Evening Wrap Up

+$694.00

If you are keeping track, I made back everything lost from yesterday, except for 2 bucks.

I'll keep this short and sweet. I will be moving out of my house Sunday. Moving into new house Monday evening. Getting internet service Tuesday. Therefore, I will be taking a short break from the blog, and trading. Good luck to all while I'm gone.

Don't forget to look for a post from me at Trading Goddess's house over the weekend.

Afternoon Update

Like an idiot, I sold out of AOI at $9.01, taking a small loss. I don't know why I sold really. I think it is because I get nervous knowing that next week I will not have access to the markets for a couple of days.

So, then, why did I buy 200 more CNMD @ $29.20? I don't know the answer to that, other than it has broken out, on volume.

So on one hand, I sell something because I'm nervous about next week, but on the other hand, I buy more of something else. This is why you do not trade when your entire life is about to be upheaved- it is hard to make good, rationale decisions. For better or worse, I will go into next week with 7K of MVIS and 600 CNMD, with a stop set for CNMD.

Good Morning World

Well I'm back from signing all my settlement paperwork for selling our current house and buying our new one. I see that the bounce I was expecting is taking place.

CNMD has broken out on volume above $29.00, and AOI is making a move as well. Glad I stayed in that revenge trade.

Due to the fact that I will be homeless, if only for a few hours, and will not have internet access for a day or two next week, I will probably not make any trades today, except to set some stops.

I have to get caught up on real work today, as I will take two weeks vacation to get moved and settled in to our new home. I hope to be able to make an update or two this afternoon.

Weekend Blogging at Trading Goddess's House

Heheheh....

Trading Goddess has given me the keys to her house for the weekend. She has given me free reign to do whatever I want, however I want to do it. Unfortunately, she will not be at home while I will be doing what it is that I do.

I can promise that I will not deviate from the themes her regular readers have become accustomed to. Those that know me know that I love technical analysis. You might be able to guess then that my weekend spot will include some combination of sex and technical analysis.

Please stop by Trading Goddess's over the weekend and drop a comment or two. Also, if you enjoy my post over at Trading Goddess's house, do stop by Fly's Place and bust his chops for firing me from his weekend spot. He obviously does not know how to retain talent.

Evening Wrap Up

-$696.00

This loss was due mainly to MVIS.

I am now 57% in cash and I refrained from buying anything this afternoon. The Nasdaq bounce from 2400 was nice to see. However, the index was struggling to close in the green, and the after-hours action looks like things will drift slightly lower. I considered picking up some QLD to play a Nasdaq bounce tomorrow. I did not buy any because I have a meeting at 9:30a.m., and I don't want to get caught on the wrong side of a gap down. Furthermore, the markets still seem to be struggling for direction. The one positive I could determine from today was that volume was extremely light.

I will spend some time tonight reveiwing charts, and will post any interesting ones. At this point it will pay well to be able to spring into action, either short or long, when the trend is again able to be determined.

Good Morning World

Looks like the indexes will fill the gaps this morning. I'm refraining as much as possible from adding or starting any new positions until the gap-fill players are done.

11:06 ***Update*** As I expected, we have filled the gap. Now where do we go? Keep watching CNMD to break 29.00 on volume.

11:23 ***Update*** bought 200 more CNMD @ $29.03

2:33 ***Update*** sold 200 BWLD @ $62.385

This breach of 2400, with little support from the bulls is making things look pretty treacherous for the longs.

Evening Wrap Up

-$341.00

Chump change, really, but it sucks that I lost most of that mucking around revenge-trading AOI. See, it is not the first time I've been stopped out of that stock in the exact same way. You'd think I would learn. I guess if I'm going to lose money, at least I make it fun, or funny, depending on your perspective.

The markets' action going into the close tells me there is a good chance of the Nasdaq testing support tomorrow at 2400. The bulls have to defend this level. The bears are looking to punch its lights out. I personally believe the markets should go ahead and test it and get it out of the way.

That's all for now.

