SD'S 2019 RAMBLINGS

[sd]

1.18.19
Just a few minutes here at lunch-
The CNBC headline is "DOW JUMPS MORE THAN 350 POINTS AFTER CHINA OFFERS A WAY TO ELIMINATE US TRADE IMBALANCE"

Quite a catalyst for the markets to go higher! Presently, The Vanguard investments (including AMZN) have recovered everything "lost" in the pullback from the 2018 high.
SPY is -8% from it's 2018 highs-
i.imgur.com/ROnDIoD.png

so - If I use it as a performance benchmark ,vs Buy and Hold- I'm doing relatively well- and- quite honestly- quite lucky - As the performance graph shows, From the 2018 highs, my account had a substantial decline- and relative good vertical recovery along with the upsurging market Tide starting Dec 26. MY net decline was approx -10% , peak to trough, so, not as severe as if I had held positions all the way down- While I had stopped out on some positions and raised some cash, I had also made some partial entries on the way lower- and again more as we exceeded -11% . And , I got to use a smaller portion of the cash buying at the low, and next day recovery...
The fact that this appeared to have worked out in my favor -up to this point- is due to the depth of the decline, and the strength of the counter reaction higher -
Before I twist a shoulder with self-congratulations- this was a rare occurrence - Had the recovery been choppier, more whipsaws would have been the norm- I did make some trading decisions along the way that were forgiven by this market's resurgence (buying red bars on the way down under a declining ema). Did Buy At the bottom with a few positions . The true measure is how much of whatever upside this market delivers that I am able to hold onto . I'll be looking for big momentum surges- gaps up- to tighten stops .
Performance graph :
i.imgur.com/QU3GHPC.png


Bought DIG on the breakout $28.87.--in the trading acct- Had a small amount of free cash to buy a few shares of VDE in Vanguard.

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I had purchased ARKG in the past - I think that genomics is such a potentially rewarding area- but that did not protect ARKG from tanking more than the average investment in the decline- I just repurchased this week, using a Buy-Stop entry expecting a breakout move higher from a base range.
Illustrating this with the 2 hour chart, it seems All the charts are very similar- with sharp declines and then a sharp reversal higher Dec 26-
Illustrating using the Sar as a buy-stop /then stop-loss - or at least how I perceive it's application
The decline from the high to the low in this chart saw a -28% downside move- SAR moved above the declining price, but would have generated a buy-stop entry on the green bars that would have filled and then the decline resumed- and the Sar stop would have executed for a -5% loss- Not bad considering the Buy and hold saw a -28% move from top to low. Then, the reentry off the bottom to where price paused and peaked was +30%- The Sar entry and stop would have captured a very respectable 18% gain in that move. Sar appears to work well in strong trending periods - but it's application cannot be applied across all types of market conditions- as whipsaw signals will chop one up in basing periods- and perhaps in very choppy conditions as we had a few years ago-
The Buy-Stop entry is on the expectation that the up move will continue...The Sar stop is below the breakout range- using the slower Sar value
i.imgur.com/g201O0S.png

Final Note- Sar as a trailing stop will never capture the absolute lows for an entry or highs for the exit- As i am presently trying to employ it, I use it as a method of trailing a stop on an existing position that is trending- realizing that if the position pauses in momentum, Sar will get progressively closer and likely stop-out- That is part of it's design - It has worked extremely well in the recent upside market momentum move that has had abnormal reaction velocity- outside of what is "normal" -
So the chart picture of SAR application looks very compelling and successful based on the most recent months- but what happens when things get choppier? This is where one cannot blindly follow TA signals generated by whipsaw price actions- and must decide how to modify the approach to adapt to changing conditions. Perhaps- sit and wait ...
Chart should be the guide though- because as much as you have to respect the experience and insight of market pros-like Arthur hill - They have developed a long term perspective that is simply more cautious and wants to go long when the sails are full and the wind is already at your back- More aggressive entries and exit trading for shorter term moves likely have less % success over time- more difficult to execute with consistency, and likely underperform over the longer term due to whipsaws.

