Santa, Bonus, Merry Christmas!

Merry Christmas

I just finished a trade which gave me a hard time a bit. I was expecting the market to be silent with a bias towards down, so I opened a bear call spread. However, although volume in the market was low, S&P 500 managed to push higher this week and endangered my trade.

Fortunately, it still closed below my short strike and even though I was completely wrong on this trade, I ended up with a profit. You can follow my trades for free at my Facebook Group I created in lieu of the newsletter (because the group is easier to maintain and manage). You can join. It is free and you will be able to track all my options trades and if you like them, you can even mirror those trades.

 

 · What’s next? Will Santa come or not?

 

Santa rally officially starts next week. Usually five days after Christmas and two days into the New Year are considered a Santa rally. But will Santa arrive this year? This week we saw markets recovering from last week’s losses and it pushed higher than I expected. This may be a good push and indication that we may see a Santa rally for the rest of the year.

We will see next week. If the market continues pushing higher, I will be adding some bull put spreads to my options trading account and ride the rally. If weakness persists, I will be adding more bear call spreads. Next week will be important to my next trading.

This will be also important to the overall trend. As I posted a chart of the current trend last time I pointed out that my outlook is bearish. Let me re-post that picture:

SPX trend
(click to enlarge)

And now, let me show you the same picture cleaned a bit without all the noise around. I removed everything which could be distractive and just left the regression channel I use to determine how the market would probably act.

I added big magenta arrows pointing to the upper channel trend lines and lower channel trend lines. Also, in between, you will see a median line. As of today, the market bounced from the median line heading upwards towards the upper channel trend line.

SPX trend
(click to enlarge)

And here comes the fruity part. Before August 2015 the channel was trending up. What changed it? Well the sudden drop in August made the damage. The premise of this charting study is, that the price tends to stay inside the channel as long as it breaks out. If it breaks out, however, it still means nothing to the trend. It must break the channel and stay there for some time. The longer it stays out of the channel, be it below, or above, the more likely the trend is going to change.

And that’s what happened in August 2015 and since then, we have a down sloping trend.

I also added dashed lines on top of each regression channel trends. They project the channel into the future as you can see for yourself, it also shows me how the channel is changing over time.

The channel lines are changing based on the price (I track 9 months time frame) but the dashed lines don’t. They stay static, they do not move. If the channel starts sloping down steeper than it is today, I will see it. If it starts turning upwards, I will also see it as a difference between the new channel trend lines and static dashed lines.

As you can see, as of now, there is no change in trend what so ever. The new channel trend lines are following my dashed lines in a perfect alignment (I put the lines on top of the channel at the end of September). This means, we are heading further down and if nothing changes the prices will be dropping in the near future.

So why is Santa rally important?

Santa can break this downtrend. If in the next 7 or so days the Santa pushes the price towards the upper trend line (somewhere between 2100 – 2110 level) and the price manage to stay there for longer time or will be bouncing at the top of the trend then we may see a reversal in trend and I will become bullish again. If Santa fails, we will again head down.

What’s also positive here is that we are bouncing from the mean level to the upper level and not opposite. This can also move the market higher. But as of now, do not expect much. Rather, expect the market trading inside that sloping channel.

 

 · Bonus, yay! But where to put it?

 

As many of the bloggers who blog about their investing we put some, or all of our yearend bonus towards our investments. I do the same. Part of my bonus goes to my 401k account automatically (it is deducted and saved in my 401 k by my employer before I even see it. The next part will go towards my debt and the last part will go towards my ROTH IRA account where I will invest it into a dividend growth stock.

As every year, I have a dilemma which stock will be that happy one and become my adopted baby. And this year, with prices falling, it is even worse to make a decision.

I will probably invest into oil involved companies as I see an opportunity in this sector. Although I will be overweight in this sector, I think it is OK since I am still building up my portfolio and thus allocation isn’t as much important to me. As oil starts improving, I will focus to other sectors which will depressed at that future time.

Here are stocks I am eyeing to purchase, but didn’t make my mind which one. Can you help me to choose?
 

If you can choose only one dividend stock to buy, which one?


View Results

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If you choose “other”, please let me know which stock you prefer to buy in comments and why.

 

 · Merry Christmas!

 

The year 2015 is almost over and we are heading to celebrate end year holidays. Let me take this opportunity to wish you Merry Christmas, success, health, and happiness to you and your families! I hope the next year will be better to all of you and that all your dreams will come through!

Merry Christmas!

 





3 responses to “Santa, Bonus, Merry Christmas!”

  1. Martin says:

    So, my bonus arrived and I reviewed the poll above. Although I was decided to invest into CVX your vote to add ADM made me to review the stock again and check the data. What was impressive to me was the dividend growth of ADM basically multiplying dividend 5 times in 10 years!!! That is increasing the dividend from current 3.10% to 17.18% in 10 years! And that is something what made me reconsider my desire to buy a CVX stock and instead I entered a buy order for ADM. If the price is good for my limit price order I should purchase the stock tomorrow!
    Thank you all for voting!
    Merry Christmas and a Happy New Year!

  2. javier says:

    Check out PWE. I like it for an oil trade. My average is 2.10 and I’m hoping to break even when oil bounces.

    • Martin says:

      They cut the dividend drastically too. This is unfortunate. I have a few holdings which are now a “recovery holdings” instead of dividend investments. But I am willing to buy them to play it just that – recovery and capital gain. It will happen. Maybe even next year.
      Thank for stopping by.

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