Ouch

Not a good day for me. I was up .50% until this afternoon and then everything went south (yeah, I looked a couple of times). I still own KRSL and it tanked big time--over 8% so that didn't help matters much. Overall the portfolio lost 1.88%.

I Screen, You Screen, Kirk Screens

Charles Kirk has just released his "Stock Screening Machine" for members. Yet another reason to divvy up some cash and get over to his members only website. I've had a look, and the whole concept looks very promising.

As a trader, I really think screening stocks is the only way to stay ahead of the game. There is no possible way to go through 8,000 stocks, look over the numbers, do the calculations, and come up with a watch list. I wouldn't know how to do that without a computer anyway.

What is cool is that the folks who screen stocks are really on the cutting edge of a new way to look at the market. Just a few years ago, stock screening was virtually impossible. The amount of data alone was too much for a computer to handle. It would have taken hours if not days to download the data (which wasn't available anyway). It would have taken hours to crunch the numbers (my laptop does it in less than 15 seconds). And it would have cost way too much to trade on an ongoing basis (thank you discount brokers).

Computers and the internet give guys like me a tremendous advantage over folks who traded even just a few years ago. Take advantage of the tools that are out there. You'll be glad you did.

Not much is changing for me this week. I'm all in right now, and I'm keeping what I have for another week.

Week in Review 4-27-06

I'd say it was a good week. The portfolio made 3.8% this week. I was able to stay unemotional throughout the week and I really benefited from staying away from all the chatter. My friend Sean attempted to drag me back in, but I resisted. It was nearly 4:30 today when I remembered to look and see how the day went (down .62%).

I surprised myself with how much extra time I have when I'm not tethered to the trading board. I avoided wrestling with the daily swings and held on to my original purchases without the aid of stops.

Month In Review--April 2007

The month of April wasn't too shabby, but with the gains of the market as a whole, I should have expected to do OK. The portfolio made 7.02% this month. That was OK compared to my different screening approaches. Here are the results of four approaches I'm monitoring right now. Each combines the Zweig screen with a "qualifier".

• Zacks #1 stocks--4.08%
• The 5 highest in Relative Strength--14.16%
• The 5 highest in ReturnGrades--8.47%
• Zweig alone (buy & hold for the month)--5.95%

The highest Relative Strength stocks tend to perform very well in bull markets like this one. Since October 2006, the Relative Strength Approach is up 73%. The Zacks #1 stocks are up 38.56% for the same period.

I've beat a couple of my yearly goals so far, so I hope things continue. I wanted to make over 20% this year, so if I can hold on to things for the remaining 8 months, I'll be able to check that off. It looks like I'm on my way to another +60% year, but I'm not going to count my chickens just yet. There's at least one guy saying that everything in the whole world is in a bubble right now. I wish I was smart enough to know. I'm just plugging away with what I do know and we'll see how that turns out.

I'm getting spoiled. Yesterday I whined about losing .01%. Today I gained .63% and I'm not satisfied. My dad is happy if he makes that in a YEAR. That may be a good indication that things are getting a bit out of hand and that I need to be a bit more cautious. I'm not sure what being more cautious means since I've sworn off stops.

I hate days like this. The Market is up big-time and I'm not. Fortunately I only looked things over once--a half hour before the market close. I was doing OK then, but I ended up losing .01% at the close.

Screening for Seasonality

A lot of folks see a long term trend toward the summer being a generally awful time to have money in the stock market. In his book Winning on Wall Street, Martin Zweig discusses the power of trading during certain times of the year. Charles Kirk posted an interesting link that discusses the seasonal trends here and here.

Since the Zweig screen is my favorite, I went back to 1998 to see how the screen did during the four summer months and compared it to how it did the final four months of each year. The results weren't as dramatic as I expected but they were interesting. The average return each year during the summer was 3.83%. The average return each year during the fall and winter months was 17.51%.

That's quite a wide margin, but the maxim "Sell in May and Go Away" doesn't seem to apply when you are making nearly 4% each summer. That summer average of 4% includes a nearly 30% loss the summer of 1998, which really skewed the numbers.