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part of my day job responsibilities is to deliver a weekly "Safety" talk once a week to the personnel on the construction project- Typically some 60-80 people from different crews, different areas of construction, ethnicity, culture, and values and experience- The mix ranges far and wide across the spectrum...
This past Fall, I started to periodically introduce the subject of "Financial Safety" into the talks-Relating it to the importance of a person, a family, etc.
and eliminating debt- Credit card debt; the Dave Ramsey approach, Emergency fund etc- and 529, retirement plans ... Undoubtedly, Most have never heard any of this before-
I also have engaged my co-workers- to prompt them to take advantage of the employer plan and do a bit more on their own- Because- one day-decades from now- they will wish they had done a bit more-
After 3 or 4 of these "Financial Safety talks" I realized that No one has seriously bothered to encourage any of them to enroll,through their various companies- to explain the importance of long term investing-and I think that is truly a huge negative for both the Employer and the employee-
It's an opportunity for the employer to retain their people , and to improve their employees "financial safety net" by getting them engaged- and that also develops employee morale and is good for the company long term to assist their people in building something of substance vs just working paycheck to paycheck.
I felt somewhat gratified today when a young man walked in at lunch time and wanted to talk more about "This financial Stuff" and how he was presently working 2 jobs to pay off debt and he wanted to get ahead...He just didn't know a path- Just knew he should get rid of this debt- But no one has ever explained the basics of investing, compounding, etc. or what was available to him through his employer, or what he could do on his own.
Similarly, my company co-workers- Too busy working to take the time to learn about this "Financial Stuff" .
I saw in an interview that Elon Musk gave when announcing the discharge of 7% of the TESLA personnel in order to keep the company afloat ..

www.cnbc.com/2019/01/18/elon-musk-tesla-email-to-employees-about-job-cuts.html

But the notable take-away from the memo is this :" but it is the reality we face. There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. "
Interesting mention there- work-life-balance- Sounds like they expected a lot of extra effort - likely in time/hours - yet some 7% still had to hit the road-
And one has to wonder how prepared that 7% was for the financial disruption of losing their jobs - what will be the impact on them, their relationships under unexpected financial duress? Having that 3-6 months of financial savings that Ramsey promotes would likely look good to them today.
Just a bit of a Rant here- but it makes me realize how fortunate I am to gradually have gotten some financial savvy-albeit later in life .
WHY is it not worth a company's time to engage their employees into understanding and participating in what is available? Too busy making the product perhaps....

[sd]

2 hr Chart of BAC -Not a position for me- trade question asked.

i.imgur.com/HfON1JH.png

Daily chart -

i.imgur.com/0Q1IGs2.png

As I further explore my use of Parabolic Sar for stops- and continue the use of Elder impulse colored bars- and the stochastic-rsi -
A few things to note to self about not interpreting TA signals - too literally- particularly as I use a faster time frame chart along with the daily for decision making.

The Price trend- as defined by where price isx relative to the moving averages - Trending up, Trending down, basing.
PSar signals will whipsaw on price directional movements - So, a declining price and a slow SAR as a trailing buy-stop may not be prudent in a downtrend- particularly when the stoch-rsi is in the red or under the 0.50 line-
There will be whipsaws and losses in taking valid signals if the price fails to develop further momentum. During a non-trending period- note Stoch-RSI in the mid range-
Sar and Price signals would give whipsaw choppy results- This may seem obvious, but the trend reversal to the upside may all look similar- a green bar, SAR trailing stop hit-and that may fizzle-
During strong trending periods- both in downtrends and uptrends- SAR -particularly the slower Sar trails price and gradually gets closer over time- expecting the momentum to slpow and a basing to occur- BAC's gap up with the entire Sector was substantial and momentum is high- The trailing SAR stops FAST @ $28.79, Slow at $28.07 .
Fast SAR is right on the 10 ema- and if profit taking is desired- this big momentum move could be followed with the fast SAR- or the position potentially split stops with both Sars- Noticing the widening gap between the ema's - this move is likely to peak soon and overhead resistance is just ahead $29-50- 31 area. (Not seen on this chart time period-) The daily chart with Sar would offer a wider stop-loss for an extended holding period.

