Thrashing about . . .

Somehow I managed to make very little today despite the market's surge forward. I still feel like I can't do anything right. My good decisions are eradicated by my bad ones.

I'm happy to wipe January off my calendar and begin anew for February. I'm thinking it's time to get back to the plan rather than frantically looking for some new strategy that works in a sucky market. We'll see if I have the gumption to stick to the plan no matter what happens. I predict that I won't.

2005 all over again . . .

I feel like I did when I first started trading with my own ideas back in 2005. I basically had no clue what I was doing and I chased after stocks that I thought would do well. I went the whole year treading water as my portfolio barely moved. I'd make 10% here and there and lose 10% here and there.

That's what I've been doing lately and it's getting old. I've traded more than 10 stocks and my portfolio barely moves. Thank goodness it's still January and I still have 11 more months to get things figured out.

Reader Question about Stock Investor Pro

I haven't answered a reader question on the blog for awhile and this just came in tonight:

I haven't had much time to visit your blog and apologize if you have talked about this recently and I missed it. I am a user of AAII Stock Investor Pro and although I do love it, I sometimes feel I am missing out on a few features that Zacks research wizard has. So my question is would you recommend Zacks Research Wizard over SI? Is it really worth $1400 more? I can't justify both (probably can't afford RW) and need to renew SI Pro soon.

It really depends on your style of trading. I like them both—but right now I prefer SI Pro for a few reasons:

1) Price—you can’t beat if for what it delivers

2) Built in screens (I really like the amount of data available on the included screens)

3) Familiarity—I’ve been using SI Pro since 2004 and I still like it a lot

However, I’d like to see SI Pro have some ability for testing without the cumbersome downloads of weekly data. I’d also like to be able to backtest ideas with it (AAII does it on their new stock screens so it’s not out of the question).

I like the speed and constant data updates that RW wizard has. I like the backtesting, but I am becoming less enthused about the results. It seems like whenever I pick a strategy that produces amazing returns, it quits working when I start tracking it. I really don’t know how to explain it, but it concerns me.

Another thing that I don’t like about Research Wizard backtesting is it creates way too many variables for me. I’ve developed some ideas that work, and the ability to quickly analyze other ideas too often causes me to question my own trading and really gets me off track. For me it’s best to narrow my focus and stick to my trading plan rather than trying to discover the next “golden ticket”.

So for now, I’d recommend that you save the money and stick with SI Pro.

I wish I knew what I was doing

I took a few positions today and made a few bucks. GHM blew up after gapping up 5%. It ended the day down over 18%. Fortunately, I had a 3% stop on it.

I tried buy in to WSCI with a limit order again, but it left me in the dust. It was up 12% today.

My strategy continues to buy half of my normal positions and place a tight (3%) stop after the stock is bought. With my portfolio down over 8% YTD, and with the goofiness in the market right now, I'm hoping to catch a few good moves and avoid tumbles like GHM showed today.

There's no understanding the stock market

Stocks were down heavily in the premarket but they've come back substantially right before the open. Asia once again had some huge declines. There is still no clear direction on where the market is headed from here. I only own two stocks, and my plan this week is to tread lightly until after the Fed meeting on Wednesday. After that, we'll see what happens. Be careful out there!

Week In Review 1-25-08

That was one of the craziest weeks that I've experienced so far. Chaos ruled, and it was very difficult to figure out which way things would end up. I ended up a piddly .30% for the week. My screens did much better than that.

Maybe I was overly cautious, but I'm glad I didn't put the whole portfolio to work. This is a different environment than I am used to, and I don't really feel comfortable trading in it yet. Next week will give us more clues to where we are headed short term.

In the mean time, I'm going to try and get my bearings and figure out a game plan for this difficult market. There are so many opposing viewpoints that make it incredibly difficult to make good decisions. My plan is to try and stay focused on what has worked for me during difficult times in the past.

Don't get too excited . . .

We've had two really good days, but that doesn't mean we're out of the woods quite yet. There still seems to be some insanity left in this market and some companies are still getting hammered when they probably shouldn't (AAPL).

We still don't have an "time to buy" signal yet. I'll be more convinced with a crossover like we had over a month ago (blue arrow). It looks like we've got a ways to go before that happens.