So, I haven't been convinced to walk away from the market from now until September. But it is never a bad idea to be more defensive during times of the year when the market is on the weak side.

An comment from last night:

Just curious what your bear market strategy might be. The Zweig screen and Zacks stocks tend to do OK during bears. Would you maintain the same style, get out of the market, or switch to plan B?
Another question would be, how would determine that you're in a bear market?
Obviously, May 2006 looked pretty bear like.

My Answer:
Good question. I'm not smart enough to know where the market is headed. I thought things were looking pretty awful in February and if I would have stayed out for March and April I would have missed out on 15% worth of gains.

You're right about the Zacks and Zweig screens doing OK in struggling markets. You mentioned last May. My portfolio of Zweig and Zacks stocks lost 6.9% from May through July. Not too awful. Higher Relative Strength stocks did slightly poorer losing 10.20%. So if things did start to get sloppy, I would probably avoid some of the more volatile stocks that aren't rated on Zacks.

An OK day. Up .73% thanks to KRSL and HDNG. I made it all day without watching the tape. Yay for me. It felt pretty good to not experience the pangs of constant flux. I'll have to admit that I was tempted at times. But I endured.

I signed up for Barchart's Morning Call newsletter a couple of weeks ago (it's free). I don't know what's going on but I have yet to get the Morning Call in the morning. Usually it comes at dinner time or not at all. I'd like it a lot more if I was able to read it in the morning, but that's just me.

It's probably better that I don't get it anyway. I don't make good decisions when I'm basing them on premarket or after-market chatter.

I signed up for Media Sentiment's newsletter six months ago. It was an interesting concept (and just $10 a month), but I don't read it any more. I'm not good at the whole day trading thing. I'm not good at shorting stocks either. And I'm scared out of my mind when it comes to options. What's the deal with those things anyway?

Maybe someday I'll be a "real" trader and figure those things out. Someday.

A Good Day

Today made up for my miserable week last week. Up 3.07%. I pulled the trigger on KRSL right before it took off this morning. It had a great day on good news. I'm hoping that the euphoria hangs on through the whole week and I don't have to give back too much.

Others are predicting gloom and doom. Bill Fleckenstein at MSN thinks that this market is a repeat of March 2000 and we're just about to take a similar dive. I like being ignorant. I admit I have no idea what's going to happen.

I do know that buying and holding right now is a foolish proposition. The bulls cannot hold out forever (even though I've been impressed with what they've been doing lately). I'm going to take advantage of things as long as I can.

That's what's great about being an individual investor. I can jump in and out like a little mouse with my measly amount of money and nobody knows or cares.

If market crashes today, I'm set up well. I'm 80% in cash. If it has a terrific day, I'll probably be scrambling to buy. If I do buy, then I'm sure the market will have a huge sell-off and I'll lose my shirt. The market knows me like that.

A few folks have told me that they are following my "system". I'm not sure what they're thinking.

• Do I really even have a system?
• I don't even follow the system if I have one.
• Every time I've followed someone else's system, I got burned big time.
• Why would you invest like a guy who whines every day about how he has no idea what he is doing?

The answer: You wouldn't. So don't. You'll be much happier if you come up with your own way of tapping into that insane tornado of cash called the market. There are as many ways to trade and invest as their are people. Let your own personality and style help you decide what is the best method for you.

I write this blog for people like me who love the challenges of the market. Despite what most money managers tell us, there are ways for average folks like us to exploit the inefficiencies of the market. If a goofball like me can make a few bucks, anyone can.

This Week with StockPunk

Everything is staying pretty much the same for me for this week. There are no new stocks on my watch list. I've got a lot of cash to put to work thanks to my inability to jump in last week and my inopportune use of stops.

The weekends are starting to drag as I look forward to Monday. Is that normal?

Too Much Information

On Saturdays I have some time to peruse some other blogs and see what people are talking about. I cannot believe how much information is out there. It seems everybody is doing something different or is focusing on a different aspect of the market. Charles Kirk has a list of his favorite blogs on his website. Clicking on one of those brings up a whole new list of that person's favorite blogs. The amount of information seems infinite.

