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Tuesday, March 29, 2011

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Well, judging the result of my predictive incursion in stocks discussed late November gives me an 8 right- 9 wrong ratio and I was thinking for a while what happened to the ones that I mentioned and follow more regularly. Let's see.

EZPW up70% High now.

ACAS up 70% High for second time now.

BSX up 30%. 10% below it's high now. I thought that could go up and I thought too that by August 26 have made the bottom, will see. It's low was 5 days later but with all the market (so just luck because everything went up).

RNWK I abandoned it in Oct for being a non performing, resumed the move up but doesn't count.Wrong.

MBI Mentioned that made a top for a while very accurately. Stop following it closely and kept a few calls just to remember it, but done with it.

EK Even though I saw that will be in deep trouble at the risk of getting killed I consider it wrong because it surprised me the scope of the drop in such a short time so, if I get surprise means that I'm wrong because is one that I followed.

ZQK When made the double top in Nov I stopped paying attention so even though the previous climb was a credit I didn't see that still have more potential to go up that was a failure. So it was a wash.

SOMX I got long dated calls in Jan. The chance to start moving up in January didn't materialized and the strong one should be around April 13 (that's why I got long term calls) I consider it wrong unless by mid April starts moving decisively up in that case I will consider it only a positive because the January window is not even close in it's importance to April. Will see.

SPPI Even though it moved up 50% in 45 days I considered that it had potential.I Got long dated calls before Christmas the stock is up +/- 35% and my expectation is an important but really important run in the coming months with chances of a correction in early April, now I will hedge with puts for a while. Will see if performs as expected.

NVTL Mentioned late Sep-early Oct that I like it but out of discipline I wouldn't touch it until Nov to see what happen. Move 40% more until Oct 25th, made the lower high Nov 2nd, and went down retracing 100% of the up move and some more. Right both times.

ITMN I like it but like NVTL I wouldn't touch it probably out of cowardice Lol. Went up 230% from that moment.

In this case the results are 8 positives 3 negatives.
Counting NVTL twice. The move up that kept going for almost another more month and the reversal from Nov until now.

Of course the samples are not the same size and still very small but I'm not being exhaustive here, just informative.

So what the hell this tells me?

That if I know the stocks(meaning a lot of time studying them)I become familiar with them and my prediction performance in this case hit around 70% right- 30% wrong, a tad less pathetic than in the Nov group wich is 47% right- 53% wrong.

I need to get consistently and average of 80-85% with several more samples as a way to develop confidence that is not merely chance. Sound severe but well, you don't know me...unbearable.

Okay so the point to make is; know your shit reallly reallly good.
It doesn't have to be too cute of a method, hey I choose Astrology so anything will be fine as long as it provides confidence, something that stands the test of time, something that you can rely on.

Narcissism it only clouds our judgement making us believe that we have something when in reality we got nothing but only hope.
So develop something that you start feeling comfortable with and go back in history and test it. History is the only laboratory that we have to test ideas. And don't expect that what happened in the past is going to happen again as a whole block now because it never does.

Know your stuff and test it, and test it, and test it until some guiding principle start making itself evident as time progresses with some clarity.

Check the quality of I-Man's calls, his last one was spectacular, (kudos I-dude) but the guy put lots of work, there's no shortcuts in this, just hard work to maybe have a chance.

And all this hard work helps temper us and start recognizing lesson #2:

Don't get emotional in the markets. If someone is emotional doesn't have any relevant knowledge. And emotions are not a strategy but just lack of work.

Well I'm working with a new batch of cookies probably will have them almost wrappped next week.

Wolfie good luck! and glad you put yourself on the line is a good way to control (at least for me) narcissism, because what is said stays in the open.

Good luck everybody.

Dan

53 comments:

  1. Sound pieces of advice here, from my POV. Then as always, thanks Dan for the post, and for the good words.

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  2. Morning all! Food inflation kept in tinier bags....

    http://www.nytimes.com/2011/03/29/business/29shrink.html?_r=1&hp

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  3. The beginning of the bursting of the professional sports bubble? This one definitely caught my eye this morning. No more publicly financed stadiums, means no more easy money gravy train for professional sports.....

    http://www.calculatedriskblog.com/2011/03/sports-stadium-bonds-in-trouble.html

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  4. By the way, great post, Dan!

