2007--The Year in Review

Year in Review--Part One

Last January I listed six goals for my trading during 2007. Even though the last few months have thrown me for a loop, I still managed to accomplish most of my goals. Here they are:

Beat the S&P 500—The S&P 500 made around 4.24% this year. With a half day of trading left, I think I beat it—by 9 times.

Beat the Stock Superstars Portfolio—I’ve already mentioned that Stock Superstars made (6.1%) this year.

Beat Charles Kirk's Yearly Return—Charles hasn’t reported the return he earned this year, but by tracking the trades he made on his members only site, I think I’ve got him beat.

Make 20% on Portfolio—Doubled it at 40.38%.

Match or beat last year's return (62.44%)—Nope. I think I could have made this goal if I had managed my account better and if I had used some market monitors to let me know when to back off of trading. I was up 52.62% on October 31^st and if I had gotten out there and waited until things turned around a bit, I think I could have beat this goal.

Control my emotional trading and stick with the program—Much better this year, but I still have a long way to go. I learned to manage my risk much better this year and that helped a lot with the emotions of trading. I still allowed too many outside influences to affect my trading.

Another Goal Met . . .

Another goal I had this year was to beat the Stock Superstars service which is a investing newsletter provided (for a fee) by The American Association of Individual Investors (AAII).

I followed the newsletter's advice in 2004 as a new trader and learned a lot about investing and fundamental stock picking.

The service is run by some very smart and seasoned investors who are very transparent in their strategies and performance (a rare combination).

So far this year, the service has made 6.8%--another confirmation that this was a very difficult year to be an investor.

One goal met . . .

The Prudent Speculator is one of the stock newsletters that I've followed for a few years. They have a very "Buffetish" take on the market and do very well year to year holding their stocks an average of five years. I've often considered using their recommendations for my long term portfolio.

Usually, they post their performance on a weekly basis, but since September it has been a lot more sporadic. I haven't seen an explanation, but I assume it might be because things haven't gone very well this year.

Here is their last performance chart that was posted nearly a month ago.

One of my goals this year was to beat the Prudent Speculator's return this year. It appears that I've done that and that is swell. In the next couple of weeks, I plan to detail all of my goals for this year and discuss what I accomplished and what I didn't.

I can't believe how worked up I got over the couple of trades I made today. That's probably not a good sign. I think I felt weird because most of my indicators say that it is still best to stay out of this market.

Overall, this was a good day. I have an option on GLDN that I've had for a month and haven't been able to sell at the price I want. For some reason it blew up today. The stock went up 3% and the option lost 53%! If there is anybody out there that knows why let me know. I'm an idiot.

Dipping my toe . . .

I just can't stay out any more. I've taken a couple positions in MS and XLF. I think the financials have bottomed out and could have a good pop in the next couple of weeks. We'll see. I'm not risking too much and this may help with my constant chomping at the bit. If they go south even more, it will teach me to be more patient.

'Tis the Season

This is me and my swell family. I'm the geek with the stupid Mennonite beard.

I'm very thankful for such a terrific family. My wife is not only beautiful (what was she thinking?), but she is also incredibly smart (again, what was she thinking?). She has been very supportive when I've risked our hard-earned money on my untested stock market ideas.

My kids are great and a lot of fun. They have put up with their parents' crazy careers without complaint.

This is a great time of year to appreciate all we have in our lives. We are spoiled as Americans, and it is easy to lose sight of that and become cynical and unappreciative. I encourage all 3 of you StockPunk readers to take some time out this season to appreciate all that you have!

Not much going on

There's not much happening today in the market. Looks like another good day to get some stuff done.

Short-term indicators aren't looking so hot anymore. Moving averages are flat and there's no real reason to get excited about buying stock.

Lately, I've found Stockbee's Market Monitor to be a very good indicator of market direction. I like using it in tandem with some of my indicators. I think it's a lot better than flying blind and I think I've become a much better trader since I started tracking the overall health of the market.

Not very convincing

Even though we ended up positive for the day, it was still pretty ugly out there. With six real trading days left in the year, I'll need a lot of convincing to get back in and days like this aren't gonna do it.

With a break from school and work next week, I hope to get into the pile of books I've accumulated over the last couple of months. This is also a great time of year to figure out how to give back.

Gap at the open

It looks like the market is going to gap up this morning. I'm still planning to stay out. That gap up in November (blue arrow) still bothers me because the market often "fills the gap" meaning it drops back down and covers the hole that the gap created.