That's why I enjoy stock screening so much. It takes a LOT of information and weeds out all but the stuff that's most important. I can get a list of my picks for the week in less than 15 minutes! For me, that's the way I want to be spending my time.

I've tried other methods. I've tried to copy the techniques of others (take a look at my 2005 performance to see how that worked out for me). I've tried to buy stocks that made sense to me (ala Peter Lynch) and that worked for the last half of 2003 (but what didn't work the last half of 2003). I've tried to religiously follow the recommendations of a newsletter (The Stock Superstars Report in 2004) and did OK, but I knew I could be more independent and learn more if I managed things on my own.

So that's where I'm at now. I'm trying to avoid all the information that gets me worked up and causes me to make mistakes. I've been too cautious as everybody doom and glooms this rally. I need to avoid much of the information and focus on what works for me.

Pulling out the Stops

I've been trading for nearly four years now and I can only think of a couple of times that stops helped me out. Maybe the bad days overwrite any good days in my memory (I've only been keeping a trading journal for a year), but I think I would remember times that I got my tush saved by a stop. It just doesn't happen enough to justify all the blood, sweat and tears that I put into calculating them.

I know stops are an important part of many traders' toolboxes. But the way I trade doesn't seem to benefit from most of the stops I set.

So from here on out, I'm banning my use of stops. I will ride out the good times and the bad without worrying about support levels, moving averages, or market crashes.

Week in Review 4-20-2007

Finally this week is over. I had a difficult time this week watching the indexes beat me into the ground. I ended up making a measly .39%. Every one of my screens beat me pretty soundly. The worst did 1.52% and the best made 3.92%. Once again, I prove the futility of trying to manage things with my own perceived brilliance.

Mistakes I Made This Week:

I had a few stocks that were no longer passing my screens. After a good day on Monday, I should have sold them. Instead I put 3% trailing stops on all of them hoping to capitalize on further gains. My greed ended up costing all of Monday's gains even as I watched the DOW press higher.

Another stop on AOB was poorly placed. It triggered on Thursday, and the stock recovered.

My fear of KRSL kept me from 6.51% worth of gains. I've also noticed that my stop earlier this month on CPA (see earlier posts about my disappointment with that one) prevented me from gaining 20%.

The more I experience in the market, the more I am convinced that I have very poor predictive abilities. Everybody says that my returns are great. I wonder how much better they would be if I quit sabotaging everything with my constant "refining".

All the chatter says were in for a very positive day today. I'm struggling to resist buying some knee-jerk stocks. I hate missing out on good days, but the best thing for me is to let things go until this weekend. It's so dang hard, though.

Well, things went pretty awfully for me again today. Another day that the DOW beats me. I am officially even for the week after being up a couple of percent. Once again, my use of stops did more damage than good. I sold AOB on a downward spiral at $10.30. It ended up at $10.50. I hate it when I start to hope that a stock tanks because I've already sold it. We'll see what happens tomorrow (yeah, I'll watch it, even though it'll make me mad if it makes money tomorrow).

The bulls can't seem to let go except with the stocks I own.

Things aren't looking good in the premarket. Overseas markets look awful. Fortunately, I'm positioned pretty well for a terrible day as I've stopped out of most of my holdings. It's time to cruise through the rest of the week and regroup during the weekend.

I got beat by the DOW again. AOB was my biggest downer. HDNG recovered after I sold it. I'll be interested to see if my trading expertise beats out the dumb screen. My prediction--it won't.

One of the hardest things for me to do is letting things work themselves out. I always want to help my stock picks with stops, forecasts, premarket chatter and charting, but as I've said in the past, it is rare that my effort helps me make better decisions.

Maybe I need to just accept the fact that I'll never be able to trade unemotionally and develop a plan to minimize the damage my emotions cause. I guess that's kind of what I'm doing now, but I still get ticked off when things don't work out. If anyone has a secret to unemotional trading, please share it.

10:12am CST Things aren't looking too positive for me today. One of the hardest things for me to deal with is the emotions of day to day swings in the market. One day barely makes a difference over a year's time, but for some reason I still am affected by crummy days. I've sold HDNG and NOV. AOB is looking weak too.