For now, I'm just goofing around with small trades with low risk. I made .50% on the portfolio yesterday with some nice trades with little risk. We'll see what today holds. Be careful out there.

Is it over yet?

Today's action really hasn't changed anything. The market was oversold and the bargain hunters went wild near the end of the day. I took some small positions with tight stops just so I could feel good about being part of a rally if it happens. I've got stops set up if things turn back around (which is very possible) in the next couple of days.

We still have more than 11 months left folks, so don't start making bad decisions because of a few good hours of trading (that's my job).

Now What?

I can't believe people seem excited by the market "only" loosing a percent today. Sure it was down much more than that at the open, but should we be happy that things are less gloomy than we originally thought? I'm thinking no.

This monthly chart of the S&P 500 is indicating that we are in a bear market. Until that price line rises above the 20 month moving average, things are going to be tough.

I have to admit, despite the carnage, I had a hard time watching some stocks come back from 10% losses and actually make 10% today. But I think this ugliness has a ways more to go, and so far this month I haven't done well when things are ugly.

My plan is to sit things out unless I absolutely have to buy a stock or two--just for my sanity. I'm going to concentrate on just a few stocks per week (5 to 10) and only buy ones if they fit some stringent criteria. It just isn't going to work for me to buy a basket of stocks and take my lumps. I'll have to wait for a turnaround to do that. It will come, but I don't think it will be very soon.

Jubak has a good article on preparing for the coming bear market.

Time to buy?

A lot of folks are counting the turn-around today as the needed "capitulation" that the bulls were hoping for. I think it happened way too quickly to truly be a signal that the bears are done. We sat at -500 points down for just a few seconds before we started to march back up again.

I don't think the rate cut is the reason. That thing will take way too long to permeate the market before it effects anything.

Whatever it is, I still think caution should rule. I missed a couple of very good trades this morning. WSCI and WW. I followed them both with limit orders as they climbed from being down significantly at the open. As I write this WSCI is up 13%.

Oh well, there will be other opportunities.

I'm not THAT negative, am I?

I found out today that if you do a Google search of "stupid stock market" the number one return is StockPunk. I found that out because apparently a LOT of people are inquiring Google about the "stupid stock market" today, and in doing so are discovering StockPunk. I think I only called it stupid in the post after the shooting here in Omaha.

While the market upsets me at times, I still think it's a pretty cool way to make money. Managing your risk is key in this kind of market. If I hadn't been cautious lately, I'm sure I would have been down 30% or more.

Ugly posted a video today of a guy blowing up his portfolio trading futures this morning. He swears a lot.

Tomorrow could be really ugly, but if the Fed steps in tonight, who knows what might happen. I'm glad I'm watching from the sidelines, but be assured--I'll be watching.

P A N I C ! ! !

Futures aren't looking so hot this morning as overseas markets tanked big time. The market isn't even open today, but the insanity is already beginning. There was a lot of talk about a bounce on Tuesday, and there were a lot of people who bought Friday night thinking they were going to catch it. They are going to end up losing their shirts.

When the market responded tepidly to the proposed stimulus on Friday, I knew something was up. That's why I got out.

Things look pretty awful at the moment, but remember--it can't go down forever. There are going to be some great opportunities this year. It will be nice to get the insanity out of the way. It happened very quickly (this is the worst January drop EVER) so the rest of the year may be one of the best buying opportunities in history.

I don't pretend to know what's going to happen, but this isn't the time to get emotional and try and make up all that you've lost. Sit back and enjoy the drama and make plans to do some amazing trading later.

The VIX as an indicator

Another indicator that traders use is the VIX. You can read the details about the VIX here.

The VIX is a measure of market volatility. The saying goes "When the VIX is high, you buy, when the VIX is low, you go." "High" on the VIX is usually considered above 30. Low is below 20.

In general, if the VIX is above 30 the market is in panic mode and this indicates an opportunity to get in when prices are low.

If the VIX is below 20, it indicates that the market is complacent and that a sell-off may be happening soon.

Despite the recent sell off, we still aren't in a panic mode yet. I would wait until the VIX moves above 30 before getting too aggressive in this market.

Things aren't looking good, yet . . .

Many traders use these charts to determine market sentiment. I won't go in to what they measure (you can find information here on Stockcharts.com, but they are often used to determine whether the market is overbought or oversold.