There is the possibility that the bears are done and the Christmas rally will finally take hold. Things are very oversold right now, but there still doesn't seem to be a real catalyst to move the market higher for more than a few days. Until there is, I'm going to watch from afar.

The Nastiness Continues

It is a rare sensation for me to be watching the market from the sidelines. Since 2003, this is the longest period of time that I've avoided trading or investing. I'll have to say that as things continue to decline, it feels pretty good to not have those helpless feelings of "Why am I losing money with everybody else?"

Now that 1460 has been broken through in the S&P 500, I'm not very confident that we won't see more selling through the end of the year. I'm becoming much more secure in my decision to be happy with my returns and regroup after Christmas.

Week In Review 12-14-07

That was one mess of a week and I'm glad I got out on Monday. I'd have to say it was one of the better decisions I've made in the last six months. For the week the portfolio was up 6.5%.

I was a bit shaky on my decision to stay in cash because there were a few indicators that I thought showed that we could be at the beginning of a bull run for a bit. Those indicators have all turned the other direction, so I'll be staying in cash next week as well. That's swell. I'll have to admit on days like today I kind of delight in the market sucking.

That was ugly

I hope none of you bought anything this morning. It looked tempting, but that rally wasn't real. There's a lot of manipulation out there. This isn't a good time to be taking chances with your money. Remember, CASH is a position.

Fortunately for folks still in the market, support held (barely). You still have time to get out of this silliness and enjoy the holiday.

So THAT's what happened

I had trouble figuring out what drove the insane rally this morning after a bizarre day yesterday. Apparently the Fed can't let the market have a few bad hours without getting involved AGAIN.

Frankly, I don't like it. Fed decisions shouldn't control the market like they have recently. Earnings haven't been all that great. Inflation is a real issue for the everyday consumer (I'm sure the big boys on Wall Street have no idea how much a gallon of milk costs). Lower home values are taxing consumers. There really isn't a reason out there right now for things to move higher.

I just don't think the Fed can continue to prop this market up. Things have to return to equilibrium and I'm afraid that just might be the February lows. It's tempting to jump in when things are this wild. But I think it's a fools game right now until things get straightened out.

I highly recommend that you read Charles Kirk's blog every couple of hours. I think he is doing an excellent job of painting a realistic picture of what is happening right now. He may have been a bit conservative throughout the year, but when you're sitting on a million large you can do whatever the flip you want in my opinion.

Keeping my eye on the chart

I'm watching a couple of points on the S&P 500. Watch the support at 1460 (solid blue line). I think that's a key number and if we break through it, we might plummet down to the February low of 1377 (red dotted line).

The most recent correction didn't give us that capitulation that we saw in August (blue arrow) and I have a feeling (after seeing the reaction to the rate cut) that we could see some really rough times if we break through that support.

Look at how goofy this market has been since July. Compare it to the nice smooth ride up from March to June. This thing has been a real pain in the buttocks and if we break though 1460 look out below!

Must . . . Resist . . . Temptation

I got that "trader's twinge" in my stomach this morning as the radio was announcing that the pre-market was trading "sharply higher". Should I get back in? Will the bulls take control today? Am I missing out?

Emotions can destroy a good trading plan. I made a good decision on Monday and it would be silly of me to get greedy and jump back in based on the pre-market reaction. OK, I've talked myself into holding tight.

Holy crud! I was right!

It doesn't happen very often, but I called this one right. But, I didn't expect that kind of reaction to a 25 basis point cut. I thought that was already priced into the market. Where do we go from here? Charles Kirk includes several interesting quotes about what happened today on his site.

So far so good

It's nice to see some profit taking ahead of the Fed announcement. It feels very good to be on the sidelines while I watch this action. I expect a jump once the announcement comes, but if it is just a .25 % cut, I think things will pull back to where they were at the open by tomorrow evening. Who knows, but it doesn't really matter when I've got nothing invested.

Time to get some homework completed . . . I hate homework.

Second guessing--Another best day ever

Today I scored my best day ever dollar-wise--I made nearly 5%. The last time that happened was November 6th. November 7th was my worst day ever. My plan today was to sell into strength since this is something I've never done and I've always regretted not doing so as I watched my gains slip away.