Patience is THE BEST quality to have as a trader. EVERY SINGLE TIME I've rushed into or out of a trade, I regret it. But it sure is taking me a long time to learn my lessons.

Well my gut comes through after all. KRSL drops 7.66%. That would have wiped out all of my gains and made me quite unhappy. Sometimes it's best not to mess with those volatile weasels. Of course, tomorrow it'll shoot up 50% and I'll flip out once again. This is my messed up life.

Overall I made .27% on the portfolio. The DOW beat me and that makes me unhappy.

I've got a busy day today (meetings all day) so I won't be able to watch the tape. Usually, that's a very good thing for me. So, I'll keep things the way they are and find out how it turns out at the market close.

Why I suck

I couldn't do it. Even after KRSL dropped at lunch time to under 6% after shooting past 8%, I still wimped out. I could have doubled my return today if I had just gone with the screen and not listened to my gut. I need to really keep track of how many times my gut is wrong because right now I feel like it's about 97.3% of the time.

Still, I shouldn't beat myself up too bad. It was a good day overall. I managed to eek out a little over 1.2% even though I had a lot in cash. Now the issue becomes what do I do tomorrow?

Using Risk Grades with my Screens

I was introduced to the RiskGrades website when I was following the Stock Superstars newsletter that AAII offers. Riskgrades are proprietary calculations that analyze volatility. A grade is given for the general market and you can compare individual stocks or even a portfolio against the risk of the market. You can measure the "Risk Impact" of adding or deleting a particular stock to or from your portfolio.

Another interesting tool that I use is the Return Grade measure which looks at the risk of stock and compares it to the return of the stock over a given period of time. The stock is given a "grade" based on its risk vs its return. I like to plug in my list of stocks from a screen and see what stocks have the highest return grade because it sometimes gives me a different perspective on the screen list.

A couple of years ago (when I was even more dumb than I am now) I followed some portfolios that picked out the top 10 "Return Grade" stocks from the list in my screens. I saw some pretty amazing returns for about 5 months, but month 5 was awful so I assumed that the idea was worthless.

So now I am revisiting the idea because I think it has merit. I started paper trading (I don't take commissions or spreads into account) the concept again in October of 2006. I chose to pick the top 5 "Return Grade" stocks from the Zweig screen (as provided by AAII) and the return over the last 6 months has been 39%.

What's wrong with me

I wanted to buy KRSL this morning and I watched it open at 2% up. So I thought I'd let things shake out a bit before I jumped in. Now it's up 6% and I'm definitely too wimpy to jump in. I'll probably watch it go to 20% and then buy and watch it drop like a brick. That's just what I do.

I don't have real clear signals this week. I've got about 17% in cash so I'm trying to decide best how to use it. KSRL continues to have great Relative Strength and did well last week, but the thing is a volatile little monkey. I'm also watching CRR but I don't know that one too well. HDNG, GRMN and MS have dropped off my Punky list. I'm putting a trailing stop on each. I have no idea how this week is going to pan out.

Yesterday went better than expected. I'm up a little bit for the week. Premarket this morning is struggling so we'll so he how this wimpy week ends up.

4:09 pm CST Week in Review: The week ended up OK. Up 1.04%. I'm glad I didn't take my Dad up on his bet, although my other screens did end up making over 3%. AOB saved me today.

My mistakes this week:

• Selling SPAR on Monday. I should have left a 3% trailing stop on it to allow it to grab a little bit more. It didn't make much, but I think my stop was too tight.
• I also should have bought KRSL. I let my emotions get the best of me because it had a terrible week. My approach is supposed to be non-emotional. KRSL made 8.48% this week which could have boosted my returns.

I sold PCP today at the end of the day. We'll see how good a decision that was next week.

Not much going on today. Things don't look overly positive. Looks like this is a "just wait it out" kind of week.

Kirk said that he is getting his cool new members only stuff up and running this afternoon so that gives me something to do. Yippee!!!

Screening Fun

A couple of stocks I'm interested in (SPAR & NOV) were mentioned on Kirk's screen of the day today. It always makes me giddy when I own a stock that's gathering interest. I get even more giddy when a stock that I own goes up more than 10% in a day. It's been a few months since that has happened. I'm pretty sure it's not going to happen today. . .