I just wanted to point out that we haven't been near this oversold level since 2002 for the S&P and since before 2000 for the NY stock exchange.

I don't think that necessarily means we'll see a bounce or we'll see further declines. It does indicate that things are at extreme levels right now, and we haven't seen times like this for nearly six years (or more).

Zweig & Zacks Screen

A few of you have commented on the 0% return that the Zweig & Zacks screen has shown so far this year. There haven't been any passing stocks on this screen for several weeks.

The screen looks for any stocks in AAII's Zweig screen that have a #1 ranking from Zack's Research.

I've been wondering recently if I could use the number of passing companies in the Zweig screen and/or the number of companies that have a number 1 ranking on Zack's to get a feel for the market. The Zweig screen averages about 15 stocks each month. Lately, only about 10 have shown up on the screen. And as I said before, none of those stocks have qualified for a number 1 ranking on Zacks. Interesting.

How soon I forget . . .

After another awful week for my portfolio and for the screens I follow, I assumed that this was probably the worst four weeks in trading for me and for the screens. So I went all the way back to August 2004 (when I first started tracking performance) and discovered that this downturn wasn't unique, and it wasn't the worst.

In fact the Zweig RS 5 screen had a MUCH worse four weeks back in AUGUST 2008--just 5 months ago. It lost a whopping 26% during that downturn--compared with 19% (so far--from the beginning of December until now) during this one. Things could still get worse, but it really puts in perspective what a short-term thinker I am.

I was writing this year off as the first losing year I've ever had (since 2003) and we aren't even four weeks into the year. Last year the Zweig RS 5 screen made 46% without any sort of stop management--even with a 26% downturn more than half way through the year.

I don't think it's quite time to jump back in, but I do think that once the dust settles we have an amazing opportunity to buy a lot of good stocks for some very good prices.

I CAN'T TAKE IT ANYMORE!!

I'm back to cash.

I thought I'd take advantage of a bounce this morning, so I took a few positions in stocks that had been beaten down over the last week. Apparently, I'm an idiot, because every stock that I had tanked. And then the whole market tanked--again.

It's time to get out and re-evaluate. I should have done that at a 6% loss, but I held on thinking that things would turn around. Maybe they will, but right now I'm making some foolish mistakes in a desperate move to make up my losses.

Maybe this time I'll wait for a real confirmation that the tide has changed. Until then, I'll just lick my wounds and try to figure out why I was so stupid.

You rubberneckers . . .

I'm like an accident on the highway. I've noticed that when the market has a particularly bad day that the number of visitors to the StockPunk website increases dramatically. I guess the idea is that if the market is bad somehow my portfolio must suffer and that's fun to watch.

Well, I wouldn't want to disappoint any of you. Despite using only half of my portfolio for trading, I ended up down 3.71% today. There's a train wreck for you.

Old habits die hard, and I revisited some of the mistakes that I made last year. I'll tell you all about them tomorrow in my week in review.

Floundering . . .

I'm just not quite sure what to do with this market. I'm usually of the persuasion that there's always money to be made despite the direction of the overall market, but I'm having a hard time incorporating that philosophy into my actual trading.

In hindsight, staying in cash would have been more prudent, and my impatience has taught me a lesson once again. I'm just not sure where to go from here. I own a few stocks that haven't stopped out and I can't figure out whether I should just dump them now or wait for a bounce (that never seems to come).

Charles Kirk has some really dreary outlooks for the market right now. I don't think I've ever seen such unpleasant sentiment market-wide. I still think there are opportunities out there and some people really seem to know how to trade in this market (Nick at My Ambitions as a Trader is having a spectacular 2008 so far). I guess I just don't know what I'm doing.

I guess it could be worse . . .

I lost .76% today. Why didn't I just stay in cash?

In the last two weeks I've lost 5% of my portfolio. That hurts, but the S & P 500 is down nearly 6% which is two percent more than it made last year.

So when I look at the big picture, things could be so much worse. In November I lost over 15% in 3 days. I think I learned a bit from my failures last year and I hope that I am trading a bit better. I just need some more patience.

Kirk has a good article on AAII screen performance. He detailed it much better than I could have.

It looks nasty out there

Looks like were in for an unpleasant day after Intel's disappointing report. This has been the most difficult market for me to trade since I started in 2003. This must have been what 2000 through 2002 was like.

