Covering High return Balanced Investing Strategies To
Make Money In Up Or Down Markets
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
December 20, 2015
Charles Moskowitz Discussion
Week 51 was a loser…we had only 2 trades, both 50% Down rule closeouts with a loss of $600. YTD was reduced to $6,996 and only one open position in CCOI calls using $510.
The market this year has been extremely difficult with more than 2 dozen hedge funds closed down. Part of the problem is that 67% of the earnings gains in the S&P500 were accomplished through “financial engineering” rather than actual gains in topline growth. I have been talking about this issue in this space for almost two years and finally it has come home to roost. Unfortunately for me, I’ve been early on this trend and missed a good deal of upside by being overly cautious. It’s really too bad that the language of Wall Street sounds so good while spelling trouble. The best example is the use of the phrase “increased productivity.” It sounds good, but really it translates into “we fired a whole bunch of people so we could squeeze out some more profits without growth.”
Last week we discussed the S&P500 coming into support around 1990 and we briefly touched 1993 before rallying to 2076 and then coming all the way back down to close on the lows on Friday @ 2005, the low close of the week. I expect some follow thru tomorrow and may go back onto the long side for an oversold bounce. As you can see in the Market Lab below, the bearish numbers are well over and the bullish numbers are well under historic norms.
One of the technical issue I’d like to point out is that the daily range of the DJIA and S&P and the Transports have expanded. This gives us what some chartists call an expanded “index of tendency.” All that means is that bigger ranges beget bigger moves. The cyclical indication for a Santa Claus rally could make it to the upside, but a break of underlying support can push use into an unexpectedly steep decline.
This is really not the week to make that judgment with only 3 ½ days of trading…..but I would be very wary of a low volume bounce. As I said above, I think there is an oversold bounce coming, but that is just a trading opportunity. I certainly wouldn’t stay long expecting follow thru.
Last but not least is the issue of tax selling and January effect trades. I feel that the biggest losing trades are indisputably in energy. I’ve been buying APC, which is one of the better energy stocks and writing short term options against the position to lower costs. This is a group that no one wants to show on their position lists at year end. It’s a very “crowded” trade on the short side and any buying will push it higher. This would be my first choice for January effect trades this coming year…..CAM.
New Options Trades
( 1 ) Buy 4 SPY January 200 Calls @ $ 2.05 ( Please use a stop at $ 1.45 )
( 2 ) Buy 8 APC January 47.50 Calls @ $ 0.95 ( Use 50% down -rule for stop loss )
All trades were based on your participation in the texting service to receive updates. Previous closed out trades not listed here may be seen in previous market letters.
New trades $ 10,000 account...In Texting we have a limited amount of words. In the interest of brevity: OPTIONS ONLY: 1 January , 2 February. The Quantity and Strike Price for each trade is specific. Trading is hypothetical. We may trade weekly options and they are noted: SPY 1/25 147 for SPY Jan 25th 147 Calls or Puts.For questions please call 702 650 3000. Closed out positions are found in previous letters dating back four years: Dec 14th; 7th; Nov30th; 23rd; 16th; 9th; 2nd; Oct 26th;19th;12th; 5th;Sept th;21st;14th;7th;Aug 31st; 24th; 17th;10th etc
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