I normally separate the futures and stocks reviews, but given we’re down to the lowest number of stock positions since building up a complete portfolio around this time last year, I figured I’d take a look at everything together for a complete overview. That, and I’m on vacation, so I’m in reflective mood.
We trend-followers normally get teased about some of our entries at highs, or exits at points where the trend could potentially resume in our favor, but some of them have been made to look very good all of a sudden. Especially in equities. Our exit in the NASDAQ long from 2 1/2 weeks ago is a prime example:-
A big decline in high-growth momentum stocks that hurts the index, you say? No problem. If it breaches our stop we’ll exit. It doesn’t matter whether it gets there on good news, bad news, or no news. If it goes, we go. By the time the serious damage was done we were long gone. Imagine what this could turn into. Our exit is already a distant memory. What incredible foresight did this timely exit require? None whatsoever. Just a process with some rules. It’s early days, but we may have just seen something similar in the S&P this week and it feels good to be out:-
These kind of exits really seem to upset our detractors. Michael Samhan picked up on this and wrote a great piece on the subject hitting the nail on the head. As we honor our stops the perma-bears or top pickers pipe up “Wait, I thought you were bullish, are you bearish now?” They want to see that we are enduring pain on the way down to make them feel better about the suffering they endured waiting for the market to turn. Our response only frustrates them further; “Well, I was long if that’s what you mean, but my trailing stop got hit so now I’m out.”
And if we get a new buy signal we’ll go long again. If the sell-off turns into a prolonged decline and gives us a short signal we’ll enter short. See the difference? We’re not bullish, we’re not bearish, we don’t have a view. We are mercenaries that join whichever side is winning. Our loyalty is to neither side, only to our process.
We currently have four remaining futures positions:- LONG 30yr, Gold, Corn, Live Cattle.
Long 30yr ($ZB_F) 2/3 +$2,406.25 per contract
I’ve been mercilessly teasing the ‘rising rate environment’ meme but there’s no question this will go down as oone of those classic cases where the overwhelming consensus thought only one scenario was possible only to see the opposite occur against all supposed logic and reasoning. Rates are not going up. For more research on this subject see Japan. For the less adventurous just continue to follow price, it will tell you what’s really happening better than any afraid-of-being-different-and-wrong-wall-street-consensus-narrative will.
Long Gold ($GC_F) 3/13 -$4,940.00 per contract
I wouldn’t want to be accused of only showing my winners so here’s a big fat loser for you, although as I’ve pointed out before, this is perfectly in line with our typical performance on gold since the blog started over a year ago given we’ve had 5 signals prior to this (2 wins, 3 losses), with an average win of $12,155 per contract, and an average loss of $5,730 per contract. Although the numbers may appear big, bear in mind also we are showing the big contract here, not the minis. After an initial follow-through higher after our entry, gold came reeling back and got very close to taking out our initial stop before bouncing back and reclaiming its MA’s this week.
Long Corn ($ZC_F) 3/5 +$737.50 per contract
Corn was unchanged on the week, after appearing to reject an attempt at higher prices midweek with an intraday reversal. For now it remains above the 20EMA and the short and intermediate-term uptrend remains intact.
Long Live Cattle ($LE_F) 3/28 -$1,000.00 per contract
Despite what looks like a very labored attempt to maintain higher levels, Live Cattle did manage to marginally retake the the 50-day MA this week and keep the longer-term uptrend intact.
Let’s now move on to our stock positions.
Here’s the summary of positions as at Friday’s close taken from our performance tab:-
SUMMARY AS OF 4/11/14
OPEN POSITIONS:- Total 14: 10 winners, 4 losers. Average win +11.4%, average loss -2.7%.
CLOSED POSITIONS:- Total 121: 60 winners, 61 losers. Average win +19.2%, average loss -6.9%.
ALL POSITIONS SINCE INCEPTION (1/27/13):-
Total 135: 70 winners, 65 losers (52% win). The average win is +18.1%, the average loss -6.7%.
Notice, despite the carnage people will tell you has taken place in the market, our numbers have remained very consistent over the last 6-9 months, with a strike rate around 50% and average win 2-3 times average loss. That was further underlined with our exits this week in $UA +72.27%, $EBAY -3.98%, $ACT +55.73%, $AAP +11.24%, $PGTI -3.91%, $TYC -2.68%, and also in the two exits signaled for Monday in $BKW +19.0%, and $BRCM -3.0%.
Those additional exits will leave us with just 12 open positions as follows:-
Long $PKG 3/25/13 +61.7% (incl 6/11 div $0.40, 9/10 div $0.40, 12/18 div $0.40, 3/12 div $0.40)
$PKG has somehow held on again, finishing Friday nestled right inbetween its ATR and price stop levels. For what it’s worth it also coincided with a 20/50 MA cross and it will be a major surprise if we’re still writing about this position as being open this time next week. Either way, it’s been a great example of what we do; following a trend for over a year no matter what the market was doing, maintaining a safe enough distance to keep us in during pullbacks, with a position size small enough to make it tolerable and big enough to make the payoff worthwhile.
Long $NVR 1/30 +3.1%
$NVR remains below its 50-day but hasn’t yet resumed lower. Our stop remains around the 1083 level.
Long $VMC 1/30 +1.8% (incl 2/20 div $0.05)
$VMC has weakened but still sits above our price support along with an ATR trail and ascending trendline.
Long $MSFT 2/3 +4.7% (incl 2/17 div $0.28)
$MSFT broke below its 20EMA and embarked on a brief test of its most recent breakout level. The rising 50-day is now coming into view and it will take a break of that along with a lower low to trigger an exit for us.
Long $RAD 2/14 +17.7%
A great week in $RAD, and another addition to the ‘Why I use closing stops” hymn book, twice coming back from below our stop on an intraday basis only to close above it before catapulting higher. That is why. We’ve now tweaked that stop slightly higher to Monday’s closing level and will keep our distance until a new base emerges.
Long $MOS 3/6 -5.8%
Our biggest open loser, we marked the recent high with our entry, and despite the weakness $MOS had been holding above its MA’s until slicing through its 50-day Friday. Our stop is just below here at $46.45.
Long $CMS 3/17 +2.1%
All three of our utilities (see also $SRE, $WEC below) are similarly positioned with small gains and longer-term uptrends intact. This week it was noticeable they not only outperformed during market weakness but also held their ground on the rallies suggesting they’re more than just a safe-haven play and are showing true leadership.
Long $SRE 3/17 +1.1% (incl 3/25 div $0.66)
Long $WEC 3/17 +3.3%
Long $IBM 3/26 +0.1%
$IBM took little part in last year’s market rally and remains indifferent to its movement lower now, having consolidated its recent breakout and resuming its short-term uptrend ahead of earnings next week.
Long $AA 3/28 -1.1%
We had a post-earnings ‘pop-and-flop’ move from $AA this week but there’s little doubting the trend here.
Long $XCO 4/3 -0.9%
$XCO had a deep pullback on Friday to take us back into negative territory but there’s little damage done to the intermediate-term action here. Time will tell but this still very much looks like a major bottom has formed.