.00)
 

What a day today! At some point I love days like this as you can make tons of money.
 

030118 trades
030118 trades
030118 trades
030118 trades
 

What is your expectation of the market?

Are you prepared for the possibility of a bear market?

How do you feel after days like today?

Was today trading bad for you and your portfolio? Or do you accept this as a great opportunity to buy more shares?

Share you thoughts with us! We will post them for all investors and traders to learn from it!
 




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Posted by Martin February 28, 2018
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Good news is bad news


How many times have you seen that revising GDP down (which means economy is slowing) is a good news for the market (as stocks climbed higher upon this GDP revision)?

I know many will argue that it will mean “danger to economy” and thus less interest hikes. But it is all bullshit. Our interest rates were below average normal for a decade. Is returning rates to normal a bad thing?

The market acts like a drug addict. FED gave it a medicine of cheap money and now, taking it away, the market sees signs of delirium, a hangover. And it fights back for more drugs.

and how quickly everything can change. One day everything is great and bright, the very next moment everything is gloomy.

How do you feel about this market?

This is the exact market action I remember in 2015 and before in 2014… and in 2012… and it didn’t make me comfortable and I was losing money back then. I am now seeing the same old mental mindset returning.

What does it mean?

I think it is time to stop trading actively, reduce exposure and wait this out a bit until we see some better direction.

I feel tired and weary about this market. I feel it is time to slow down and stop opening new trades; just managing the old ones.

What do you think about this market?

How do you manage volatility?

How do you trade a market when any trade you place turns out wrong? Do you stop or try to navigate through? Do you trade or do you turn the computer off and stop paying attention to the market until it calms down? In normal volatility days it seems that if you do so, you may stay aside for a very long time. So there must be a way to trade even a volatile market!

Most of our trades are still good but there are a few which are turning sour. And it doesn’t make me happy at all.

My market outlook is still bullish despite the current weakness. How about you? Do you believe that this market is just another overblown overreaction or a bear market starting unprecedentedly into a growing economy?

You may ask: “If you are bullish why this nervousness and bad mood?” and I would agree with you that I am also just overreacting and become scared because I still have a lot of money in the game and I do not like it. and now when the markets are in this mess, it is difficult to unload.

 

 · Trading activity today

 

I only took a few trades today. I felt like Amazon (AMZN) was a good play for Friday’s expiration as tech stocks were the only sector going up today. I hope this will not turn bad tomorrow. If we go sideways or even slightly down my AMZN positions are still in good shape to get closed for profit tomorrow or worse on Friday. Unless AMZN tanks 50 to 100 points in a day the trades should be OK.

I am a bit itchy saying “the trades are in good shape and if it won’t tank in a day…” because last time when I said that, the market turned down and tanked more than I liked it. But I do not take it personally :-)
 

Here are today’s opening and closing trades.
(balance + $5.00)
 

trades
 

Let me know what do you think about the market, what is your outlook? How are you trading during days like today? post either in comments below or just send me your email I will post your reply (if you approve) for all of us to learn from you!




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Posted by Martin February 27, 2018
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Looking for evidence of a bias


I advocate not to predict the market and its move. I advocate not to get into looking for evidence to confirm your own bias. I must admit that I am now guilty of doing so.

It is difficult to stay unbiased when a trader has certain positions and you wish the market would do what you wish for in order to turn those positions in winning ones.

I admit, I am doing exactly that in a desperate searching for justifying my trades. I am guilty of looking for evidence that my expectation of continuous bullish trend is correct.

However, I keep telling myself to prevent myself being attached too much to the analysis and results I just searched for. No matter what I find about the market I must stay free from overly expecting its next move and be disappointed if it doesn’t happen. Empty your thoughts, your head and trade what you see; not what you believe or what you expect to happen!
 

A recent port by Forbes contributor John Kosar there is another way to look at the market to determine the next direction of the market.

Semiconductors.