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  5. Great refresher post for me to get started back, Dastro! I looked at all the charts, and to let you know I kept track of Barry Ritholz's and Peter Green's recommendations in Minyanville, and they were batting around 50%. So you're definitely up there.

    "You'll read it in the news". The news is bad. Meltdown in Japan, polluting the ocean and air tto China and Korea (even got to the US, I heard). I hear nothing can be done to stop it now. Middle East in flames, and the Arabs are backing down. I guess even they fear Quad Daffy.

    Everything's coming up Roses. I don't understand the market, but I've slept 10 hours and am ready for a turnaround Tuesday to re-enter. Looking at AAPL, in an upchannel.

    Too bad I left all my positions. That APOL short would have made my day.

    And, the other good news is pretty soon you'll be able to buy property in downtown Tokyo. I presume a lot will be on the market.

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  6. @Rock,

    Welcome back.

    @Dan,

    Thanks for the post.

    @WS,

    Good call.

    "FED's comments boost dollar". marketwatch.com

    Fed's moving back to "normalized" monetary policy. So risk off.

    ICan

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  7. OK, folks, look out. It looks like UUP has broken out of its down channel which it started around Feb 4. Stochs are on the rise.

    You don't suppose that means yet another flight to quality do you? Greece downgraded yet again. but GLD iseems to be foundering, down since I left and now the 5-day relative strength is almost -2% compared to the S&P. Doesn't add up to a flight to quality.

    Maybe I was awake too much over the last week, and I can't get it yet.

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  8. Thanks, ICan. You have no idea how good it is to be back.

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  9. Cobras's intraday comments - lot of charts!


    Busy day for me. Be back later


    ICan

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  10. Dan - Great post, love getting your updates.

    Went up 230% from that moment

    D'oh!

    Wow, you're shooting for 80% accuracy, good on you! I know exactly what you mean when you say you want to be sure, I like higher than normal percentages for accuracy as well, not one to be happy with a 60/40.

    Narcissism it only clouds our judgment making us believe that we have something when in reality we got nothing but only hope.

    Couldn't agree more.

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  11. Rock you're back!! We missed the hell out of you buddy :-)

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  12. Man, that Case Shiller report is brutal:

    The 10-City Composite was down 2.0% and the 20-City Composite fell 3.1% from their January 2010 levels. San Diego and Washington D.C. were the only two markets to record positive year-over-year changes. However, San Diego was up a scant 0.1%,

    A double-dip'll do ya!

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  13. Thanks, Thor.

    Good to see my last week's post made it. I was wondering.

    I've always dreamed of having an "up 230%".

    My 2, 3, 5% wins look so pitiful, in comparison.

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  14. Rock - I hear ya, I console myself by remembering that on the other side of that 230% profit is a pretty big loss. I'm definitely happier with 2 or 5% when it comes to my risk appetite! Two years on educating myself on the markets and investments and I still have the vast majority of my holdings in bonds and CD's! I'm 39 going on 69 I guess :-)

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  15. Thor, bonds are ok but I would stay away from CD's. Much easier just to download music. :>)

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  16. Dan, I love your posts, and your attitude!

    You are absolutely right, it takes hard work, familiarity, and hard work.

    I cant imagine having the time to do price work on more than one market, so your results are spectacular depending on how you view it.


    Gann said that "Fear of the market is the beginning of wisdom."

    I-Man is afraid of the market, and that is why the I works so hard.

    There's also a great deal of risk management wisdom in that quote.

    Focus on what you stand to lose, before you even think about what you may win. If you're on the right side of the tape, the gains will come.

    I think its human nature to expect that your winnings will be huge, and your losses nonexistent.

    The Market seems to have other ideas most of the time.

    :)

    GL, All.

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  17. Viva compounding!

    Small gains over time with good risk management will make ya rich, beeatch!

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  18. I-Man - Oh yes indeed, especially when your principle is not a small amount. That's the way a lot of folks end up with a good deal of wealth, they save, invest wisely, and are frugal.

    Greg - Hah, I'd probably do better buying and selling music than I would in a CD!

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  19. When I pay all my debts, and start stacking a nest egg, it will all be in CDs.

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  20. Dan – If you count, strike outs, foul balls and walks as good things, then I am batting 1000. Of course if they are counted against me, then I am well below 100.

    Your post this morning was excellent, I am not an “emotional” guy, I try and make decisions based on the facts, but being emotionally tied to the market has been my biggest downfall and perhaps one of the harder lessons to learn.