Explanation of SAR :https://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:parabolic_sar

I plan to review and adjust stops again today- Market has given an exceptional up move from the Dec 24 low. .
Applying a TA approach to offset/guide/temper the human emotions involved in trading is likely a good way to gain perspective.
When I see aggressive pull-aways of price from the ema line, it almost always is followed by a snap back reversion- and so a tight stop for a portion of the position may capture some of that excess enthusiasm of price- while still keeping a portion of the position intact with a lower stop-

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SAR STops started getting hit today on market weakness. VFMF,VGT,VWO were taken out. VMF, VGT captured good gains - VWO was a recent reentry on a buy-stop after it had stopped out. The 1st trade caught the majority of the up move ; the reentry took a loss. Reviewed the remaining SAR stops-on the 2 hr chart- several have inverted above the declining price- so I adjusted stops to the trailing SAR prior to today's action- or just under today's low.
Reportedly -today's sell-off was over concerns that the global growth story is in jeopardy.
AH, well the "New High" reached yesterday was fleeting-
Well, this is not unexpected, and so I have to look at the likelihood that if the weakness continues, I'll lose 2-3 % as the Sar stop is relatively close-
The real test for myself is the application of reentering on TA in the future and not jumping in too early- I was overall fortunate in that the snap back rally recovered enough to cover some of my early partial buys during the decline as well.

[sd]

A 2nd day of market weakness and presently 40% of the investment funds have stopped out- gains, 2/3 of IB- Dig & ARKG (Both losses).I've given back about 2% of the port value in these 2 days. If this continues, I'll likely give up 3-4% as my remaining stops get executed.
The Utility sector has come off it's bottom , and is seeing some buying today, so I've taken a position-this lunch hour- Technically, it had surpassed the trailing SAR buy level on the 17th last week- but I didn't have any free cash....Note that I had taken a loss on this recently -as I had made a good entry, but had failed to include a stop initially-
Perhaps this is the end of the Jan surge -as Blygh has noted- Funds are positioned to take profits- I had a good run up last Jan, and locked in some gains then as the market made an excess momentum move up.
Going back into the Utility sector is a defensive move- and if the market continues to be weak for this next week, I should be able to see my position get into profitable territory again- This time, I'll be paying more attention-
Note that the Risk on this is modest - Purchase price compared to stop- is about a -2.3 % loss if hit at the stop level . That is both the blessing -and curse- of applying Sar on a 2 hr chart. The Sar stop of $117.15 on the 2 hr is much closer to Price than the Daily -You can vary the values to change the responsiveness- so I'm learning as I go with this specific application of Sar values as something I want to react to. Generally speaking, it appears that it often coincides well with the Elder colored Impulse bars; The 0.01 Sar on the 2 hr $117.15, the 0.02 Sar is 117.90- so I elected to use the wider Sar to try to stay with the trade with some room for a bit of volatility. The Daily 0.02 Sar is $115.76-
At some point in a winning trade, Price will pause and base or retrace a bit- "Normal and Healthy" for it to do so- but applying the 2 hr chart does not give much pullback room. Over the course of time- Even if it proves successful, it would generate a lot of commission fees if one has to pay for trades- Vanguard


Posting the 2 hr and then the Daily

i.imgur.com/zwIBT40.png

i.imgur.com/SaTSlMT.png

1.25 edit- Market rallied, VPU weakened- I sold 80% of the position for a small $50 loss +/- and shifted the assets into funds anticipated to do better.

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Of the trades that stopped out- VWO appears to be making a strong move back up to test the recent high- I put in a buy-stop order to fill on a breakout above the recent high-similarly, the other positions did not have a substantial further decline- most closed up slightly higher- all are below the prior high.
I was surprised to see VWO higher- I thought negative comments/projections about global trade would be enough to rattle the markets...but the foreign mkts are also higher this pm. I haven't heard the expression recently- but it used to be said "
Wall Street Climbs a Wall of Worry" Let's see what occurs tomorrow...