If today sucks badly, it would be good to see a bit of a panic so that we can finally get that over with and move on. We still haven't seen any sort of capitulation like we did in August.

I have a maximum of 6% loss for a month before I quit trading for the rest of the month. I'm at -4.5% right now.

Thought I was all bad and stuff

I thought I'd put some money to work after lunch because I was down a piddly amount despite the market's lousy showing. So I did some aggressive (for me) trading and got kicked in the teeth. I had one do a round trip in an hour (bought it--lost 10%--sold it).

I didn't follow any plan. I just bought a bunch of stocks that were showing strength or might show some strength tomorrow. I'm dumb. Down 1.17%.

Put a little $$ to work

I bought four stocks today. All but one were duds. Up .47%.

This Week with StockPunk

I'm not anticipating that things are going to get too much better with the market this week. I might try and take a few positions, but I don't have more than a couple of candidates. Things will turn around eventually. Patience is key during crummy times like this (I need to take my own advice).

AAII Stock Screens

Most of you know that I love AAII's stock screening ideas and that I have focused on the Zweig screen since 2005. The site hasn't reported year-end numbers for the screens yet, but there are some interesting things to note for 2007.

November 2007 was one of the worst months for the AAII stock screens since they started tracking the returns in 1998. It's comforting to know that some of the difficulties we faced as traders in 2007 were felt far and wide.

Many of the screens that consistently out-perform the market struggled this year. Others that haven't really kept up over the years had banner years.

AAII provides an excellent spreadsheet that details every screen with monthly returns, turnover, average number of stock picks, and cumulative return. It is worth spending several hours on their site and soaking in some of the knowledge and experience that they offer.

Week in Review 1-11-08

That was a good week to be watching from the sidelines. For the most part, I was. I still managed to give back .42% this week despite having only 30% of my portfolio committed. By Tuesday, I was all cash and remain there today.

It's hard to know what next week will bring us. The constant see-sawing of the market is getting quite irritating, and it sure isn't easy to find a place to jump in without getting smacked.

This market is killing me . . .

I feel good about not trading at the beginning of the week, but the last couple of days have been tough as I've sat on my hands as the market churns upward. I'm really not seeing any real signs that the worst is over and the see-saws we see every day aren't doing much to convince me to get back in (even though I so desperately want to).

I was just telling my wife yesterday how it is not even two weeks into the year I'm already unhappy with how my year is going. "How will I ever make any money this year?", I lamented. She called me an impatient baby.

I missed out

I didn't participate in the late day rally today, and you know what?--that's OK. The gains I gave up today more than offset the pain I would have felt over the losses from the last few days. I still don't trust the market, and today didn't convince me that it's time to put some money to work.

Right now I'm ahead of my screens by a couple of percent, but my guess is they'll catch up to me soon--they always do. I still don't have the guts to trade mechanically.

Oversold Bounce?

There's talk of an oversold bounce this morning. That may be, but right now (in my worthless opinion) there is nothing holding up this market. Until we start seeing some earnings numbers, I'm not willing to risk much.

Today should give us a lot of information about where we're headed in the next week or so. I suggest you sit back and watch the action and enjoy being a spectator.

Barchart reported this is the worst YTD performance for the market since 1930.

O.K., I'm convinced . . .

I was a bit unhappy to see the DOW climb 75 points while I sat on the sidelines, but as it rolled over in the afternoon, my angst turned to relief. This thing is ugly and now that we've taken out the August lows with out the sellers giving up like they did in August (red arrow) my guess is this thing is headed to the March lows.

It could turn around tomorrow, but there's not much in the way of news to do it.

What a mess . . .

This market doesn't seem to have any idea where it's going. We filled in the gap (blue arrows) but we still haven't seen sellers going nuts and then giving up (left red arrow). Today we had some action, but it wasn't enough to put an end to this see-saw action.

Tomorrow should be interesting.

That didn't last long

O.K., I'm back to cash again. This market ticks me off.

Still a coward

Despite my discovery that market timing hinders my performance (see earlier post), I remain a trading coward after the market has kicked me in the teeth. I've taken a position in GHM and nothing else. I would like to see some strength once again before I make any more commitments. I think the market is on the fence between a good rally and an awful downturn and I am too emotional to risk money in a downturn (I might even cry a bit).

