SD'S 2019 RAMBLINGS

[sd]

Had some free time this Friday lunch hour to review- Glad to have gotten back in this week, gained 1% and holding at an all-time incremental high-
I hadn't bothered to take any action in the IB account- Rom stopped out for a nice gain, but today I elected to go with more leverage there and bought CURE and TNA- Healthcare 3x and small cap 3x. The trade off is higher Risk , more volatility- and not to be depended on over the long term - to deliver the expected performance- So Buyer beware - In the past I did hold CURE for multiple weeks ; a nice gain when the Healthcare sector was performing with strength. Presently, it has been a so-so performer - I was considering the Tech sector again, but it appears to be basing some. Stops will be in place.

Viewing the summary page on the 1 week performance- SPY gained 2.24% +/- while the Vanguard small cap, Energy, and Value funds also gained +4% for the week-
ARKG- genomics (not a position) also gained over 4% on the week.
There were only 2 funds I hold- VPU- Utilities, and VWO- emerging mkts- down less than .5% - I expected Utilities to be flat to down when the market rallies- And the emerging mkts are in chop because of the Trade talks/tariffs undecided etc.
The summary view in stockcharts is useful at a quick glance to compare which positions are outperforming, and which are lagging.
click on the chart to enlarge...
i.imgur.com/vXunOtS.png
S&P sector performance since Dec 24:
i.imgur.com/P9qMCIs.png

[sd]

Morningstar report on active management and the higher fees charged - does not guarantee outperformance-
Something to be said for those that are willing to question the status quo....

www.morningstar.com/articles/913754/cleanup-how-fee-bundling-kills-performance.html

[sd]

Market continues higher-but viewing sector strength as weekly performance gains shows how things may be shifting-
SPY showing a .20 % gain, the healthcare position declining in Vanguard and CURE-in the trading account- prompted tightening stops-VOOG underperformed .06%, Tech- VGT also an underperformer +.14%-
On a daily performance basis- most of my remaining positions are outperforming SPY- momentum in small caps and "value" up over .70% today - or 3x the performance of large caps (Spy) . VWO was a big pop yesterday and up .44 today on "news" - about potential tariffs not being instituted-
Considering how the allocation % works- Tech and Large caps -VGT, VOOG = 20% of the port exposure- Healthcare -VHT- is an underperformer but I did not allocate back into that sector- Today's decliner- VNQ- real-estate- was the sole decliner -.62% today- and is close to stopping out- but note that VNQI-global- appears to be moving back higher-
As i view the performance summary- and , it's a learning process - allocating to those areas that have better momentum can likely be best viewed on a weekly basis- This week, commodities, energy , small caps and utilities are doing well. As Cramer likes to promote: There's a stock market somewheres-
At some point-soon I think- I will have more time to allocate to things connected with the market- Ideally I can turn that time and interest into outperformance-
Trading account note- I have moved my stop loss for CURE to break even- and Tna to net about 2% - n Stops in the investing account should be net +

[sd]

Stopped out on both CURE and TNA Thursday- small profit in TNA, B.E in The market weakness prompted me to tighten stops in the Vanguard account positions- expecting them to get taken out today (Friday- triple witching- historically a bad time for stocks according to Tom Bowley-Stockcharts-added a negative Bias
But, here's the headlines at the close-....Amazing- the markets put in another higher weekly close- A decades+ record for consecutive weeks with higher closes-(https://www.cnbc.com/2019/02/22/stock-markets-futures-mixed-amid-weak-data-us-china-trade-talks.html)
Conventional Common sense suggests we've gone up too much, too far- Yada, yada....I tightened stops closer last night-after all- But nothing stopped out in the Vanguard account-so, it's one more week with incremental gains in most positions.
Today's upside price action saw Tech- VGT making the largest daily move- + 1.34%- to a new 2019 high-, about 4% shy of it's 2018 all-time high, similar to SPY's recovery.
Since this recovery is something notable for the record books following the December swoon lower, after the almost -20% market decline, such volatility swings are outside the "norm" of most investors' memories- or certainly our recent experience. Self included- We all are susceptible to our personal Bias and perception of the market's actions-
Coinciding with this market movement that continues to go higher comes a certain amount of healthy skepticism that we will continue these record making higher weekly closes for many more weeks....Following some of the chartist that have commentaries on stockcharts, several have pointed out that we are just now at or coming to the bullish upside "golden" cross of the 50 /200 ema-