Rick writes:

I stumbled across your blog site about your investing experiences and was intrigued by your methods. I have been buying/selling stocks and funds for close to 10 years now. I never really spent much time researching or really trying to make any money. My first round was with DRIP's and although I only made about 5-6% it was fun. I then moved to funds and typically made about 10-12% a year and at the same time I dabbled with stocks. I almost always ended up losing money with stocks.

After a couple years away from stocks, I decided to get back at it. This time around I am taking it serious and I am going to learn what I am doing before buying anything and try to make very educated decisions. I am a member of Zack's Premium, as well as a couple other sites, and I am starting to get more comfortable with the screens and started to build some of my own custom screens. I haven't paid much attention to AAII's site until I came across your blog.

I am interested in why you like the AAII site so much, what do you gain from it that is better/different than what I can get either free from other sites or from Zack's? Any advice you could offer?

Also, thank you for recommending Kirk's report, it is a Gem that I never came across before.

My Reply:

Thanks for sharing some of your experience, Rick. I am always fascinated to see what other people are doing because there are a million ways out there to work the market!

Here's why I like AAII.

1. It's cheap compared to most sites. I was a member of just the site for a few years. At $40 a year, that was a bargain. I learned a bunch each month and I really cut my teeth on AAII's risk management and stock screening.
2. They're honest. Most sites "cook the books" a bit to make themselves look better than they really are. Just look at Hulbert's Financial Digest (I recommend subscribing) and you can see how inflated nearly every newsletter or service makes their returns. I subscribed to AAII's Stock Superstars Report for a couple of years, and I was extremely impressed with how accurately information was reported. The same goes for their stock screens. I've tracked them myself to confirm the numbers (because some of them are hard to believe) and have always found them to be accurate. I haven't found many other stock sites that are like that.
3. The screens have nearly 10 years of data. AAII's stock screening started in 1998 which is years before I got into the game. In their screening area they track performance on a monthly basis. I've been hard pressed to find any other site that provides that type of information.
4. I like other members of AAII. I went to a local meeting of AAII members and I was the youngest guy there (I'm 40). It looked like a room of Warren Buffets. And they asked questions like Warren Buffet. There weren't any "hot shots" that tried to dazzle with their revolutionary techniques.

I've found that Zacks shares many of those attributes. The site has shared an enormous amount of information for free over the years (they just started charging for Premium) and for the most part, they avoid sensationalism.

I'm always looking for alternatives. I have an irrational fear that AAII will close shop and my sources for information will dry up. So I would like to have a couple of backup sources for data eventually.

Not much to report today. Things look generally positive. This should be a "go away until the market close and see what happened" type of day, but I'm sure I'll have to look every once in a while. I like my Yahoo stock ticker Widget that's on my desktop. The quotes are delayed 20 minutes and that helps me not take things too seriously.

3:32 pm CST I got a little cocky at lunch time when I was up 1% for the day. I ended up making .17%. Watching the tape today only got me upset.

An OK day. SPAR sold when I set a stop at last Thursday's close when the stock was up 2%. It ended up bouncing back a little bit but not enough to make me curse my decision. HDNG was up pretty good today. I'm glad I didn't knee-jerk sell it last week.

jt writes:

Hi:

sorry to be such a pest but i would like to ask one more question concerning your process. What software do you use to test and what is your source of data? You also mention testing back from January 2003 (in your recent post about using RS as a filter. Have you ever tested your strategies under different conditions (between 2000-2002 for example?)

My reply:

I use AAII's Stock Investor Pro for both the screening and data. The service provides new numbers each week and I've been real happy with value that AAII provides.

I started following AAII's screens in 2003 (I had no idea what I was doing back then and some would argue that I still don't). My own modifications came just a couple of years ago. I have searched far and wide for a way to backtest my ideas but everything I've come across is too expensive or cumbersome. If anyone out there has some good ideas on backtesting please let me know!

SPAR is the only stock that has disappeared from the screen. It still looks strong though. Cramer gave it a "buy" last week. I'm going to give it a little room to roam and dump it like a bad habit if it goes south on me.