Some day maybe I'll be able to put my money where my mouth is and trade mechanically no matter what the market conditions are.

Prudent Speculator 2007 Performance

If you had a rough year in the market, don't beat yourself up too much. One of the most respected and best performing (according to Hulbert Financial Digest) stock services over the last 20 years struggled badly this year. Most of their services lagged the market.

Charle's Kirk lamented this week that many of his members struggled to beat the market last year as well. I think this was just a really difficult year.

But as I said in the post before this, I think sometimes that we create our own problems. I know I made things way more complex than they needed to be and my portfolio suffered. Sometimes we think our plans are too simple and we modify them so much that they quit working.

I hope that in 2008 I am able to step back and re-focus my trading by simplifying the way I approach the market. I spent way too much time listening to the news, blogs, and other traders which really got me off track.

Another lesson from 2007

I always like to go back and analyze the previous year's data to see if there is something I can learn from what happened. I like to see if new information I've learned helps or hinders my trading. Most of the time, any new information causes me to perform poorly.

Last year was no exception. Although it was a pretty good year, I still didn't manage to outperform any of my screens. What that means is that all of my labor, sweat, knowledge, and effort created no advantage over a simple mechanical stock screen. I could have spent 15 minutes a week and created the same (or even better) results than I did with constant monitoring, reading, thinking and planning.

Don't get me wrong--I enjoyed every minute of all that hard work because I absolutely love what the market has to offer. I love reading about it, watching it, analyzing it and trading it. But I do think that I could spend a lot of the time that I spend on the market on other more productive things.

To give you an example, one of the things I've really studied this year is timing the market--going to cash when things suck and going crazy when things are going well. I put together several indicators that I think really capture the "underbelly" of the market and allow me to accurately predict the short-term direction of the market.

I went back and applied what I learned to my stock screens to see if I could utilize my timing models to capture the upswings and sit out the downswings. The results kind of shocked me. I expected to at least double my theoretical return. Instead, I cut it in half. For my style of trading and screening, market timing is counterproductive (at least over 2007 it was).

So, I'm back to the conclusion that I had at the end of 2006. If I stick to a mechanical plan in the good times and the bad, I have a very good chance of soundly beating the market.

Week In Review 1-4-2008

What an awful week that was. I got caught on the wrong side of this action and lost over 3% for the week. StockPunk's To the Moon screen had a good week however--if only I had invested in it.

Not much better today . . .

I made up part of the loss from yesterday, but I wanted to get rid of some stupid trades and I got greedy and put my limit orders too high. They came close to selling, but never did. So I'm stuck with them another day (or two).

Not a good start to 2008

I wish I would have followed the advice of my handy dandy Market Meter today. Instead, I held on to a few stocks from last week thinking that maybe this struggling market would come around. It didn't and I lost 1.37%.

Evil Kid Brother

My brother Mitch and I are in a constant battle for notoriety. Every time he comes over, he Googles his name just to rub it in my face that he can produce more hits than my name can. He easily wins that game--the only "Scott Carl" that shows up on Google is some lyric writer.

Now he's gone and done it again by appearing on the front page of the Omaha World Herald--with a color photo none-the-less. He's a punk. Here's the online version of the article.

I called him this morning and he said that it was one of his new year's resolutions to get on the front page of our paper. Two days in to the year and he's done, he bragged.

Honestly, I'm very proud of him and his accomplishments, and I've benefited from his expertise during our scuba trips together. He deserves the acclaim.

Changes to StockPunk for 2008

In the next couple of weeks, I'll be detailing changes that I'll be making to the site over the next year.

Here are a couple--

Weekly Stock Screens--
During 2007 I posted stocks that passed my screens on a weekly basis. I did this to allow folks to follow the screens and to show that the screens can produce real returns.

This year I will only post stocks that I come up with on my own. I will still post the returns of some of my favorite screens, but I will not post the actual stocks that show up each week. If you are interested in finding out which stocks qualify, you'll need to use AAII's Stock Investor Pro and/or Zack's Rankings.

StockPunk's Market Meter--
During 2007, I learned a lot about determining the overall direction of the market as a whole. I plan to use StockPunk's Market Meter to allow StockPunk readers to see my opinion on market direction on a daily basis.