Arthur Hill had an excellent article/video this week on backtesting entering and exiting positions based on moving average crossovers.....compared to a buy and hold approach. www.youtube.com/watch?v=rk4YYYfDU24&feature=youtu.be
As I presently have a much lower tolerance for giving up gains, I prefer to employ signals based on faster moving averages.

Sector rotation this week in the Vanguard account saw Healthcare and energy losing ground, the Utility sector holding the lead + 2.43%; Eemerging mkts 2.4% , while SPY delivered 0.64% The remaining funds Tech, factor value,quality, and small caps all outperforming Spy
Note that Vanguard Large cap Voog outperformed as well _+.84

i.imgur.com/8VNmKJh.png

2.24.19 Upgraded stops- Viewing both the daily and the 2 hr ; with the VPU utility fund gaining momentum this week, have to view that as the market
participants putting some cash into safety, but that seems to be offset with the Tech fund also breaking out higher Friday -VGT-
In the IB account, 3 day rule to clear applies- Small caps- TNA- Stop got caught on that intraday spike lower Thursday. My stop was moved up very tight and I elected defensively to lock in some gain early in the position. So, I netted a whopping 1 % gain and the stock closed the week up 4% higher...

i.imgur.com/oGIUG7x.png

[sd]

The market futures were up higher at the open- based on optimism of things working out with China-
While I was all in, in Vanguard, I was waiting for Cash to clear in the IB account-Which it did today-
I decided i would mix things up a bit in the trading account, and selected 3 of the trending horse competitors-Cien, AOS,BWXT, and also a reentry into TNA- Tna had made a gap open, it was break time , and i went ahead and entered the 4 positions with limit orders to get filled- above the active ask price by a few pennies.
TNA pulled back, closed the gap- to be a net drain -$70.00 and AOS also lost ground, while BWxt and Cien closed higher.
In the Vanguard account, VPU stopped out for a gain as it weakened today after an up week- Several other positions looked weaker on the day, but stops are in place and I don't want to overreact on a minor weakness-but it was a lackluster day over almost all positions with an average move of less than =.10% with VNQ losing 0.79% and possibly developing a base .... Definitely appears that we have stalled out in the momentum arena.Spy up just .14%.
On the face of the good news, the price action appears subdued-Toppish, not certain what it would take to make the markets propel higher with some vigor- Vix raised a bit as well.

[sd]

Got snookered today- Viewed the market open, with everything up and had approx 25% in cash from stops executing this past week- VIOO<VPU -
And viewing the summary page saw that healthcare was breaking out higher, and energy moving up out of the base- so I went in long in both positions-
Energy closed higher- but the Healthcare position- VHT closed down 1.45% on the day- I hadn't held a position in VHT for a while as it had been underperforming.
In the trading account, I had held 4 positions for the week, with TNA stopping out for a sharp loss today. Cien, AOS, BWXT still positions, but BWXT close to stopping out-

[sd]

www.hussmanfunds.com/comment/mc190303/?mc_cid=a15dc69c3c&mc_eid=8d2dedb909


Posted the link to the article- didn't have time to expand on it- but coming after this past down market week, and a majority of my Vanguard stops were hit near the price lows- Viewing it intraday today, Tech - VGT having a significant rebound- but I limited myself to adding back into VPU for the moment-full position and 50% partial fills back into the factor funds at a 2% discount to where I stopped out- unfortunately, tech caught my stop at the very low and has snapped back-
My stops were set to protect a small % gain- so I gave up about 3% from the recent high- and don't quite trust to jump back in today full bore-

[sd]

Mid day- 3.13.19 Back in Vanguard funds this week and also elected to add ARKK-today an actively managed group of funds that has momentum with it-Holding 21% cash in Vanguard after also adding back into technology VGT and the Multi-factor fund VFMF.