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Caught the market at 3 pm- President Trump announced that the gov't shutdown would be put on hold for 3 weeks- Guess that was the catalyst for the upside move across all
segments- Plus Asia had been up- I sold 80% of the VPU position for a small loss and put the proceeds + the 40% free cash - All back in. Did not realize until today that I had held split stops on VMO and still own some VWO as a 4% exposure weighting .
So, my recent stop outs that generated the free cash are now put to work repurchasing at a higher price- That is the price to be paid in employing tight stops.
This is the whipsaw effect of small directional moves vs trending moves that will chew up profits previously made . I'm Keeping in mind that less than 1/2 of the account was whipsawed- for a -2% move - and that 60% of the account stayed intact and benefited by being in place as this up move occurred.
Presently back to holding 12 Vanguard ETF's and some AMZN in the Vanguard account- and the % of asset allocation is designed to give an edge over simply buying a one fund covers all approach-VTI- Vanguard Total Stock Market- as an example- Which actually should be the benchmark vs SPY-but the correlation is so close together- As goes the SPY, so goes the broader market it appears
My Fund exposure only has a small exposure 4% to Emerging mkts, 4% Developed Europe- Remaining is comprised of some adjustments and diverse weighting-
Healthcare-14% VHT, Energy- raised up to 9% VDE, Tech- VGT- 14%; S&P Growth -VOOG -16% ; Utilities 2.5% VPU; (was 12%) ; Small caps VIOO 13%; Factor Fund VFVA- VAlue - 7%; Factor Fund Momentum - VFMF 8%; Amzn- 8%



Other than Utilities , which tend to be ultra defensive- most of the other positions will rise and fall with the wider market direction. I think Healthcare is generally considered as defensive- it had a lesser decline % wise vs SPY, VOOG over the past year- but it was also a slower performer in the prior 3 year period.
Tech seems to offer the greater upside VGT outperforming SPY by 100% in the 3 year, 2 year period- and recovering better this past year-
The factor funds are new to Vanguard this past year- so we'll see how they compare with the various indexes- I selected both the Value fund and the momentum fund- sold the Quality factor fund as the price movements seem scattered and wide- low volume presently in all of these "new" funds-
Small cap exposure- typically more volatile- with periods of greater upside- remains to be seen if this is a year that will see that type of momentum growth.

It will be interesting to see after 1 quarter how this approach worked- and compare to how my professional fund "benchmark" performs, Livingston -Muscular Portfolio- is designed to capture the larger trends and not be a short term investment vehicle- and protect the downside from major losses-

In the company sponsored 401K, I have a large % exposure to the emerging markets- and have not tried to time those bi-weekly investments -So, I've been "investing" and buying more during the decline over the past year on regular intervals- It's taking the longer term view there- and that has seen nothing but Red until the recent upturn-
I will Pause adding further into those global funds and start to allocate the bi-weekly investments to a "balanced Fund"- conservative focus- or US Growth and Income .

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Friday I purchased ROM- in the Trading account- a leveraged play on the Tech sector-
Premise is that Tech will continue to lead the markets in 2019- I already have a decent position in VGT through Vanguard- but I'm willing to take some added Risk in the Trading account.
Chart snapshot is the 2 hr- Daily noted a Close to a higher close in the rebound from the Dec lows. Since leveraged positions rebalance Daily, this is a speculative momentum Buy. Hoping to see several days of market upside momentum this week to enable me to get a stop and some profits ...

i.imgur.com/WgVeYGY.png

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mONDAY 1.28.19. Markets lower- VHT stops out - Healthcare ....as well as SMDV in the trading account-
The ROM position declines -2.59% , Positions all lower- Those funds purchased on Friday with "unsettled" funds will clear for stops for WED-
There would be some kind of trading violation if purchases using unsettled funds get sold within the 3 day clearing limit.
I'm allowing my prior position stops to remain in place....Will see where we stand on the new purchases by EodTuesday.

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Well, the Headline tells the story:
"Dow surges more than 400 points to above 25,000 after Fed signals patience with rate hikes"

"In a statement, the central bank said: "The Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate." The statement also dropped the word "gradual."

The Fed addressed the balance sheet, which had been a concern for investors, in a separate statement. The Fed said it "is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments."
"It seems like the Fed is becoming more market dependent rather than data dependent," said Jack Ablin, founding partner of Cresset Wealth. "The market has become accustomed to below fair-value interest rates and trying to raise them is creating hardship. Accommodation is the new neutral."

