ContrarianJeff's Account Talk

[tsptalk]

Interesting that dozens and dozens of folks on the tracker have moved to the F or G in the past few days, and hardly anyone is jumping into stocks. The volume of penny stocks being traded is near a record low. Newsletters are not recommending their subscribers to buy into this market. These and other indicators show that people are not believing in this rally--despite the fact that the SP500 is near multi-year highs and technically looks healthy.

Are you some kind of a contrarian, Jeff?

 

[nasa1974]

. I kept thinking "August usually sucks for the market", which made me hold my cash. But I eventually reminded myself to trade the chart and stick to my strategy.

Last year August was ghastly. But if I remember right (I will be corrected if wrong) Tom posted a chart that showed August does very well in an election year. But with that said we haven't had this kind of "sell the News" market in a long time. So how will August do??? Who knows!!! We just need to get lucky.

 

[tsptalk]

Last year August was ghastly. But if I remember right (I will be corrected if wrong) Tom posted a chart that showed August does very well in an election year.

 

[nasa1974]

Thanks Tom. :cheesy:

 

[ContrarianJeff]

I wonder why August in election years is positive? Interesting. I noticed that the average gain is around 2.5% for the month--and we're getting near there already.

I'll be interested to see what the reaction will be to the imminent pullback in the markets. Will there be a rush to buy in to this market on a pullback? Or will folks sitting in cash stay in cash expecting a greater drop? That may be the tell. There are some mixed signals as far as sentiment. I just read an article by Mark Hulbert that the newsletters he tracks have increased their bullishness. This isn't a big concern right now because a healthy market actually needs sentiment to become more bullish to maintain its rise, but it's usually better if it's a slow increase in the number of bulls. When huge crowds jump on the train quickly, it's usually time to jump off.

 

[tsptalk]

I wonder why August in election years is positive? Interesting. I noticed that the average gain is around 2.5% for the month--and we're getting near there already.

Maybe because of the presidential campaign conventions? Each party promises the moon in the various speeches, and the stock market is usually first to react. Just a hunch.

 

[ContrarianJeff]

A few days ago, I moved half of my account to G. So now I am 50% I-fund and 50% G-fund. The markets were/are seriously overbought on a number of short-term and intermediate-term indicators (including Bollinger bands and Stock/Bond ratio), the dollar was/is oversold and looked like it was due for a bounce, insider selling has picked up quickly, and some sentiment indicators are showing excessive bullishness. Also, when stocks hit annual highs after a Fed announcement, there is usually a pause that lasts for a short time. It seemed like a good time to reduce risk. Those are the reasons I moved money out of the I fund. But I decided to keep half in the I fund because the momentum of this market is incredibly strong, and there are some sentiment indicators that show stubborn bearishness in the face of this monster rally. It would not surprise me if we continue to grind higher.

Also, and this is where psychology comes into my trading, I've learned that my pride is an account killer. I know myself and my pride well enough to understand that if I cash out and the market continues to rise, I will often stubbornly wait for the market to drop back to my exit point. I hate buying in at a price that is higher than where I sold. The problem with that philosophy is that I have often missed out on huge rallies just because of my ego and because I refused to admit that I was wrong. When I keep some of my account in equities and the market rises, I can console myself with the fact that at least I'm not totally missing out on a rally.

 

[Boghie]

Also, and this is where psychology comes into my trading, I've learned that my pride is an account killer. I know myself and my pride well enough to understand that if I cash out and the market continues to rise, I will often stubbornly wait for the market to drop back to my exit point. I hate buying in at a price that is higher than where I sold. The problem with that philosophy is that I have often missed out on huge rallies just because of my ego and because I refused to admit that I was wrong. When I keep some of my account in equities and the market rises, I can console myself with the fact that at least I'm not totally missing out on a rally.

With you there. Like your thoughts.

I think it is the best basis of an investment strategy is to form a strategy on knowledge of self.

Personally, I seem to have a good feeling for tops but have a difficult time at entry points. In 2011 that reared its ugly head. I had started to believe my own press clippings and initiated more rapid trading than I should. I don't know much. That was proven. And, to invest well one must be patient. I learned about myself much as you have. I need to be patient and slow. And, I have to eat and enjoy pride as much as you do.