The ARK Fund group is a relatively new 2014- Woman led company- seeking innovation and disruptive companies- in different areas-
Can be more volatile - The ARKK fund has a .75 Expense ratio, and selects from 50-60 companies held by it's more focused funds-with a narrow focus on select companies the active manager thinks will be innovators or leaders ion that area. I don't know the ARK concentration from the different fund categories- and they just added a financial fund into the mix- which I think has exposure to cryptocurrencies...among other aspects of financial innovation.
In the theme of Momentum Investing, putting $$$ to work where the Tide is flowing is concentrating monies for a bigger return. Technology is a leading broad sector- Innovation in technology is an accelerating theme- Genomics- healthcare and farming-
When the markets are going up, the relatively narrow focus through fewer companies ownership in select areas can be rewarding-and doubly Risky if that focused concentration falls out of favor.
With Vanguard funds, I have broad diversification, and numerous companies owned within each fund- so dilution by the many is the net result- but still trying to shift the allocation within the types of Vanguard funds that seem to be outperforming- I decided to Add ARKK in the Vanguard account with a 15% weighting, giving active focused stock selection vs passive broader index stock holdings.
I included ARKK in the Vanguard charts along with SPY (benchmark)
The RRG- Relative Rotation Graph shows the performance rotation-

10 weeks :https://i.imgur.com/7XE9Esv.png

1 week -https://i.imgur.com/M0QnPPx.png




ark-funds.com/

Research paper :https://research.ark-invest.com/thematic-investing-white-paper

[sd]

3.19.19- Not much has changed - holding all the same positions with 21% cash in the Vanguard account, and All cash in the trading account-
Have to post this link on a study of active management vs passive investing- and for 9 years, the results for active management have failed to surpass the long term benefit of passive investment.
Essentially- that is compared to a Buy and Hold investor vs the active managers- the great majority who fail to outperform after fees-
www.cnbc.com/2019/03/15/active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html
At present, I am now down 1.5% from the 2018 high, which I will attribute to luck - good and bad- I had stops caught in the substantial fall 2018 decline and was buying back at cheaper prices- including on Dec 24, 26 ..... That was fine, but some weeks back, I was whipsawed out on a 2-3% decline, and got back in on a few positions slightly lower, but Tech (VGT) had moved up 6 points- and I reentered at a smaller position and at a higher price- While my stops exited defensively to lock in profits, the whipsaw chop and grind is in play- So I presently am sitting pat without stops in play ....dangerous thing to do, but there's a number of things that can rally or roil the markets- and a quick sell-off on false news of -2-4% just eats up the benefit of holding and getting back in at cheaper prices- With minor declines, and a tight stop at -2 or -3% , THE DECLINE NEEDS TO GO SUBSTANTIALLY LOWER (in order to get a net profitable reentry) TO SEE A ta SIGNAL UP TURN - below the price the position was exited. ....I would venture to say a -10% decline low with a stop exercised at -3% would then make a higher reversal close- likely an upmove of 3% from the low- not a whole lot of meat to sink your teeth into- Conversely- a more active strategy is a different story-

Presently there is a lot of discord on the global front with trade tariffs still a lag on the world economy. Reading today that a number of global companies are issuing warnings-about slowing global growth and lower profits.

