Saturday January 31, 2015

$SPY, $STUDY, January ended with a very strong overall performance in the Alpha One Model portfolio which is up 30.5% YTD.  The major portion of this gain comes from the Options trading which is undertaken as the portfolio holdings are trimmed back by the Asset Allocation model.  Options trading contributed $15,220.82 (25.4%).  However, the holdings have appreciated very nicely contributing an unrealized net gain of $3,052.91 (5%) on the beginning balance of $60,000.00.

Please note that the Alpha Master List has been refreshed and the new list posted on today’s blog along with the new Watch List.  Monday we will be closing $AGN, $ALGN, $CBG, $PZZA, and $TMO all of which are no longer on the master list.  These positions will be replaced from the watch list as the week moves forward.

Last week was truly an eventful one for investors and traders alike, finishing in a volatile fashion Friday, reflecting indecision among investors amid mixed signals from the market. Earnings were mixed as many were affected by a stronger dollar. The Fed’s latest statement released on Wednesday sounded a little hawkish, but the Fed Chair’s comment on Thursday was dovish. Consumer sentiment and confidence readings were strong but durable goods orders, as well as Q4 GDP (2.6%) were weaker than expected.

While the weak finish to January has left the market with a downbeat note going forward it is not all that bad at this juncture. After coming off the record highs reached at the end of the last year, the S&P 500 has pretty much gone sideways. Although short term volatility has been high and the risk of a correction has increased, the longer term uptrend is not broken. Of the 227 companies that have reported earnings to date for the quarter, 80% have reported actual EPS above the mean EPS estimate. Barring an unusually high number of companies reporting earnings below expectations in the second half of the earnings season, it appears likely the S&P 500 will report year-over-year growth in earnings for the quarter. Thus, the fourth quarter will likely mark the 8th consecutive quarter of year-over-year earnings growth for the index, after a year-over-year decline in Q3 2012 (-1.0%).

With no QE from the Fed, it is a stock picker’s market and so far this earnings season has demonstrated just that. Be very careful in this roller coaster market. Pullbacks will provide opportunities for stocks which have received positive reactions to their earnings.

Friday January 30, 2015

$SPY, $STUDY, Today’s trade SPY150320P201 Entered @$5.54, Exited @ $6.18, I had to stay in the trade longer than I normal today but by patiently waiting for alert signal triggered at 15:21 PM the trade was closed profitably.  

The alert level was determined when the trade was originally entered using the spreadsheet below. 

Wednesday January 28, 2015

$SPY, $STUDY, Today’s trade SPY150320P205 entered @$5.28  exited @$6.07…

Tuesday January 27, 2015

$SPY, $STUDY, Today’s trade SPY130520C203 entered @$4.63 exited @$5.05.  I was hesitant to trade the opening decline without a current Sell signal.  There was a Sell signal generated at 4:00 PM 1/16/15 but not repeated in today’s premarket.  So I practiced what I preach and was patient taking advantage of the mid-day reversal for a brief trade on the Calls.  Not sure what will happen into the Close but I am out for the day.

Saturday January 24, 2015

$SPY, $STUDY, The Alpha One Model continues to perform as designed, up in excess of $13m YTD from the starting portfolio balance of $60m.  The lion share of the gain has come from the hedging activities which use intraday trading of Options to offset market swings which may impact the portfolio holdings.  The model holdings are now at Long 52% with Cash of 48% which is slightly lower than the recently raised recommendations generated by the Asset Allocation model which are at 75% Long and 25% Cash.  There are several names on the current Watch list that I will be watching in the coming week, albeit with a conservative eye.

The technical condition of the market improved last week as evidenced by the Alpha Market Model summary.  The OTC returned to a Buy Status but all four members still carry a neutral opinion. The first two weeks of the earnings season have been lackluster with only the OTC carrying a positive YTD return. The overall technical indicators are telling us that near term downside is likely to be limited. For the next week it is up to the tech companies to brighten the earnings picture – MSFT on Monday, AAPL and AMGN on Tuesday, FB on Wednesday, and AMZN and GOOGL on Thursday. Overall, the short term momentum favors the bulls. However, we are in earnings season, as we know it is up to earnings to determine each stock’s fate.