    A few years back I worked for a company that matched my 401k, so I put 5% of my paycheck in and they matched that 5%. Although I got a 5% smaller pay check, in theory I was actually getting a 5% raise.

    Then I sat and watched as it went from a goodly sum to very little. The feeling of having no control and trusting in others “Who knew what they were doing” (Along with a few other factors) helped me to realize – Heck I can loose my hard earned money, just as easily as the “Pro’s”

    It takes a lot of work and studying of stocks, figuring out the timing and of course some luck, to be good at making market calls and at your rate, your hard work and study is paying off. Heck I would like to see 50% by the end of the year.

    But it is all about learning and more importantly learning a trading style that works for the individual.

    Your (And of course all the others) posts have helped me begin to get a feel for a style that hopefully in a couple more years, pays.

    Thanks for your post.

    Mutt

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  21. Rock - 5% is a good rate of return.

    Last week I made 0.00092%

    But I did not loose and that my friend is a lesson I learned from you.

    Mutt

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  22. @ICan:
    Did you see that Adam and Eve pattern on the USD over on Cobra?

    Classic! I can't wait to see the results.

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  23. I-Man - Frustrating for me to a certain extent as well. I have a very very small appetite for loss. I don't know if that's something a person can move beyond? Or train yourself to have better control over, or if it's best to just go with what comes naturally to a person.

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  24. Being able to take small losses is one of the most important things you can learn.

    Its when folks cant admit they are wrong that problems arise.

    I tend to be wrong about 5 times a day on average, so its nothing new for me to take a small loss.

    The key once you can do that, is to try and make those losses even smaller, and immediately go into "defense mode" whenever a trade goes against you.

    I think human instinct is to "hope you're not wrong" when the market tells you you're wrong, instead of just taking the cut and getting out.

    Something I read from Paul Tudor Jones a while back that really stuck with me was:

    "I'd rather be out wishing I was in, than in wishing I was out."

    I apply this same philosophy to taking gains in winning trades. I always protect gains with stops. I'd rather get clipped out with a profit, and look for a reentry with gains in hand, then sit and watch my gains retrace to evaporation.

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  25. @Mutt

    I'm very happy for you. Makes my night.

    Opportunities are easier to come by than losses are to make up.

    Although, today, I didn't have much of an opportunity. But there's always tomorrow.

    Actually, look at my favorite short X. It is in a very very tight up-channel. I think that if the dollar does explode, as Cobra's site hints, that my favorite short X will fall below the support at 52.50 and head down to 42-43.

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  26. @I-Man,re Paul Tudor Jones' quote:"I'd rather be out wishing I was in, than in wishing I was out."

    Priceless! :D

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  27. I take it you know the feeling...

    Man, it sucks.

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  28. Welcome back Rock buddy.

    Lots of food for thought today, both in post and comment sections. Looks like one of the best "trading rules" discussions ever, here on AT.

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  29. I-Man - that makes sense. I definitely have no problems admitting I'm wrong, it's more about that I hate having gone into something with a certain amount of money, and watching that number go down instead of up. Right now, I'm far more comfortable watching my investments go up a little bit each month, and then a little more every year because of the compounding, than I am with trading individual stocks or ETF's and risking a larger loss in hopes of a larger profit.
    For me, I'll take the smaller, less risky gains.

    I just had to re-do my 2009 taxes (left off my schedule 1d!) and my total loss from trading that year was $4465.91. I went into day trading that year knowing that I might lose all of it - that was the risk I was prepared to take. Not a huge amount of money I know, but adding up all those losses, and seeing the final number, was almost physically painful to me! :-/

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  30. Losing money is definitely physically painful for I-Man, I feel ya.

    Physically, emotionally, psychologically...

    Losing money just flat out sucks ass.

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  31. @I-Man,12:23PM : yeah, I've had my dose of frustration too already.

    As is probably the case for many fellows here, I have messed up trades in nearly any possible ways: selling my long near a short term bottom, covering my short near a top, getting out just before the break I was targeting started BIG time, or missing the entry by a few points ..

    But hey, maybe that's also what makes it fun.

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  32. If things are too easy for you, you will get soft.

    Thats how I like to look at it.

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  33. re Losses: I'm okay with taking losses, as long as it's in tune with my risk management "plan". ie several small losses, for a (possibly smaller) number of big wins = profits.