Plus, I learned I am not a market timer. I have a feel so I use that feel. I check what others are doing and kinda data mine us all. But all that stuff is used for maybe 20% - 30% of my holdings now. The rest are core holdings.

I like your barbell holdings. You have some cash to buy low but you also have assets that can make your account move. I'm hoping my 27/27/25/13/8 allocation gives me the same opportunity.

Thank you for your ideas...

 

[ContrarianJeff]

My latest "for what it's worth" post. I moved from 50% I-fund/50% G-fund to 80% G-fund/20% C-fund. I'm cutting back my exposure to stocks--especially international stocks--for a few reasons. One, the dollar looks stronger to me both technically and sentiment-wise. The dollar chart has turned up slightly and there are a couple of big gaps above that look like they want to be filled. QE3 hasn't crushed the dollar like some predicted. Yet sentiment toward the buck is still bearish. If the dollar moves up, that will not bode well for equities, in particular the I-fund.

Two, the VIX looks like it may begin a move up. It's made a "higher low" in mid-September, and volatility in October usually increases for some unknown reason. Although October is usually positive for stocks, some of the biggest market declines have happened from the time period of late September through October. If the VIX begins to move north, we could see a pretty big drop in stocks.

Three, I don't like the way the market is acting intraday--up big at the beginning of sessions and then dropping as the day progresses. This is not a big negative, but still a little disconcerting.

Four, sentiment is not crazy bullish by any means, but it appears a little too happy and complacent to me (e.g., lots and lots of folks on the tracker have moved out of cash/bonds and moved into stocks). It seems that fewer investors are scared and that they expect the next leg higher to be a given. As a contrarian, that gives me pause.

I'm keeping 20% in the C-fund because the market is still technically strong. Momentum can keep this thing running higher for a long time. I don't want to bet completely against this kind of momo. If it does keep moving up, I'd like to get at least a small share of those gains.

 

[Boghie]

Nice reasoning...

And, you beat the Sentiment Tracker by a bit. I'm not certain I will move more to the Zero Gain G and I am looking for a correction in the 'F Fund'. Too bad we have no other 'safe' investments, eh. A nice REIT would be helpful. Maybe a commodities play. Oh well. I can handle a 10% correction in my current allocation without crying...

 

[ContrarianJeff]

I moved from 80%-G/20%-C to 100% stocks today with a 40/30/30 split for I/S/C. Not a lot of confidence in this move because the market still looks weak intraday. Up in the beginning of the day and down as the day progresses. Not a good sign. There are other indicators (like insider selling) that are giving warning signs too.

But I want to be in stocks and I figure this is a decent time to re-enter for a few reasons. The AAII bearish sentiment is up again. Also, the dollar and the VIX haven't shot up like I thought they would have. If the buck rolls over, stocks should move higher. Charts are showing that many of the major averages are touching the lower bollinger band, which may provide support.

Finally, and this is the biggest reason for my currently bullish stance, about four weeks ago, the NYSE 10-day up issues ratio hit a one year high at the same time that the SP500 hit a one year high. This has been a pretty good long-term indicator that further gains are in store. We'll see.

 

[Mcqlives]

I moved from 80%-G/20%-C to 100% stocks today with a 40/30/30 split for I/S/C. Not a lot of confidence in this move because the market still looks weak intraday. Up in the beginning of the day and down as the day progresses. Not a good sign. There are other indicators (like insider selling) that are giving warning signs too.

But I want to be in stocks and I figure this is a decent time to re-enter for a few reasons. The AAII bearish sentiment is up again. Also, the dollar and the VIX haven't shot up like I thought they would have. If the buck rolls over, stocks should move higher. Charts are showing that many of the major averages are touching the lower bollinger band, which may provide support.

Finally, and this is the biggest reason for my currently bullish stance, about four weeks ago, the NYSE 10-day up issues ratio hit a one year high at the same time that the SP500 hit a one year high. This has been a pretty good long-term indicator that further gains are in store. We'll see.

you are really living up to your name with that move.