In conjunction with this, I have gotten busy with opportunities on the Home front- Yard, Garden, and fewer and shorter work hours- as the present project is concluding-
In seeking to achieve a certain healthy balance in one's life- work is stimulating and sometimes demanding- but at some point- there has to be a balance that is not directly cost-benefit related as the person working has primary relationships outside of work (Hopefully!) Over Christmas vacation I did a 2 page -2 column- Plus/Minus comparisom of why I do what i do work-vs what it provides in terms of life quality- While the tangible pluses of being well compensated- (relatively ) allows a certain quality of life from a financial point, the less tangible is the loss of time with family.
Similarly, is the time one spends absorbed in the compulsion of investing and/or trading-.... If one is by themselves, it's one matter- If family is in the picture- it's an altogether different dynamic at play- The Cost-Benefit ratio gets much more complex.

And with that important point referenced, I have so totally enjoyed the past week without much concern for the markets - Or for the job as it is wrapping up-
Important milestone- I have delayed engaging my SS for several years- This past Friday - via phone call with the SS, I activated my full SS- some 2 years after my FRA. The breakeven payback period of waiting until 70.5 is close to 12 years- Age 82 - to see the difference in the monies paid out to the individual ... Spousal benefit was important to me- The longer i delayed, the more my spouse could potentially receive- but the short end of this- Is that I will now be receiving a 16% higher SS monthly payment than if I took the payment at FRA 66.5 yrs. It also means my b payback period to breakeven will be shorter- If i live for 6 years (estimated) I will now be receiving more in total compensation than if I took payment at 66.5 years-
Note that there is something I haven't calculated- The COLA adjustment- Cola is the Cost of Living Adjustment,,, for 2017, SS recipients received an increase of 2.2% ; for 2018 , I think the COLA is 2.8%- So, i think the numbers may not tell the full story- If my delay from 2 years ago gains me +8% and + 8% = +16% in higher payments from the level established at age 66.5 years, but my delay does not receive the COLA adjustment those collecting received- I miss out on the 2.2 for 2017 and the 2.8% increase for 2018- So, effectively, my + 16% add based on the 2016 calculation at full FRA, does not get the adjustment- so my 16% increase is actually 16% - 2.2-2.8 = -5% or a net +11%.
Rounding out the numbers- If the average person receives $1,400 /month at FRA x 12 months= 16,800. Year 1 sees a 2.2 COLA and the benefit increases by that amount $370.00/yr =17,169 in year 2
or 12 monthly payments of 1,430.00.
Year 2 sees an increase in payments of 2.8% for 2018....or an addition $480 ....for the past year COLA- not mych- about another $10/week- -40/month $480/year-
But what if you drew the payment at FRA and did not need to spend it- and invested it at a simple 7% average market return?
Question for another day, as it is too late to continue at this hour
And, I never got into the hydroponics we will be doing this year in the garden. Since i don't do FB or linked In, may as well include here....

[sd]

When I mentioned to my daughter that I was looking into trying to use some hydroponics this year- she responded that the only people she knew to use hydroponics grew the UM, ERR,. inedible crop....
LOL! Likely won't be legal in NC for the next 10 years- So, I'll stick to lettuce,swiss chard, kale etc.

There are some really unique systems out there- Growing plants in soiless media- and feeding with a balanced fertilizer solution- A bit of science is involved- check the PH with a simple test kit- and decide on an active system- pump running the water/fertilizer solution through a gutter/trough etc to a drain back to a recycle bin, or a passive system-
www.maximumyield.com/the-kratky-method-is-a-simple-and-fun-way-to-grow/2/2996
build a box frame, line it with 6 mil plastic,
float a piece of 1" Styrofoam on the water- drill some holes in the styrafoam at plant spacing intervals, insert a plastic net cup, drop into the net cup your previously sprouted plant in a rockwool cube-
Lots of variables- including the need for oxygen into the root structure- so as the plants develop and use the water and nutrients, the water level will decline in the container- and the styrofoam could be supported by blocks in the solution to hold the styrofoam up as the longer roots develop into the water-
Variations include introducing aeration through an air pump into the water solution. Another variation includes a gutter system where the net cup is periodically immersed in water and wicks up the nutrients into the container above. Water is periodically pumped through the gutter system, and drains back to the recycle tank .
Another version of this system uses rows of pvc piping with holes drilled through to allow the net cups to be inserted - and the pump cycles water through the pvc system- And then there is the bucket container system- also uses buckets with media, and the plant solution is pumped into the container and it drains out the bottom into a pipe that returns it to the storage container.
And likely many other versions- I'm inclined to go with the simple and cost effective- Priced the pvc pipe system and that would cost years of munching on lettuce to get a payback-
And then there was the Gutter grow system- using rain gutters as the trough- I knew there was a reason to bring all that seamless gutter home 10 years ago! The actual designs vary from simple to extravagant- Like the basement vertical grow system with 2" pvc verticals with 45 degree wyes that plants are rooted into- Problem is the cost and payback period of these innovative designs.
Don't even want to price in the indoor LED lighting systems .......I'll stay with simple- and economical- Photos eventually....

