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.