The Fed policy statement prompted the market to find the "Glass is Half Full" . and that was enough to be the catalyst for the markets to put in a forward move, disregarding the other concerns cited about global growth slowing-----Late in the market cycle- precursor to a future inevitable recession etc....and any other negatives were temporarily slid aside....And FB nailed earnings- despite all the negative buzz....Go Tech!

With the recent volatility, we are all aware of how susceptible our financial investments are to the market's interpretation of what is important that Day- or the day before- or perhaps tomorrow's news..... Or someone's projection that we are overdue for a correction, overpriced, due for a recession etc. The recent -20% decline was substantial within the context of the Bull market trend since 2009- Yes, we are in a historically rare duration of long term up trend, with a few minor corrections periodically over that time- Despite the upside since 12-24-2018, we are still at a deficit in terms of recapturing the uptrend- and it certainly feels like we could be teetering on the edge of a more substantial decline. That's what the news tends to remind us-And that Keeps us tuned in as well- Makes me want to be cautious! and to stay tuned in.
d**n, I haven't seen CNBC in a month since we dropped cable and CNBC wasn't part of the HDTV over the air 42 channels that try to sell me something constantly that we get for Free! Hmm- go figure...
While I had set stops in place last week-on existing positions; and couldn't set stops until today in funds purchased with "Unsettled Funds" ...
Fortunately today arrived with the Fed announcement propelling the markets to see the brighter side ahead- The VHT position had stopped out- leaving 14% put into the free cash drawer- but the remainder stayed contained within a sideways basing pattern that could have gone in either direction- depending on the catalyst- The Fed announcement arrived before the prospective future North Korean launch of a long range nuclear missile into San Francisco...

Overall, I get the sense that I would have taken a -3% loss on stops getting hit , but got a breather here with most positions gaining 1- 1.5% . I even got lucky with the ROM position gaining +6% after declining from my entry- Chart showed sideways action on most positions within a basing pattern- Seemed Typical of almlost all positions- after the run up from Dec 26- have to consider that a normal pause-
Now, We've had a move higher out of the base - some positions testing the recent high, Tech-as an example- making a new recent high VGT- or XLK - technically this is a breakout higher- so the low of the recent base should be a good place to set a stop-loss as it should not be revisited- So gradually ratcheting up stops will be the next agenda- but not squeezing the price action too closely-

Virtually everything- including Utilities went higher that I have positions in- but notably Energy and emerging markets joined in as well- How far this momentum will take us remains to be seen- but I wou;ld like to think with the Fed out of the concerns, investors will focus more on the potential for further upside, vs the downside...
Either way- The recent base lows appear to be a very established place to set a stop-loss and draw a line in the sand-

The Healthcare position I stopped out on -just caught my very close stop- VHT moved up 1.93% today- but I will reenter with a 1/2 position and the remaining 1/2 I will Buy VNQ- A Vanguard REIT that has been steadily uptrending for the prior 3 weeks- and pays a dividend as well-
I am repurchasing 35 VHT, 96 VNQ- VNQ looks to be trending strongly, and has moved up the past 3 days from a pause at the $79.50 level- I read an article recently about VNQ in SA that made a strong case for Reits having been oversold and potentially good defensively-

My take away for tonight is that I'm reasonably optimistic that the markets will indeed continue to find reasons to climb that wall of worry- but I will still employ stops
based on levels of support- bases made and then broken out from- The PSAR whipsawed during the development of the base- but certainly looks viable during trending periods. As an example of the Whipsaw- I will now be repurchasing VHT at a +2% premium from where I owned it previously, and then had stopped out lower-That's the trade-off of employing tight stop-losses.