My goal is to make 3% this week. My Dad wanted to bet me that I wouldn't be able to make it. I didn't take the bet.

Kirk has some good stuff going on at his site.

You know you're a little messed up when you don't like three day weekends because the market is closed.

KRSL has shown up on the screen again, but I'm not touching that thing this week. It lost over 13% last week and I'm too scared to make any commitments. That means everyone else should buy it now because it'll probably shoot up 45% this week. You can thank me later.

Ken has discovered some inconsistencies with what I have written and my current stock holdings. Here's what he said:

You mentioned you are holding or have held SPAR, KRSL, PCP, HDNG, TSS. From the data on AAII's website which is as of 2/28, none of those stocks have a number 1 Zacks rank. As a matter of fact, SPAR, KRSL and HDNG have no Zacks rank, N/A. Only one stock in the screen, GRMN, has a number 1 Zacks rank.
Please correct me if I'm wrong, but it seems you're not only buying the Zweig's number one Zacks rank stocks. As a matter of fact, out of the five top long term performing AAII screen, four of them will not have five number 1 Zacks ranked stocks in them. Only the Est Rev Up 5% screen will have at least five but then again that screen plays right into the hands of the Zacks number 1 rank's criteria.

My response:

Thanks for your question, Ken. Here's the deal. As I've mentioned before, I've also been tracking whether or not a stock's relative strength impacts its performance in a screen. I've found that it does (see earlier posts). So I weight the top 5 stocks with the highest relative strength and also consider whether the stocks are rated #1 by Zacks.

I've found that a combination of the two gives me better diversification and allows me to choose more stocks. Last week, for example, only 3 stocks were rated #1: NOV, MS, and GRMN. So I picked a couple of more that were rated high in relative strength.

I won't sell a stock if it slips from #1 to #2 on the Zacks rating unless it is no longer listed on the screen (I'll put a 3% trailing stop on it then). PCP continues to perform and even though it rates a "2" on Zacks it is still listed on the Zweig screen so I'll keep it until it starts weakening.

Screening for Relative Strength

I've been following the relative strength of the stocks that filter into my screens since January of 2003. I've been especially interested in the stocks that shake out as the highest relative strength in my screens on a weekly basis. For the Zweig screen, investing in the highest relative strength stock each week since January 2003 would have resulted in a 5656% compounded return so far. Holy freakin' cow.

It gets better. I hypothesized that if I mechanically invested in the #1 Relative Strength stock only when a MACD chart indicated that the stock was trending upward I could avoid some of the bigger losses. I started tracking what would happen in August of 2004. Less than 3 years later the returns are 4258% so far. Not too shabby.

Last year, I foolishly tried to invest a large part of my portfolio this way (in just one stock) and soon realized that I couldn't take the heat of the daily swings. My worst day zapped me with a 9% loss on my total portfolio. Despite the enormous past returns, I couldn't justify the worry and pain of large losses.

I've got a much more balanced portfolio now and I have taken the advice of traders who are smarter than I am. I no longer risk more than 2% of my portfolio on any one trade (a common rule of thumb with successful traders). The growth has been less exponential, but my sanity is what's important.

Week in Review:

HDNG kept me from having a pretty good week. That's the breaks I guess. Overall I was up .88%. We'll see what new information the three day weekend will bring. Enjoy the break.

Ten years ago, my wife and I lived in Timisoara, Romania. In Eastern Europe, something crazy happens every day. I wish I would have been able to blog like this so the entire world would be able to log on and experience the insanity. Instead I spent hours writing e-mails to different people, which was therapeutic enough.

This is my beautiful wife (how'd she ever get hooked up with me?) and me in front of Ceaucescu's "palace" in Bucharest. It is a reminder of what pure greed and arrogance leads to (he's dead and the palace--which is bigger than the Pentagon-- sits empty). I was humbled by the happiness and joy of the Romanian people despite their lack of wealth. It is good to remember how good we have it here and to make sure we share some of what we have with others near us and around the world.