It is said that semiconductors usually lead the way to the upside as well to the downside. Per John, “Semis tend to be the “tip of the spear,” leading the way in both stock market uptrends and downtrends. This is because they are the “fast horse” that investors want to be on to capture some relative outperformance versus the overall market during stock market advances, and are typically the first horse they jump off of when the market weakens, often in favor of more stodgy blue chip stocks.”

Semiconductors struggled to make new highs recently as they were bound in a range:
 

SOXX
(Source: Forbes)
 

Semiconductors (Nasdaq GIDS: SOX) broke a major resistance at 1362 lately and that makes the resistance a support should the new support hold, of course.

If you check the chart by the end of the day it actually retreated from the new highs which makes the move questionable. But, it also makes it hopeful.

With a low volume pullback today I can expect that this is again in favor of just a small pullback and not a reversal of the trend.

 
SOXX
 

However, next few days will show where are we going. Heading down to re-test previous lows (<50% chance) or bounce off of the 50 DMA and continue creating new highs as I expected before.
 




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Posted by Martin February 27, 2018
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Powell tanked the market but on a very low volume


Powell testified in front of the Congress and tanked the market. But did he?

Maybe he sparked this selling but it was expected. We recovered most of the correction in a fast pace. This recent correction was fast and in one wave and we recovered in the same fast pace… and in one wave.

However, the selling happened in a very light volume:

 
SP500
 

A low volume pullback is a technical correction toward an area of support that occurs on lower-than-average volume. Since the move occurs on low volume, traders often attribute the pullback to weak longs locking in profits rather than a reversal. (Investopedia.com)

If this definition is correct and we are really in a “technical pullback” then this is a profit taking event, healthy for the market, and the uptrend should resume (and since I have a few bullish trades I wish it is what will be happening in the next few days).

Yesterday, I posted “We may see a small pullback to 50 DMA but we most likely continue higher as per my previous estimate…” and it seems that this is exactly what has happened today. In fact, I think it is something what was supposed to happen despite Powell’s testimony.

However, this selling derailed me and I made a few trades out of discomfort. Yes, I collected more premiums but, as I stated, I wasn’t much happy with those trades.

I had to close my trading platform to not get sucked in more trading.

 

 · Trading activity today

 

Although, we collected nice premiums trading today, I am not much happy with it. The trades were driven by emotions and not by calm trading. Followers of our trading and this blog may remember that I strive to trade without emotions and without panicking. I strive to control myself and always be in a “comfort zone”.
 

I must admit, I failed today.
 

Here is a summary of opening and closing trades.
(balance + $435.00)
 

SP500
SP500
 

Let’s see what next few days bring. I assume we may see some downward pressure to continue but more buyers will for sure step in and continue buying. The odds of larger pullback though are very low.
 




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Posted by Martin February 27, 2018
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Powell speaks, market craps


Although he said nothing spectacular, nothing everybody already knew (except maybe that everybody expected three interest hikes while he mentioned four) and market went on a selling frenzy again.

At some point this freaked me out a bit as my recently rolled SPX calls into puts got into trouble and I rolled them back into calls. But then I realized that it was all over-reaction. There still is absolutely no catalyst for a bear market out there. So I rolled it back into puts.

I increased risk a bit doing so, but now decided to sit still and do nothing until this crappy market moves calm down.

Today’s morning action and my trading reminded me of staying away from these market moves and reacting to them. It is difficult to do when your trade position is being attacked (in my case puts getting touched or in the money) but if the overall outlook is bullish, converting puts into calls is wrong just because the market is only freaking out.

So, I moved my trade back to what it was (happily collecting more credit) and now I need to sit tight and wait.

 

 · What investors missed – again?

 

First of all, the Wall Street reaction was based only on an assumptions of the same ones. Powell actually hasn’t said anything that he would increase the rates. He once again stressed data dependency and although we see economic prosperity and growth, according to Powell, it doesn’t pose an increased risk yet.