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Markets closed the week higher- Fed policy, the primary stimulus,setting the tone - Earnings underway.... Everything appears to be trending higher.
Did reduce the VHT position and added VNQ- Looking at the RRG sector rotation for the positions, momentum performance this week has been both energy, Reits.
Since most positions look to be trending higher- viewing the 2 hr chart with SAR as well as the 2 hr 50 ema- No reason to get too tight when Price is trending and above the fast ema. Seeing a drop here Friday- several red bars and a close below the fast ema. This has had a steady uptrend for weeks, with a base pause mid way.

i.imgur.com/lxULEYw.png

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Took a summary shot - of the past 1 week performance - Energy and Tech outperformed the market-comp- (Voog)
Tech gained 4.36%, Energy gained 4.31- Voog gained 3.48- - almost everything was up except for AMZN, losing a bit .Not too shabby- Another 1 week performance of some segments will outperform the annual performance for the SPY. Of course, I am widely invested, so I get some out performance as well as underperformance-
I am overweight Tech,....
Account makes a new comp high- breaking above the July 2018 high- Stops are updated- potential for a 2-3% loss under "normal" market declines-
Flash crash, nuclear war, assassination; meteor crash, impeachment; would be those rare events we consider totally improbable -Followed by another Gov't shutdown, Fed action on expanding inflation, major earnings misses and the spectre of a global default- Venezuela sees US military action, Russia defends...

Despite these possible scenarios- and projections that an End to this extended Bull market are close at Hand, You have to not get the Crazy 8 ball out of the closet-
Stay with the charts- don't become a future soothsayer; Trade what you see- and, use trailing stop-losses to see where we go- and get stopped out on the next bit of bad news that rattles the markets- Reenter - and reset a new stop- That's my philosophy of my being 100% long in the face of Naysayers. Trust in the charts and the uptrending ema's..... Give some wiggle room- but stay with the trend...until it breaks- and then the best loss is the 1st loss.
Note- I stopped out on the ARKG position , and only hold 1 VDE position- Positions are not equal weighted, I'm trying to increase allocations to the better performance areas.
i.imgur.com/AhX1g4b.png

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What a difference a few days make !- After a flat market day Wed, I updated and tightened stops- I got more aggressive on the stop for the Tech sector VGT and the ROM position, because both appeared possibly extended.....more so than the other positions-
Well, Thursday, both stopped out along with 9 other positions .Leaving VNQ and VPU- Real Estate and Utilities- moving higher (Also Bank/financials were higher- not a position there)
What prompted the markets to give back a little here, and is it more than just a small pause/base? I read several "reasons"- from concerns about a slowing global economy and concerns about US earnings going to disappoint in 2019- And Cramer commented today that Investors should not be jumping in early just to Buy this Dip-
I did add to the VPU position at today's open. That leaves approx 85% in cash, and a weekend to decide whether to put in trailing Buy-stops on those positions I exited- or to 'wait and see'.
Ideally, if i have stopped out on average -2% from the highs, this pullback will retrace a minimum of -5%, in order for a possible reentry that captures a net gain.
Otherwise, i will chase at a loss- This is the reality of active trading- Utilizing stops to protect from the potential decline, puts one in a whipsaw position of seeing the trend direction proceed - without you- and the end result is a sub par performance vs Buy and Hold- This is the true Benchmark for active investors- The trade off is protecting the profit/Risk ratio-

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2.12. Market rallies on the possible avoidance of another gov't shut down, and possibly some postponement of Tariffs with China.
I tightened the trailing stops on VNQ and VPU - to see if they sell-off in the upswing back into equities...I went long this afternoon- in the Vanguard accounts -Back All-in- This is where the whipsaw starts to impact- I don't have the time to fully evaluate the prior exits with today's entries- but I think I am at a deficit in most reentry positions as they did not decline enough to get back in at a net gain- I think the emerging markets -VWO should be a net gain-from the point I exited with a stop and gained a new entry-net lower.But i need to track this when I get more free time. The net account value is holding at the prior high level for 2018-
I went back - "All-In" thinking that today's market reaction should have enough 'news' to keep it afloat this week- most of the ETF's moved up over 1% on the day with a broad market rally- I see I failed to add to the Healthcare Fund -VHT- I did overweight the Vanguard factor funds.
I did the reentry during the last 30 minutes of the day somewhat winging the allocation % . Tech typically leads, but I average weighted VGT - some of that will be picked up in the Vanguard momentum fund though-
Most of the funds moved up +1%- with VPU a paltry +.14 and VNQ losing -.61 - reason to tighten the stop to today's low, put those assets into VHT.