[sd]

Busy Days- Mueller report delivered and the AG said Trump was not going to face any obstruction charges-Politics being as divisive as it now is, Dems are clamoring for the fu;ll re;port and want to find reasons to keep ongoing investigations in the press- Wall funding rejection was vetoed by Trump- Looks like the back door method of appropriating funding will continue??? Healthcare- Obamacare deemed unconstitutional- Trump claims that the Republican party will become the party that delivers good and affordable healthcare choices to the country- but after all these years, No Republican counter plan is defined and on the table- and healthcare costs continue to rise far more than inflation....- Trade tariffs still an issue- but the trade deficit is reportedly diminishing- Global concerns also seem to have the markets undecided..... Mixed messages out there- with the Fed on the sidelines sitting on their hands- Future rate hikes now not expected for 2019 as the economy has cooled and slowed...Inflation reportedly still not a large concern.
With this perspective, still holding long, and not trading ....Still working but now just a 40 hour schedule these past few weeks-Don't mind that at all! Too busy on the home front....spring fever and trying to get things organized- dragged the air layered figs out of the crawl space - Breba crop figs popping out on some- covering at night as we are still dropping into the low 30's

Investing- Brian Livingston - article with links to using ETF's and shifting asset allocations into momentum areas- Other rthan holding a larger cash position, and shifting allocations a few weeks ago, I haven't kept up viewing the holdings the past 2 weeks- increased the tech exposure, didn't go back into small caps as they were weakening- and continue to do so-
Utilities- VPU still uptrending, holding above the 20 ema with a new recent high this past Monday-
Markets- particularly Tech had made a nice up move since the December 24 lows- Performance chart from the beginning of 2019 shows QQQ's +19%, Spy 15%, Utilities -VPU 13% and Dow 12%
i.imgur.com/ksCYCzF.png
However, the last 4 weeks are not as inspiring - with tech and utilities ahead for that period-spy barely, and the Dow losing slightly

i.imgur.com/ujVO1iT.png
Going back to last August 2018- Chart shows that we have not made a recovery from that time frame- with the broad indexes all not back to those prior levels- Utilities were the only other sector that I compared in this brief look back, - Utilities have benefitted the most from this group- had a lesser -10% decline going into December than the indexes,. and have made a +12% recovery (+14% from the lows). So, it's a good partial example of Livingston's thesis about shifting asset allocations in a diversified portfolio- The question is , how does one effectively time the transition into a meaningful and structured approach that captures some of the outperformance and momentum -
Notice at the beginning of this chart, The VPU red line started off up 2% in the 1st 2 weeks, while the indexes went down into negative territory slightly, but then VPU lost momentum and declined -2% while the indexes all gained for a few weeks. - and then it whipsawed again-In October the indexes had all dropped into the negative % from August -
Viewing comparative performance momentum on a shorter time frame makes sense - RRG charts may assist in understanding that better visually.
i.imgur.com/YxBb9QF.png

[sd]

Markets moving higher this week on expectations of trade resolutions....
I shifted some allocations in Vanguard, Sold Utilities- selling off as the market goes up added to the VGT position.-Very Overweight.....
Added ARKG,ARKF in the trading account, along with AOS- all trending up....Put on a small position in Healthcare with CURE- expectation that healthcare should get some interest as the markets hopefully broaden.
And to go along with a rising market- Rising temps in NC-Spring is in the air!