So his remarks can be seen positively and not negatively. The entire testimony pointed to lack of need to raise the rates! There was no urgency to do so. It was clear that FED would go forward and raise the rates only, if inflation starts moving in a faster and stronger pace. And that is not yet happening. Moreover, our inflation rate is still below historical average so any inflation growth will be returning to normal. Once the pendulum swings above the average we may see the need for FED to react.
 
 




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Posted by Martin February 26, 2018
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The market cleared 50 DMA today


Many stock operators recently claimed that we are in a bearish market which will turn lower and retest the February lows before it turns up higher. Others were spooked of inflation claiming that it is a game changer and that the stock market is heading towards the long waited bear market. Some called for the market to close below 200 DMA in order to call the correction to be over.
 

And all together forgot about the state of current economy.
 

I do not want to sound like I know everything or a newly discovered stock market guru. Not at all. I am learning myself. And I try to be reading about the market a lot. Mostly about its history, historical sentiments, behaviors and how the markets performed in the past during similar correction.

This still can be dangerous as I saw many people claiming that this market is too similar to 1932, 1962, 1987, 2002, 2008… and who knows what else. But is it?
 

Again, everyone who is making comparisons with previous bear markets are comparing apples and oranges. And I wonder, is it just me who feel like an idiot telling everyone that they are comparing incomparable?

How can anyone, a bit sane, be comparing today’s market with booming economy, earnings up 16%, sales up over 6% year-over-year, historically low inflation and unprecedentedly low interest rates with an economy of 1987 which was already stagnating, we had high inflation, high interest rates, slowing earnings (some companies even showed losses)? Was the economy of 1986 – 1987 the same as today? Of course, it wasn’t!
 

We will ultimately get to the same state when the economy stops growing and our rates will be high, inflation high, earnings mediocre, and consumer spending stops. But we are not there yet!

If we see troubles I would expect them in 2019 but not this year.

If you look at every 10% correction in the past and look at what the market did next, you will see that it always rallied after the correction (except one exception).

 
S&P500 - 2012
 

In 2012 the market corrected 9.99% and never re-tested the 200 DMA, it took 3 months to create new ATH, and another almost a year before the market suffered another 10% correction.

 
S&P500 - 2012
 

In 2007 the market corrected 10.25% and never re-tested 200 DMA. It took about 2 months for the market to create new ATH. In November 2007 the market stumbled and turned into worst crisis since 1929. The signs of economic problems were already painted all over the place and saying that today we have the same economic problems as at the end of 2007 is ridiculous.

 
S&P500 - 2012
 

In 1998 the market sustained 19% correction (so not exactly what we are seeing today). It created a double bottom before it rallied up to new all time highs.

 
S&P500 - 2012
 

In 1997 the market corrected by 9.34%. It didn’t even reached 200 DMA, reversed and recovered sharply, creating new highs in about 3 months.
 

There are more examples of the same pattern further down in history. I was just lazy to look the all up and post them but you can do this search for yourself. You will most likely see the same results no matter what was the state of the US economy. The market recovered and created new all time highs before it either suffered a new correction or bear market.

Thus my expectation is that we will see another 1 to 3 months of recovery (plus/minus). Then we will see. But taking into account the booming economy I have a reason to believe that we will see more than 1 to 3 months.

 

 · 50 DMA cleared

 

In my previous post I expressed my concerns that we may be in a short term bearish pattern since the market was below 50 DMA and it was not able to break up.

The market seemed to start creating a sideways pattern:

 
S&P500 - 2012
 

A previous day the market seemed to be in a descending triangle. As far as my limited and very poor knowledge of technical analysis goes I expected the market to break from the trianlge in the same direction as it entered into the triangle, which was up.

 
S&P500 - 2012
 

Today, we cleared both patterns:

 
S&P500 - 2012
 

And we also finished and closed above 50 DMA which clearly indicates that once spooked investors realized their spookiness and are again strong in buying into this market. The more investors who sold in panic down low will be coming back and buying back high.

 
S&P500 - 2012
 

We may see a small pullback to 50 DMA but we most likely continue higher as per my previous estimate based on a usual historical market behavior of 1 to 3 months recovery after 10% correction.