--Not much going on today. I'm going to try and get some things done today. I have a more than full time job so my trading style suits me very well. It's not a big deal if I can't monitor things all day and, as I've said before, it usually works out better for me when I don't.

10:42 am CST--Well, HDNG is down 14% right now and I'm personally doing OK. No panic attacks or heavy sweating. Last year my portfolio would have been pretty devastated, but I've learned some better ways to manage portfolio risk since then. My overall portfolio is down 1.60% which sucks, but it doesn't freak me out. Last year my portfolio lost 9% in ONE DAY and I thought I was having a heart attack. I've had MANY more days where a stock went up more than 14% in one day (In 2005, I owned FORD which went up 45% in ONE DAY) so I need to keep things in perspective.

I believe my use of bold and color shows my passion.

3:58 pm CST -- My hopes that things would return to normal were dashed at the market close. I was down 1.74% thanks to HDNG--dang it. This is why despite some pretty decent returns, most folks choose not to trade this way. It's not easy to watch a stock drop like that. This is where a trading diary can make a difference. I can go back and remind myself that the rough days (not that this was really rough--more like disappointing) are just a blip.

Things look positive in the premarket chatter. I'll be busy most of the day so I'll have to let things work themselves out without my help. That's a good thing.

Charles Kirk posted an excellent article written by Doug Hirschhorn about risk taking and the fear of failure on his site. Take a look.

3:36 pm CST--I got beat by the DOW today which ticks me off. I was up .90%. Of course the stock that I dumped last week --CPA went up 5.55% today.

Nothing looks too exciting this morning although the premarket looks slightly positive. I don't have any stocks that really stick out so I'm working with a pretty big basket this week.

Overall not a bad day today--up about .60%. I was cursing myself at the open for jumping on things too soon, but it all worked out OK in the end. I still think I'm fooling myself to think I can time things, but I need to develop a more calculated system for when to buy. I've tried using charts, percentage stops and just plain old market buys, but I find it best if I just stick to one method and leave the emotion out of it.

Kirk reported that one of my big winners for last year AXR has really tanked this year. The screens I've run have really done a good job of identifying when a stock is done. I sold AXR at $116.48 and cursed myself as it rose to near $150. But today it is sitting at $75.26 --further proof that I really have no idea what I'm doing.

Here's one of the e-mails I received today:

I've been a Kirk reader for some time and have learned a lot from his stuff. He's what pointed me to your blog, which I found interesting, informative and amusing. Also, your 2006/2007 performance is very impressive.

As a Zacks Elite subscriber, I too use Zacks Rank with my screens. You mentioned you use Zacks with the AAII Zweig screen to boost performance. Now you've convinced me to join AAII, which I knew about but had never joined.

Would you mind sharing with me the details of how you rebalance weekly? Traders have differing methods for rebalancing, and I'm always interested in learning how successful traders manage their trades. Thanks.

My reply--

Thanks for your e-mail and your encouraging comments. I’m glad you found some things amusing. Sometimes I have no idea what I am doing and I think it is good to communicate that. The only thing that I can’t figure out about my performance is why an idiot like me can earn that much when there are much smarter folks out there who struggle to beat the market. It worries me sometimes that I have just been lucky the last couple of years and that I really am just a dweeb that doesn’t have a clue.

Zacks has a really cool stock screener called Research Wizard (you’re probably familiar with it). I’ve done the 2 week trial a couple of times and I like it, but I haven’t been able to justify the $1,000 per year price tag yet. I think I would be very interested if I could seamlessly incorporate AAII’s screens into Zack's screener. I use AAII’s Stock Investor Pro which costs around $200 per year.

I really don’t have a tried and true system for rebalancing. I don’t actually rebalance each week. I re-evaluate my holdings each week. I heavily emphasize stocks that match the Zweig screen, Can Slim Screen, and a few of the others and then filter the stocks with Zack’s #1 ranking. I hold around 5 stocks until something changes—either the stock no longer appears on the screens or it loses it’s Zacks ranking. (If the ranking changes from a “1” to a “2” I might tighten my stops a bit, but not much. If it changes to a “3” it’s over for the stock and I put a 3 percent trailing stop on it.) That’s pretty much it. Nothing too complicated.