Last week the scenario set up by the technical indicators was slipping into bearish territory but at the end of the current week the scenario has reversed course finishing mostly bullish territory.  Confirming the change of direction was a new all-time high by the NYSE Advance/Decline line and an expansion of the NYSE new 52-week highs vs. new 52-week lows. This week’s jump was expected as the market has rallied on every instance of quantitative easing. However, the outlook is still cloudy looking out over the next week or two. While low interest rates continue to keep a floor under the market, earnings season has been mixed and the fall in oil related stocks is weighing on the broader market.

If the market stalls over the coming week or two it could still be susceptible to a further pullback based on high valuations due to the cuts in fourth quarter earnings. As was mentioned last week, volatility should continue going forward. The next FOMC meeting convenes on Tuesday and Fed chairperson Janet Yellen will give an update on our economy. If the Fed hints at a bump in rates (unlikely), investors could use the change in language on the economy as an excuse to take profits.

Thursday January 22, 2015

$SPY, $STUDY, In both my intraday trading and the long term investing I am a true advocate of systemic (Rules Based) investing.  The following article from “TraderFeed” is both on topic and timely, I hope you benefit from it.

Best Practices in Trading: Using Rules to Achieve Consistency of Performance

Thursday January 22, 2015

$SPY, $STUDY, AM trade SPY150320C24 Entered @ $4.78 exited @ $5.25.  Today since I have a noon commitment the exit was calculated using range forecast for the SPY which is set up in the lower left corner of the picture below.  Had I been available to watch the trade the more aggressive upside of $5.38 would have been my target, however if I am away from my desk conservative is the game plan.

Tuesday January 20, 2015

$SPY, $STUDY, AM trades Closed AAPL @ $107.61 on Opinion Downgrade and Option Trade SPY150320P202 entered @$5.77  exited @$6.45. 

Tuesday January 20, 2015

Worth reading...
http://traderfeed.blogspot.com/2015/01/best-practices-in-trading-accepting.html?m=1

Saturday January 17, 2015

$SPY, $STUDY, Alpha One Model had a profitable week albeit on the back of Options trading, but in general the equity holdings and the portfolio process are working as detailed in the Alpha Process document.  The system continues to downgrade names on technical weakness and they are then closed out.  The exposure is limited to approximately the level of the recommended allocation levels which remain at 62.5% Long and 37.5% Cash.  While the portfolio is at little less than that level currently, we may add either $CAVM or $CTSH from the Watch list in the coming week, should the major’s react positively to the forth coming earnings releases.  The $AAPL position will be closed this coming Tuesday as the Opinion was downgraded Friday.

As crude oil prices continued to rise steadily throughout Friday’s session, stocks followed. There are some indications of positive divergence developing between the price levels of the major indexes and their technical indicators. With oil prices stabilizing, we are likely to see higher prices in the near term while volatility retreats.

However, the markets will remain volatile going into the shortened trading week and the probable direction for the major averages over the next few weeks is most likely lower. We have a busy earnings report week coming up, so remain nimble as it is going to be a stock picker’s market.

Friday January 16, 2015

$SPY, $STUDY,  AM Trade SPY 150320C200  Enter @ $5.56, Exit @ $6.15..

Thursday January 15, 2015

$SPY, $STUDY, Closed $MA on an Opinion Downgrade today and the AM Trade was SPY150320P202, in at $6.84 exited at $7.41.

Today’s weak finish suggests that this down leg isn’t over. The S&P is now looking at 1988, yesterday’s low, for support, followed by 1972, its mid-December low. More bank earnings are due out on Friday. They include: $GS, $PNC and $STI.

Wednesday January 14, 2015

$SPY, $STUDY, In addition to the Option trade posted earlier today the $MU Micron Technology position was closed as well on an opinion downgrade.

Stocks left something for both bulls and bears at the end of the day. Bulls probably breathed a sigh of relief as all major indexes finished above their 100-day moving averages. Bears would probably say that the near term trend is still down. One thing which everyone can agree on is that volatility is likely to remain high.  Earnings season just got started and has several weeks to go and the correlation between stocks prices and crude oil prices is still high. 

Wednesday January 14, 2015

$SPY, $STUDY, AM trade SPY 150320P200  Entered @ $6.51  Exited @ $6.85. 