 

[JTH]

I moved from 80%-G/20%-C to 100% stocks today with a 40/30/30 split for I/S/C. Not a lot of confidence in this move because the market still looks weak intraday. Up in the beginning of the day and down as the day progresses. Not a good sign. There are other indicators (like insider selling) that are giving warning signs too.

But I want to be in stocks and I figure this is a decent time to re-enter for a few reasons. The AAII bearish sentiment is up again. Also, the dollar and the VIX haven't shot up like I thought they would have. If the buck rolls over, stocks should move higher. Charts are showing that many of the major averages are touching the lower bollinger band, which may provide support.

Finally, and this is the biggest reason for my currently bullish stance, about four weeks ago, the NYSE 10-day up issues ratio hit a one year high at the same time that the SP500 hit a one year high. This has been a pretty good long-term indicator that further gains are in store. We'll see.

Thanks, I love it when someone actually knows why they are moving

 

[ContrarianJeff]

The dollar continues to drop. UUP, the dollar etf, is down 12 cents to 21.64. If UUP breaks below 21.57, its mid-September low, it looks like the buck will keep falling until finding support in the range of 21.00 to 21.20. The UUP's MACD is rolling over, so it looks like this is a significant possibility. If that happens, stocks could ramp up.

The NYSE cumulative Advance-Decline line also continues to show strength, nearing its highs. This is another bullish sign as the SP500 is nearing a multi-year high.

 

[ContrarianJeff]

I'm moving from 100% equities to 70% G-fund. The markets are getting a little overheated and due for a pullback. It also looks like the buck wants to bounce up for a time (which isn't good for stocks). However, I'm still expecting a new multi-year high for the SP500 within the next few months.

 

[Boghie]

I'm moving from 100% equities to 70% G-fund. The markets are getting a little overheated and due for a pullback. It also looks like the buck wants to bounce up for a time (which isn't good for stocks). However, I'm still expecting a new multi-year high for the SP500 within the next few months.

That's not what I wanted to here. Just moved money into equities. Was thinking about going in the opposite direction. Oh well. I'll sit and see...

 

[polarbear]

Jeff, I think you have the right idea. Maybe just out completely. Coolhand and Uptrend agree, so do Daneric (Daneric's Elliott waves blogspot), more or less Tony Caldaro, and the following four commentators on safehaven.com: Andre Gratian, Chris Vermeulen, George Krum, and "TheWaveTrading". Add to that the concerns Tom (our own Tom Crowley) expressed in his Weekly Wrap-up and Monday commentary.

 

[ContrarianJeff]

Boghie, I have not been particularly accurate in my predictions this year, so I wouldn't sweat it. I can't seem to get a good handle on when the market is turning. It's frustrating. Your guess is as good as mine. Also, the reason I left 30% in equities is that the bullish case is still pretty good. MACD just turned upward, so momentum looks decent. And the Sentiment Survey on this site seems to be getting more accurate, and it says buy right now. To top it off, Mark Hulbert of Marketwatch says that insider activity is very bullish.

Polarbear, I know this was not your intent, but I have to confess that you are making me doubt my bearish stance. One of the ironic results of being a contrarian is the realization that when lots of folks agree with you about the direction of the market, you are probably wrong. I'm still hoping for a relatively shallow pullback, which will provide an opportunity to go long.

 

[Boghie]

Contrarian,

Looks like you are getting all contrarian on me

Just moved mostly out of equities. I like my return and don't want squabbling politicians to play with it. Looks like we are in a trading range till the old lawyers get hit in the head with a cash flow two-by-four...

 

[ContrarianJeff]

Hey Boghie--Honestly, I don't know what I'm doing. It feels like we are due for a pullback, but I thought that on Monday and we're up since then. My risk tolerance is high (I'm in my early 40's), so I would rather be in the market and risk a drop than be out of the market and not get those gains. I think you're exactly right though--we are in a trading range. I like to watch the Dow Jones Transportation Average, and that thing just keeps bouncing between 4900 and 5200. Weird.