This Is Called Getting Screwed

Here is an intraday 1 minute chart of me getting screwed out of my position in AOI. As the dropped happened, I tried to cancel my stop, but couldn't get it canceled in time. As I'm writing, AOI is trading at 9.04. My stop sold at $8.77. This makes me very very angry.

***Update*** I am revenge trading this sucker. Re-bought 1K at $9.11, and put the stop back in the same place. I know, that's ridiculous.

Good Morning World

Bought 200 CNMD @ $28.96. Will look to add to the position on strength above $29.00.

Selling GIGM last night in AH was a good move. I will reiniate the position at some point. SMSI is still really strong. I regret getting stopped out on that one. AOI is also still strong, and ready to move to $10.00

Good luck to all today.

10:37 ***Update*** They ran the stops in AOI. Got stopped out at what is now the LOD at $8.77. Crap!

Stockalicious- Part 3

If you haven't checked out their site yet, you are missing the best online stock journaling tool! Also, Stockalicious is very open to suggestions. They even have an I Hate You section where one can say what they hate about the site. Rather than explaining the latest changes made to the portfolio tool, I will repaste an email from the Stockalicious crew.

Hi Woodshedder,

The total and average profit figures for all positions have been introduced to our website. You should be able to see it in your portfolio at the bottom of the positions now. Also, we have just introduced a cash balance feature to calculate your portfolio value. You should now be able to see the cash balance in your portfolio page. You can set this to any amount and we will calculate the daily portfolio gain/loss % against the cash value + stock value, better reflecting the real world trading/investment experience.

For your convenience, every time you add a SELL transaction, we will add the transaction amount to the cash balance. Conversely, every time you add a BUY transaction, we will deduct the transaction amount from the cash balance.

Cheers,
The Stockalicious Team

Sold GIGM in AH- and More Charts

Sold 750 GIGM @ $14.01 in after hours. I had considered selling it just before the close, but got stuck in a meeting and could not trade. After looking at the candlestick today, it looks like the stock is ready to revisit its moving averages. I have solid gains here, and with rumors of shenanigans with Iran likely to drive oil higher and tech lower, I decided it was a good exit point.

One to watch is CNMD. This chart looks ripe to breakout. The base is not very sound, so any breakout should be watched closely for signs of a potential failure.

Evening Wrap Up

+$1557.00 and you can see the percentage gain in my cool Stockalicious widget to the right. Wow! This puts me up YTD about 1%. Not great, but having been down almost 10% YTD a week ago, I'm definitely feeling "back in the saddle."

Today's action played out just as I thought it might. I have been paring down my positions, and am now in 45% cash. I feel this is a healthy place to be right now while the markets work off an overbought condition. I am still actively screening for new positions, and if the markets successfully test support in the next few days, I will be ready to pounce.

This evening I hope to update the blogosphere about some of the recent changes in the Stockalicious.com portfolio tool, and maybe put up some more charts.

Afternoon Update

Stopped out of SMSI at $19.04 for a nice gain of $1610.00

MVIS is holding up better than I expected.

GIGM is retracing, which is to be expected.

BWLD is making a moon shot!

AOI is holding steady. Another strong up day and AOI might see 10.00

That's all for now....back to work!

Good Morning World

You know, as I write this, I'm thinking, I wonder if anyone even cares what trades I made? Is this egotisical and self-serving to think anyone cares?

I bought 500 more GIGM yesterday expecting a strong gap up and run this morning. That didn't happen, so I sold the shares @ $14.27 This still leaves a core position of 750 shares.

SMSI is still blasting through the roof this morning. I might sell out today.

MVIS looks like a gap-fill is in order. Sometimes I hate shorts. Especially since I can't short stocks under 5 bucks.

I also bought 1K of AOI @ $8.99.

Microvision to Develop Innovative Displays with a Global Automotive Tier 1 Supplier

Read it here.

It would be nice to think MVIS will get a boost from this today. However, it seems the news leaked yesterday. We'll see...