Tuesday January 13, 2015

$SPY, $STUDY  Today’s trade SPY150320P204  in @ $5.50  exit @ $6.07

Saturday January 10, 2015

Some might say that the stock market is showing us that 2015 is no 2014, but it is way too early to draw that conclusion.  Particularly since January 2014 was a down month for all four of the major indexes.  Perhaps what should be garnered from this first week of trading is that volatility remains the driver and what we need to be focused on is our portfolio discipline, stock picking technique and our hedging activities.

At the end of this first full week of 2015, all four major indexes are in the red for the year and are caring Sell signals. With few exceptions the tracking indicators of the major indexes are negative and heading lower, suggesting more pullbacks likely in the near term. It won’t be surprising to volatility as measured by the VIX and VXN remaining relatively high.  As the month unfolds it will be up to earnings to drive the direction of the markets, thankfully. 

Currently the portfolio allocation is closely aligned with the 75% Long and 25% Cash recommendation of the model.

The Alpha One Model had a robust start to the year up 13.85% through Friday,  albeit the lion share of the gain is from Options trading in the hedging activities.  However it is important to note that the stocks were up 1.83% for the year and that is significantly better than the markets. Eleven of the current fourteen holdings have positive returns thus far this year.  

FactSet StreetAccount Summary - USWeekly Recap: Dow (0.54%), S&P (0.65%), Nasdaq (0.48%), Russell (1.09%)

What will be the ActualEarnings Growth Rate for Q4?

Friday January 9, 2015

$SPY, $STUDY, AM trade SPY150220P204 in @ $3.70  out @$4.23.

Earlier this week I received an inquiry from a new follower asking about the exit strategy which is employed when I am day trading Options. 

An exit is undertaken when either of two variables is triggered; it is very simplistic and straight forward.  The position is closed if 1) the profit target is reached or 2) there is a reversal in the underlying which is indicated by a directional arrow on the SPY chart. (The directional arrows on the charts are not driven by the same algorithms.  Separate metrics are considered in analyzing the underlying and the contract being traded.)

The spreadsheet below is the method used to establish the profit targets and is driven by the estimated trading range for the day.  

Thursday January 8, 2015

$SPY, $STUDY, AM trade SPY150220C208  in at $2.17 exit at $2.56.

Thursday January 8, 2015

Will be closing today $ALXN (Alexion Pharmaceuticals, Inc) and $BIDU (Baidu Inc (ADR)) on Opinion Downgrade, replacing with $STZ (Constellation Brands, Inc.)  and $ALGN (Align Technology, Inc.). 

Yesterdays market was a decent oversold bounce, but still indecisive. With the exception of the DJIA, all other major indexes did not make it back up to the prior day’s highs. Stocks can bounce some more but watch for signs of rip selling. The “patient” Fed worked to calm December’s Bears, I am wondering what will turn this January pullback around. Perhaps Friday’s jobs report will do the job. But the real driving force will be the earnings. Expect the major markets to remain volatile until earnings season starts in about a week.

Wednesday January 7, 2015

$SPY, $STUDY,  AM trade today SPY150220C201 in at $5.32 out at $5.05 my error.  

Tuesday January 6, 2015

$SPY, $STUDY, Closed AM trade SPY150220P203 in at $4.95 out at $5.69 

Monday January 5, 2015

If there was one thing that the stock market tried to tell us on this first day of the first full week of 2015, it would probably be that 2015 will be no 2014, as the S&P 500 is now down four sessions in a row, the first 4-day losing streak since December 2013. 

The magnitude of today’s decline probably caught many investors by surprise. It will take a few sessions for investors to digest today’s loss and to rethink their plan for 2015. There is quite a lot of data due out in the next few days which will help gauge the strength of our economy.

The Market Model for the four major indexes went to a Sell mode with a strong Overbought reading.  The recommended Asset Allocation reading also declined to 62.5% Long and 37.5% Cash.  We will be liquidating the $FL (Foot Locker) position tomorrow as the Opinion was downgraded to Neutral.  

Keep a close eye on the Breadth indicators for the next several days as today was the third consecutive day where the S & P 500 closed with a strong Distribution rating.  It was not but a few days ago when this major concluded a run of six consecutive days of Distribution and that had not occurred since prior to 2000.  Expect volatility to remain relatively high until earnings can give us a better picture in several weeks. For the S&P 500, watch for support in the 2000-2003 area.

Monday January 5, 2015

$SPY,  $STUDY   Traded this AM the SPY150220P205 in at 4.83 and out at 5.45. http://alphavl.blogspot.com/