But as I look over things tonight I wonder if I made the right decision. I was expecting the Fed's decision to be more of a let down, but folks are starting to talk about a 50 basis point cut or more. My indicators are telling me that we're headed out of a bottom. Stockbee's Market Monitor is in rally mode. Phil Grande is saying "go to cash, now". Kirk went to cash today too. Cramer says expect a 1,000 point rally by Christmas for the DOW. I'm so confused.

Stupid Jim Cramer

No sooner had I sold off all of my positions then I seen this on the Kirk Report. Whatever Cramer. The good thing is if he is right (and I doubt that he is or that the fed will cut rates .50 percent) then I'll just jump back in for a quick ride up through Christmas. Look at me, it hasn't even been a few hours and I'm whining about getting back in. I'm pathetic.

Taking my gains

One of the biggest problems I have is hanging on too long and refusing to sell when the market is showing a lot of strength. I'm trying to change that today by selling into this Pre-Fed rally. I really don't think we can continue rolling on these rate cuts. People will look to earnings when the smoke clears and I'm guessing we'll see a decline again. That's just my guess, but some of the other bloggers I respect seem to see things that way too.

I had hoped to end the year up 30% and I just topped 40% today. I'm happy with that and during this busy time of year (in school, work and at home), I'd like to focus on the more important stuff the rest of the year. The challenging thing for me will be to sit idly if the market storms forward. We'll see how this "experiment" works.

This Week with StockPunk

Looks like this will be a "sit tight" week. Not much changing on the screens, so I'm planning on letting things ride until something dramatic happens. Hope everybody does swell this week!

Week in Review -- December 7th, 2007

This was a pretty good week for me financially. The portfolio was up over 4% and it looks like were at the beginning of a tradable rally into Christmas. My indicators for putting money back in have just gone positive, but I had a feeling last week that things would hang together and we'd be able to make some money going into Christmas. Sometimes my feelings are right.

My plan is to stay fully invested through the holidays and re-evaluate come the first week in January. I'm looking forward to posting my first year-in-review at the end of the month. So far my screens are kicking my tail so it should be pretty interesting when put this last year in perspective.

Is it safe?

It looks like it may be time to go long again. The averages seem to have bottomed out and money is moving back into the market.

This may be short-lived, but with the end of the year window dressing going on, I'm hoping to make up some of my November losses. I'm hoping we see a September-like rally. That would be swell.

More important than the stupid stock market

The last two days have kept me away from trading and they've been awful. I can't discuss what happened yesterday, but today is national news. I grew up two miles from the Westroads Mall in Omaha where 8 innocent people lost their lives today. We have a friend who works at Von Maur and she was there today. She left the store to visit a nearby store when the shootings started. Thankfully, she called us to let us know she was OK.

So right now the market is not the most important thing on my mind. This is a good time for me to be thankful for a healthy and safe family.

Back to the Basics

These last couple of months I've allowed myself to get a bit off track. I subscribed to the Wall Street Journal, I started listening to stock radio shows, and I began participating in a trading forum online. I think I began to get overly confident in the "knowledge" I was gaining and I tried to cram all of that information into a new trading strategy.

I started using some market indicators that supposedly told me when to be aggressive and when to run to the sidelines, and I began using a spreadsheet that calculated the best time to get out of a stock to lock in gains or to avoid big losses. I went to all cash for a couple of weeks and avoided trading (boy that was hard).

With all of that fantastic use of my brilliant trading mind, I managed to loose 25% of my YTD returns by the end of November. When I compared that to my Zweig Relative Strength top 5 screen I was a bit shocked and more than a bit angry at myself. If I would have ignored everything that was going on and just plugged money into that screen, I would have MADE 4% during the month of November. That's a 29% difference between my returns and the returns of an unemotional and completely computer-selected screen.

So, I think that it would be wise of me to quit trying to outsmart what I know works. It's never a bad idea to continue to learn new things and to try to improve on a system that works. But it was obviously a bad idea for me to charge ahead with unproven methods. I got a little cocky and I made a lot of money. The market has a way of humbling me EVERY TIME I get over-confident.

Judging from my e-mails, I wasn't the only one to get humbled in the last couple of months. I hope that we all use this as an opportunity to get back to what we know works and get back to the basic ideas that make money in the market.

Today I made 1.01%. Back to the basics.

This Week with StockPunk 12-3-2007

This should be an interesting week. We'll see if the bulls can remain in control this week. I'm putting more money to work as I'm hoping to catch some of the Christmas rally that typically happens this time of year.

I really did a terrible job trading when things went sour last month. I hope to get back to my trading basics this month and make up for some of my losses.