Nasdaq- Still Holding the 50-day

Looking at the chart, the Stochs are giving a clear sell signal, and the MACD looks like it might have one more uptick left before consolidating. The upper Bollinger Band is coming down hard and is likely to provide resistance to any upside move. The 20 day moving average is down at ~2400. Volume is still weak.

So what does all this mean? I believe we must continue consolidating here to allow the overbought condition to work itself off. I continue to see support around 2430, but would not be surprised to see a brief touch upon 2400.

All that being said, the Nasdaq is holding its 50 day average, leading me to be bullish.

And here is one to watch. If you follow this blog, you know that AOI has been a favorite of mine for several months. The chart shows it is forming a bullish pennant. Volume has been strong for the entire move, leading me to believe there is more move to come.

Evening Wrap Up

+ $2524.00

Yes sir. I love it when several birds come home to roost. This puts me solidly back into 6 figures, and may give me a tiny gain YTD.

I did buy 500 more GIGM at $14.30 just before the market closed.

More later, especially an examination of the Nasdaq chart, given time.

Holy Moly!

I get back from a god-awful long meeting to see SMSI has went through the roof on news. That position being up 10% certainly doesn't hurt the account value. MVIS has also woken up.

I as stated earlier, I was going to see if we had a rally this afternoon, and then buy back positions I had sold. To that end, I bought back 200 BWLD @ $60.13, and am looking to add to GIGM. The rest of the positions, excepting NIHD, are lagging, and I will probably not buy them back this afternoon.

New Tool for Stay-at-Home Daytraders

This tool could very possibly increase my gains by 10-20%.

Selling Almost Everything

Sold these on housing news:
200 NIHD $73.52
400 TALX $33.70
1000 SWHC $13.41
200 TZOO $38.30
200 BWLD $59.50

Call me crazy. I just wanted to preserve some gains.
Still long SMSI, GIGM, and MVIS.

Will update the Stockalicious widget when I get more time.

I will watch today's action to see how the market digests the housing numbers. Any rally at this point will be extremely bullish, and I will seek to re-purchase positions going into the close.

Good Morning World

Don't Jinx Me!

I don't want to hear any talk about MVIS being up 5%. I also don't want to hear anything about GIGM rising 3.5%. I espcially don't want to hear anythign about SWHC, TALX, SMSI, and TZOO being up this morning.

The 20-Day Play- SMSI

In order for a stock to make The 20-Day Play, it must trade above its 20 day simple moving average for at least 20 days, and then bounce on or near the 20 day simple moving average.

SMSI has only traded above its 20dsma for the last 18 days. While failing to meet the time criteria for the setup, I still believe it is a good candidate, albeit premature. The stock rocketed on a great earnings report on monumental volume. It has since pulled back on decreasing volume. The MACD and the Stochs show there may be a day or two more left in the pullback. This puts the price touching down on the 20dsma just as the Stochs edge near oversold.

One other observation. A Golden Cross (50dsma rises from under and crosses the 200dsma) looks to be confirmed tomorrow.

Getting Perspective on Future Nasdaq Performance

I’ve been experimenting with Excel in an effort to start wrapping my mind around how to program a system to backtest ideas. Specifically, I’ve been looking at the history of momentum in the QQQQ, not so much to provide trading opportunities, rather, to give some guidance as to what one might expect after a given market event.

After the markets begin to correct in February, I began waiting for a high-percentage gain day which might mark a bottom to the correction. After making a double-bottom on March 14, the Nasdaq Composite followed-through 5 days later on March 21st, closing higher than 1.9% from the previous close.

What does a market event such as a close >1.9% the previous day’s close portend for near-term market momentum? Using the QQQQ to track the Nasdaq Composite, I’m hoping to gain some insight as to what the next 2 weeks might hold for the Comp. and ultimately for my portfolio as it is heavily weighted in technology.

Sample Data: QQQQ – October 10, 2002 to March 23, 2007.

