09/20/2012 second try, CAJ for NPK

After crunching the data, I'll try again tomorrow: selling CAJ and buying NPK.

As usual, a negative gap will prevent the trade.  The model only rotates into an equal or better position.

09/20/2012 after market

The 2% gap down in the CAJ position prevented the trade into NPK; the model only trades on equal or better gaps.

I'll recalculate tonight.

09/20/2012 premarket, "The Scream Machine"

Small Portfolio	XLF & IAU	19.21%
Position	Date	Return	Days
DECK	6/15/2012	-13.92%	96
CVX	7/5/2012	9.46%	76
RIMM	7/16/2012	-0.55%	65
UEIC	7/30/2012	30.92%	51
QSII	8/6/2012	11.78%	44
SWM	8/23/2012	3.94%	27
FCX	8/27/2012	14.97%	23
DWA	9/4/2012	3.65%	15
CAJ	9/5/2012	10.65%	14
DVN	9/7/2012	4.72%	12
S&P	Annualized	6.59%
Small Portfolio	Annualized	14.71%
Large Portfolio	Annualized	18.32%

 

Scheduled rotation: selling CAJ; buying NPK.

The market is wildly overbought right now, so any new position is liable to get hammered in the beginning.  DECK had a significant drop off this week after an analyst noted that some of its shoes were on sale 3 months before Christmas.

Merry Christmas to me…

Speaking of Christmas gifts… all of this free money from the central banks is just a new version of the old trade wars they had in the 1930s.  If we devalue our currency by 10%, that’s the equivalent of a 10% tariff on every product developed in the context of another currency.

If the Euro is devalued, that deflates the dollar.  If the dollar is devalued, that deflates the Euro.  If the Yen is devalued, that deflates both the Euro and the dollar.

If every currency is devalued at once, though, no one gets even a temporary reprieve.

The ECRI sees us as already in a recession.  Europe clearly has been in recession for a while.

The market may be on a sugar high, but it isn’t pulling the rest of the economy along.

Clearly the best investment right now is a good job – but that’s just as risky as DECK, and with currency devaluations it’s not very much more profitable.

I said the other day, “Enjoy the ride.”  This ride, of course, may very well turn into something like that old roller coaster from Six Flags called “The Scream Machine.”

Tim

09/15/2012 enjoy the ride

Small Portfolio	XLF & IAU	20.16%
Position	Date	Return	Days
DECK	6/15/2012	1.94%	92
CVX	7/5/2012	10.07%	72
RIMM	7/16/2012	4.28%	61
UEIC	7/30/2012	34.15%	47
QSII	8/6/2012	16.09%	40
SWM	8/23/2012	6.80%	23
FCX	8/27/2012	18.02%	19
DWA	9/4/2012	6.72%	11
CAJ	9/5/2012	11.45%	10
DVN	9/7/2012	9.07%	8
S&P	Annualized	6.92%
Small Portfolio	Annualized	15.57%
Large Portfolio	Annualized	22.29%

As expected, Bernanke pulled the trigger: QE3 is here.

Enjoy the ride.

No trades going into the week, but there may be one in the last half of the week.

There’s really nothing to say at this point.  It will last until it stops.

Tim

09/08/2012 holding steady into next week

Small Portfolio	XLF & IAU	17.84%
Position	Date	Return	Days
DECK	6/15/2012	-3.90%	85
CVX	7/5/2012	7.02%	65
RIMM	7/16/2012	-0.83%	54
UEIC	7/30/2012	16.15%	40
QSII	8/6/2012	13.77%	33
SWM	8/23/2012	4.00%	16
FCX	8/27/2012	9.13%	12
DWA	9/4/2012	3.42%	4
CAJ	9/5/2012	1.11%	3
DVN	9/7/2012	1.61%	1
S&P	Annualized	5.40%
Small Portfolio	Annualized	13.98%
Large Portfolio	Annualized	16.65%

 

The model is now completely converted to the upgraded fundamental filters.  BT was the last of the Joel Greenblatt formula stocks to go, and now the remaining ones are selected from a Benjamin Graham style filter similar to the one used on the “Value Investor” portfolio on www.Validea.com.

I’ve also adjusted the rotation rules.  The first two this week were scheduled, and the final one was mandatory: BT had the worst fundamentals AND the worst technicals, so it had to go.

DVN was only slightly better from a fundamental perspective, but vastly better from a technical one.  We can thank the Environmental Protection Agency for favoring natural gas over coal.  Not good for coal (or the country), but potentially good for DVN.  The biggest hope for DVN, however, is a central bank (temporary) rescue of the Euro.  That should fall apart disastrously sometime in the future, but natural gas should get a double kick from both industrial use and inflation if the Euro-fix works for a while.

If not, well, nothing will be a very good investment, will it?

As I mentioned the other day, the rotations will slow down again.  There won’t be a scheduled one this week, and it is unlikely a mandatory trigger will hit.

Time to watch what unfolds.

There’s a lot of talk about election years being bullish, and that’s true.  But even in election years September has a bad track record.  We may be gritting our teeth over the next few weeks, and if President Obama taps into the national gas reserves to try to juice his own election returns, that might negatively impact DVN as prices across the energy sector decline.

But that’s not under my control, and it’s impossible to predict. If I were him, I’d do it.  But I can’t select stocks trying to second guess people in power.

From a strictly technical perspective, the market seems to be favoring cautious optimism over defensive sectors.  On discretionary trades I’d still buy the dips, but not be married to those positions.  The market may be forming a blow off top.  Very profitable to ride, as long as you’re nimble.

The Mousetrap isn’t nimble.  It’s just designed to go up more and down less than everything else.  I do have some non-listed discretionary hedges on the side… and I’m being punished accordingly.

Tim

09/07/2012 premarket: selling BT; buying DVN

Small Portfolio	XLF & IAU	16.21%
Position	Date	Return	Days
BT	1/4/2012	18.09%	247
DECK	6/15/2012	-1.56%	84
CVX	7/5/2012	6.11%	64
RIMM	7/16/2012	-7.31%	53
UEIC	7/30/2012	18.85%	39
QSII	8/6/2012	11.20%	32
SWM	8/23/2012	2.05%	15
FCX	8/27/2012	0.58%	11
DWA	9/4/2012	3.24%	3
CAJ	9/5/2012	-0.74%	2
S&P	Annualized	5.08%
Small Portfolio	Annualized	12.73%
Large Portfolio	Annualized	14.97%

Yet another rotation.  Should slow down after this one:

The model is selling BT, and buying DVN.

As always, a negative divergence tomorrow would cancel the trade.

Also, this is now the second trade in a new sell rule for the model.  Sells were based on technical considerations alone before, and are now based on a combination of technical and fundamental values.

This should prevent incidents where TTM had to decline from +70% to +20% before it was sold, and should also prevent selling CECO the other day, only to watch it recover most of its losses in the next two days.  Models are always something to be fine tuned – but never curve fitted.

Tim