[sd]

Arthur Clark has an excellent article/backtest on applying RSI for trading strong momentum candidates. The backtest covered 20 years of all the S&P 500 stocks-
Apparently that was a member's only link-
stockcharts has a lot of content from contributers , stockchartsTV, and even a basic membership is economical .

[ira85]

I didn't get the link above to work. But by searching for terms I found some good info about RSI. This looks useful
www.ccmg.com/relative-strength-valued-investment-factor/

In the horse race you have a link to some data on SCTR scores and horse race picks. At first glance SCTR sounds similar to RSI. Is that right? Is one more useful than the other? I'm not expecting you to do a lot of research on this. If I'm too lazy to research it, there's no reason you should work harder than me. Just off the top of you head your sense of the pros and cons of SCTR versus RSI. SCTR looks like it might be proprietary and RSI might be in the public domain. (that's a guess) -ira

Hi Ira,
I will check out the link- thanks for posting it.
I think I made a mistake in posting the link- It's likely a ' member's only' access and so I will edit it out of the prior post.
The study actually concluded that going with high momentum stocks and staying the course over longer periods- proved to be the most profitable approach- Seemed to be a very comprehensive study- I need to read it again a time or two-
This also coincides with Brian Livingston's approach to seeking to be weighted in long term momentum moves.

SCTR ratings- I had to read the Chart School explanation-of SCTR but it also appears to be trying to outweigh longer term outperformance within market groups of the particular stock or ETF.
It's a multi-step weighted ranking system that ranks components within specific groups- Large, mid,small caps, Etfs etc. It's calculation is somewhat complicated and a long article- but I think the goal is to identify the persistent outperformers - with the higher scores, the better historical performers- The thinking there is that momentum and out performance within a group tends to be persistent in many instances- leaders often remain the leaders over long periods of time.
stockcharts.com/school/doku.php?id=chart_school:technical_indicators:sctr

One of the points Arthur Hill made- is that the wording of Above 70 as being "Overbought " and below 30 as being "Oversold" are deceiving to those that interpret that literally-
The over 70 reading just indicates above average momentum, which can continue for many weeks or months- Anyone taking that price is in "oversold" territory as a reason to exit is potentially shortchanging themselves of a longer term run to the upside- Similarly, "Oversold" simply does not mean it's a reason to Buy- Indeed- going above 70 may be a reason to take an entry.

Note that High SCTR ratings don't guarantee the upside will continue- I don't use them specifically- for example- I own a position in the energy sector-VDE with a very miserable low SCTR score of 5.4 and also the Tech sector VGT with a Sctr score 93.8 based on YTD. While VGT returned 24.5% ytd, VDE was the next best Vanguard performer in the portfolio with 19.46% gain ytd
(Presently I do not have positions in everything shown in the attached list , and weightings in those positions I presently hold vary)


i.imgur.com/q6962Us.png

Note that the YTD comparison showed that Energy (VDE) was outperforming VGT for a month + and in mid Feb, the momentum shifted- VDE slowed and Tech continued higher. I suspect if they were compared back Feb 1, the SCTR ratings would have been lower for VGT and higher for VDE because the SCTR takes more weighting on the longer term trends.
i.imgur.com/nWjHyMd.png

VDE is still slightly outperforming SPY based on a Jan 1 comp:

i.imgur.com/uxfh2ck.png
Thanks, SD

[ira85]

Interesting. I've never tried to use RSI or SCTR. I ought to try using them for my horse race picks. I've certainly needed help.

Thanks!