A blog on disciplined, risk-adjusted investing
February 24, 2012 Leave a comment
Ain’t this interesting – Apple is facing 18-yr and 3-yr channel resistance at the same time! Keeping a watch on this one for sure
**** Update: Mar 1st – Apple has pushed through resistance on the chart above and is now testing the line as support.
January 31, 2012 Leave a comment
Source: Dilbert
Apologies for not updating this blog in a while. I’ve been slowly trying to move away from subjective analysis (eg. charting) and towards more quantitative methods. The advantage of this is that you can backtest, automate, achieve consistency & minimize emotions. With the help of a few portfolio managers, I’m working on finalizing 3 ETF trading models that I hope to run in parallel for diversification. Historical performance results will be posted when this project is complete.
December 4, 2011 Leave a comment
Source: Bespoke Group
With a market like this, it’s time for the Whipsaw Song
October 27, 2011 Leave a comment
Last Friday, we posted that the S&P500 broke above its trading range. Since then, the index has given a nice 4% return in less than a week. Higher beta indices like EEM and IWM have given 6%. Today, the S&P500 made a break above the 200-SMA we were targeting. This new breakout above the 200-SMA and seasonality factors allow us to continue being long equities. Although, there is a high chance of a short-term pullback as the market is overbought (for example: the % of S&P500 stocks above their 50-SMA is 94% – the highest level in 5 years!).
October 24, 2011 1 Comment
Some investors heavily rely on seasonal investing. But does seasonality really work? Let’s explore.
One major seasonality strategy is known as the Best Six Months. Ever hear of the phrase “Sell in May and go away?” Below is a bar chart of monthly historical returns for S&P500.
Source: Bespoke
And so far this year, seasonality has been on track for the S&P500:
When looking over long periods of time, investing from Nov 1st to April 30th (ie. the Best Six Months) would outperform investing from May 1st to Oct 31st. In fact, let’s suppose there are two people who invested $10,000 into the S&P 500 back in 1960. Person A invests only in the best six months while Person B invests in the remainder six months. The chart below shows how the two fared.
Source: InvestTech
Found on: The Big Picture
Other seasonal strategies that have been shown to outperform the stock market are:
There’s a convenient ETF that exploits seasonality by rotating investments in several asset classes such as equities, bonds, commodities and cash. It’s called Horizons AlphaPro Seasonal Rotation ETF (Ticker: HAC:TSX). As seasonal periods are never the same, this ETF is also supported by additional fundamental and technical analysis. Below is a chart showing the performance of HAC since inception almost 2 years ago.
Source: EquityClock
Although this ETF is convenient, there are some downsides such as:
For more info on this ETF, see here.
We’ve now covered trend-line (including moving averages), Shiller P/E and seasonality strategies on this blog. In the future, we’ll also take a look at sentiment and sector rotation strategies. These basic technical tools should help give you a lot more confidence when managing risk in volatile markets.
October 21, 2011 2 Comments
The S&P500 had been struggling to break above the green resistance for the past 2 months but it finally did today. Next resistance is at 1275 (the 200-SMA), so this bear market rally some room to run to the upside. We’ll be looking to go short again at this next resistance.
October 6, 2011 Leave a comment
Steve jobs built the world’s leading tech company and changed the way people think about technology. It’s sad to see him pass away at 56. Below is a speech Steve gave to Stanford’s 2005 grad class, urging grads to pursue their dreams and see the opportunities in life’s setbacks – including death itself.
October 6, 2011 Leave a comment
Source: Leuthold Group
Found on World Beta blog
October 2, 2011 1 Comment
This is my favorite video on what leads to success:
I left a comment last year on the TED website under the username Wayne Gretzky to summarize this talk:
“Generate IDEAS that SERVE others something of value and that you have PASSION for. PUSH yourself and WORK hard on your idea. PERSIST through failure, criticism, rejection, pressure. With enough practice, you will become GOOD. Really FOCUS on this plan and you will have success!”
October 1, 2011 1 Comment
Unfortunately, having a business degree does not equate to being a successful investor. I’ve stopped counting the number of people I meet with an MBA, CFA or PhD who blindly accept what the conventional textbooks tell them: that markets are efficient and “buy and hold” is always the best investment strategy. For the ones that see past this, they lack an investment strategy that can successfully control emotions and market risk. Despite their high credentials, most mutual fund managers, analysts, brokers & economists fail to protect themselves and their investors in major market downturns.
Interestingly, I’ve also seen people who don’t have formal business education but yet they’ve mastered a few simple concepts (such as secular market cycles and basic technical analysis). They are observant, critical thinkers that don’t blindly accept what the business textbooks tell them. With an open mind and persistence, they are always learning and improving their investment strategy.
Joel Greenblatt talks about this topic in his new book, “The Big Secret for the Small Investor.” You can read the excerpt here. I love the paragraph where Joel writes:
“Becoming a successful investor doesn’t have much to do with attending a top business school (though being stupid with no degree isn’t much help, either). Success also has nothing to do with an ability to master the economic and business news that bombards us each day. And success can’t be found by following the hundreds of expert opinions offered on television, in newspapers, and in investment books. The secret to beating the market, as unlikely as it sounds, is in learning just a few simple concepts that almost anyone can master. These simple concepts serve as a road map, a road map that provides a way through all the noise, confusion, and bad directions. A road map that most smart MBAs, investment professionals, and amateur investors simply don’t have.”
