TB; RE:" range bound Chat & Chew "
>I'm not unhappy about the current situation, although I'm now a cautious Bull. A trading range is probably around 4-6%. OEX 600-636 fits this hypothesis very neatly. Nevertheless, in my system a trading range is tough, since it tells you to sell when you should be buying and vice versa.
-- another long, rambling Gin&Tonic infused message follows (^_^) --
Focusing on the major market (rather than TechStox) You and I have been through two S&P trading ranges together, July-December '97 and April-June '98. July-October '98 I consider a bearish market rather than a "range"... though my charts say that the entire April to October '98 period was a bearish market for most stox, the ones you and I play with did not tank until July.
When there ain't no momentum, as happens in a range-bound S&P, we could say that: F/A can only hope to reveal those stocks that will decay the least when the range is over and done with; All T/A does is tell us that things are going up and down - the index is really drifting, rather than capital gaining.
You and I both got pretty good at riding those waves of trading-range sentiment during last April-October. So much so (for me, at least) that I found myself needlessly exiting and re-entering during the bullish swing from October to the present; a lot of over-work, really: eg., Jurgen and I both went long DELL @ ~45, but I was out @ 65 plus short CALL premium (the apparent range-top).
During trading-ranges we have done lots of things:
- like nothing; a good portfolio will be back where it was when the upward mo stopped, whenever the mo picks up again. Sometimes the Techs recover faster, other times the BigBoyz do, so I suppose that's why we try to hold diamonds and clubs along with the hearts and spades: long-term growth is a no-trump contract, oui ?
- "cover" the portfolio (ie., "short CALLs") and gain the decay in time value generated by the lack of mo; ie., "tax" considerations rather than...
- ...going into time deposits (ie., "long cash") @ 4~5% money market or 8.5% APR higher-yield monthly thingys for the duration and go play in the garden ( whatever :-)
- trade the waves up and down... Has the effect of focusing one deeper and deeper into the tiny ticks and tocks of the market, and narrowing or "de-diversifying" your watch list - perhaps even distilling it down to some index - because your "portfolio" becomes a position or some positions at most.
And so on. Perhaps from my recent ramblings you have noticed that I am now chatting a lot more about the mo (^_^) and that's because I tend to sell good stocks too soon, when the mo is still in the market. This works great for me as a trader - it's really a very conservative way to do things and encourages me to cut losers quicker, too. I'm a happy trader now but, I have become dis-satisfied with myself as an investor (a complete turn of affairs since 1995).
When I look at the dumb strategy of buying a mix of "good" stox, ie., stocks that grow fast when the market has mo - blindly, every quarter, the results simply astound me, Berney: anywhere from 1.5 to 2x the S&P. I expect my 'investements' in these very same stox to do better than income averaging the winners, and they didn't in 1998.
Of course, you really gotta try to catch a dip if you're doing LEAPS - blind buying LEAPS ain't gonna put some tyro in the same class as a Jurgen - but the trick is (not just timing the dip, but) picking underlying vehicles that will go with the market mo in the first place. Leveraging the index will double its gain, but leveraging a go-mo underlying within that index, on a dip, as Jurgen tends to do will return much, much more.
So I spent the last few months doing two things: First, I tried to identify stocks / indices that "go with the mo". When the OEX (or NDX) has got mo, what goes? Second, I tried to set up some kind of mo measure and tune this for each chart to give me some kind of visual cue when my gut is saying yes|no mo.
I felt the need for this kind of crutch, at least for now, because my forte has always been sentiment rather than extent, turning points rather than trends, so to speak...
...probably because I started off as a TechStock dip investor many years ago in San Francisco (and made beaucoup $$$ by doing so, until INTC broke all the rules and collapsed on me). I no longer "hold stocks for x years for tax purposes" - man, was that a wake-up call! " Hello, your dip got dipped ! "
In the good old days I could buy TechStocks on dips and ride them (of course I never had to sell them back then ;-) the same way JT rides his LEAPS today. Like I said, I haven't been doing that with my investments during 1998 (a tough year, I grant you but still) and I want to get that good JuJu back. I can't toss around a CORE like mine the same way I trade and play in the garden with MadameGonzo ;-)
anyhoo, the way you've been trading lately, you ain't gonna have no problemo in a trading range, dude, if that's the hand we get dealt next: TraderBerney has arrived.
-Steve |