However, if you do your own research, market analysis, or chart studies like the ones above, you may come to different results. In fact, for every chart claiming one thing, someone else can come up with a hundred other charts saying otherwise.

In one of the Facebook groups a novice investor asked if it was feasible to set a goal and strategy to make 1% weekly revenue since he already studied all charts, back-tested all studies, and market. Really? Did he really studied all? ALL? And what makes one to believe and set a goal based on some, limited studies? I think it was not a feasible goal.

I am not saying that it is not possible to achieve such goal. It for sure is. But is it sustainable? In the long run? I don’t think so. It is not feasible to create a goal that from now on you will be making 1% per week because you have studied all indicators, charts, predictions, studies, or magical formulas.

Just by setting such a goal you put yourself mentally under large psychological pressure which will either push you to trade when you should not and making mistakes because back in your head you will feel like you have to trade.

In February, this month, I just made over 5% (5.60% so far) and the month is not over yet but should I plan for it as my “feasible goal”? Not at all. Should I use this number as my goal for next month? Not at all.

I focus on protecting my money and trades so when I trade I have to make sure that I have enough cash to manage the trade should it turn against me and I need to adjust, and that I know what to do when the trade turns against me, what steps I need to take. So my trading is to stay in a comfort zone and I do not care how much money I make in the process.

Yes, I publish it for others to see and learn, but not as that was my goal.

And of course, in the past, I may have been saying different things, I am still learning and developing myself. It would be actually bad if I was staying rigidly in a wrong strategy and mistake. That’s why my trading account looked like a bum-and-bust account. I made tons of money and later lost them, then I made tons of money again, and lost them again. Not interested in such results. I want consistent result. Framing myself in an unsustainable goal is not my way and hopefully never will be. And I do not care if others take it or reject it.

If there is only 1,000,000.00 market participants you will be able to get 1,000,000 different results of analysis, expectations, and predictions. And if you can provide so many different explanations to a single event, how do you know which one is the right? Yours?

 

 · Trading activity today

 

There is a market wisdom which says that if the Friday trading finishes up and strong, expect Monday market going higher. I followed S&P 500 futures and Asians markets to see what Monday morning trading would look like. And the market was set to open up.

So I opened a few bullish trades today. But the market lacked any move trading sideways. At some point it even looked like we may head lower. So I added a bearish trade. Expectations? Predictions? Analysis? All can be wrong and turn around at a dime. No even best and brilliant analysis in the entire world will not guarantee success.
 

And so, I had to roll my bearish trade.
 

Here is a summary of opening and closing trades.
(balance + $468.00)

 
Trades
 




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Posted by Martin February 24, 2018
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Overreacting spooked investors are realizing their spookiness


 


 




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Posted by Martin February 24, 2018
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Opening and closing trades in Friday


I was at the meeting almost entire day on Friday so I missed nice rally. But it is OK. In the stock market there is no day of missed opportunity (well, you can miss your opportunity if you decide to stay out and sell all your positions (close them) out of fear or panic and sit aside afraid of even looking at the market and going back to stocks only after all panic is all gone and stocks recovered all their losses creating new all time highs.

But that is not what I am referring to. Not to situation of spooked investors selling low and buying high. I am referring to everyday trading and investing. Then, if you are in the market all the time, have a plan, execute the plan diligently, then there is no missed opportunity. There will always be another one if one is missed.

Have I been in my office, I could trade a few SPX puts to extract more money from the market. But I wasn’t in the office so stayed aside.
 

However, in the morning before going to work I placed two new orders which executed later on.

A summary of opening and closing trades.
(balance + $82.00)

 
Trades of the day
 

Friday was a great day of a rally thanks to spooked (now) FED who stepped in calming the markets that they will not be hasty in raising the interest rates. From a technical analysis perspective and human/market behavior I can expect the market to rally again on Monday. If that materialize I might trade SPX that day. But I can’t say until I see what the market wants to do.
 
 




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