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  34. Note that, while I try to keep in mind risk management, I don't actually really "plan" it (yet),eg not keeping a "balance sheet style" spreadsheet of my trades,actual and planned.

    Nevetheless, I try to monitor my ratios losses/wins and remain aware of when things may start to go wrong.

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  35. @I-Man,12:51PM:"If things are too easy for you, you will get soft."

    Exactly. Not only that, but maybe it would get boring pretty quickly ?

    I remember a line from a Buddhist book, something like "You should be glad if you have bad karma. It means you have lots of room for improvement."

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  36. Forgot to mention - lowest price on gas on my way in to work in the morning was $4.15. The most I remember paying back in 2008 was $4.75 - getting close.

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  37. @Thor:
    Can you imagine XOM's profits this quarter? It's relative strength is below the market, and I find that an opportunity.

    I remember the last time gas went to the roof, XOM had the most unbelievable quarter and even the government investigated the profits. We'll see if their operations are more efficient this time.

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  38. Rock - Betcha it's either at, or very close to, their all time high for profits.

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  39. hah, and of course the government won't look too deeply into how they arrive at such colossal profits.

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  40. Interesting take on housing's long term prospects.

    http://finance.fortune.cnn.com/2011/03/29/why-house-prices-will-keep-falling/

    Unless Ben Bernanke sets off a big inflation wave, house prices are doomed to keep falling for years.

    Tuesday's release of the monthly Case-Shiller U.S. house price index shows a 3.1% year-over-year decline for January. The index of 20 big U.S. cities fell to 140, just a point and change above its spring 2009 low in the wake of the financial meltdown.

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  41. Ah - maybe not,

    But this analysis overlooks a stubborn fact Shiller has spent years documenting: that house prices over time tend to rise more or less in step with inflation. And while inflation fears are certainly rising right now, actual inflation as measured by the government remains quite low.

    You'd think the author would recognize the folly of trying to base his entire argument on past results. We just went through a decade with an imaginary housing market, it's pointless to assume that we're simply going to revert to one particular data point.

    Nothing on immigration, nothing on demographics, or household formation, just that one data point - housing follows inflation.

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  42. @Thor
    I just went through my REITs charts.

    Every one was in a down channel except for WRE (I think that's Washington DC), and IRET (go figure, how can the index be up and all the reits down?) AEC AVB, EQR, HCP (hospitals). That's 6 out of 30 in an upchannel. Not good.

    Also, TOL is headed down. But DHI is slightly north of hroizontal.

    Not surprising we see CNN report on the falling prices.

    However, rent prices are up. I just turned one of my houses and it's rent went up 10%. Nice.

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  43. http://seekingalpha.com/currents/post/72136?source=feed

    Short reits, anyone?

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  44. @Rock:Short reits, anyone?

    Can't help on that one. I don't have much knowledge of sector picking. However, your mention of most REITs stocks being in a downtrend hints at weakness, for sure.

    On that sector topic, ">BR shared his views on March 22nd:

    Sectors that look especially ugly are retail and consumer discretionary.

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  45. @Ican 9:48 AM: Thanks. However, we've not broken either way, yet. Battle still raging out there.

    Well, good evening all. Was a highly interesting discussion today, thks.

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  46. Dave Rosenberg on Canadian housing bubble:

    There is none. Demand is coming from new immigrants. So BOC gov. should relax and not raise rates(Dave is long gold/silver).

    http://www.theglobeandmail.com/globe-investor/markets/market-blog

    Funny comments on this story - "Who kidnapped David Rosenberg...".

    ICan

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  47. @Rock,

    Check out IEZ

    http://www.tradermike.net


    ICan

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  48. ALso from the Globe and Mail:

    "Streetwise:No,the market isn't over-bought".

    Index/current 1-year Fwd P/E projection/ 5year historical P/E

    S&P 500/13.6/13.6

    Energy/13.1/11.3

    Materials/13.9/14.9

    Financials/12.5/12.4

    Etc.

    ICan

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  49. From the NY Times:

    "Commedy of Errors in Kabul as Karzai Aide is Arrested, Then Released".

    "President Hamid Karzai ordered the release of a prominent aide two hours after his arrest in corruption charges and and before press conference detailing the charges against him".

    That's how business is done in the East.

    ICan

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