Starting equity for the sample period was $1o,ooo. The data in the table above shows that time is on the side of the longs after the QQQQ closes >1.9% the previous close. The green numbers represent the best results for each category. On average, the QQQQ has closed ~0.8% higher ten days after the >1.9% close.

This test does not really generate a killer strategy, but that was not the point. As I go into next week 103% net long, it is helpful to have some assurances as to where the market might head. A Nasdaq close up .797% 10 days later from its March 21st close leaves the index at 2475.49 on April 4th. After my recent buying spree it is reasurring to know that a gain of >1.9% the previous close usually leads to a continuation of momentum over the next 10 days.

Weekly Wrap Up

For the week, I was up $2,366.00, or 2.4%

For Friday, I was up just under 500 bucks. Alas, the account did close just under 6 figures.

While the past week didn't give me outstanding returns, there are some areas which I am proud of. First and foremost is that I did not overtrade. I scaled into positions, and I set stops below normal ranges of volatility. On the week, I only had one stop hit, and the stock bottomed shortly thereafter, allowing me to reinitiate the position paying only .02cents more for the shares than I had sold them for.

I ended the week with 5 positions in the green, and 3 positions in the red. Of the losing positions, two of them, SWHC and TZOO, are down miniscule amounts (~$12.00). MVIS, my perennial loser, I am not overly concerned with.

Over this weekend I hope to post some new research I've been working on, as well as post links to some of the bearish bloggers out there in hopes that my readers can get a well-rounded perspective on the market action of late.

Evening Wrap Up Will Be Delayed

I have a four o'clock appointment out of the office, so I will have to update for today's and this past week's action later tonight.

So far, I am up about $1000.00 today, and just barely back to 6 digits.

Lots of Green on My Screen

I get back from my meeting to see that existing home sales rose unexpectedly. This market is certainly going to give the indecisive some fits in trying to trade it. I think the only way to be successful with all the uncertainty is to buy companies who have recently reported strong earnings.

I like the recent earnings report from GIGM, BWLD, SWHC, and NIHD. All are experiencing significant growth. I believe they will continue to be stronger than the rest of the market during any weakness, and will return double-digit percentage gains if the market continues to firm-up.

Remember, uncertainty is good. We need bears to keep shorting, and we need some fear to keep the bulls from buying this market to unsustainable levels.

3:15 ***Update*** Bought another 100 shares of TZOO @ $38.13 I am now officially margined.

Good Morning World

Looks like another down day for my account, as most of my positions are ripe for a little consolidation or pullback.

I have a meeting at 10:00 a.m., which is rather unfortunate as the housing information released then may color today's trading.

Good luck to all.

Evening Wrap Up

- $140.00 Again, this loss was due to MVIS. Most of my other positions did well.

Tomorrow will probably be a good day to do nothing. I'm expecting light volume and a tight range. I think Monday will see the current short-term uptrend resume.

Funny, this evening I went to Barnes and Nobles to pick up the Thursday edition of IBD. I like the top 200 stocks part of the Thursday edition. Anyway, they were all out of the paper, and I've never seen them run out in 2 years of buying from that store. I'm sure IBD did a little happy dance yesterday when the follow-through day came, as I bet they don't sell many papers in a falling market. With the follow-through day giving the green light to the IBD faithful to buy again, I can only imagine that they rushed to the store all day and bought up all the papers so they could get some ideas.

Very Healthy Day

I love the action that I'm seeing today. The indexes are experiencing a very orderly pullback on very light volume. This kind of action makes me want to go on margin, but I won't, yet.

SWHC is making man-sized gains, and is breaking out. I want to be around for the ride, so I added 500 @ $13.59.

Good Morning World

Gapping Up!

It looks like I have two stocks that will gap up: NIHD and SMSI.

I feel very comfortable with my positions this morning. That is probably a bad sign.

1:00 ***Update***

Bought TZOO- 100 @ $38.46

BWLD- Nothing Makes Me Angrier Than A Downgrade (Unless I'm Short)

Look at that chart. It is a great study in what happens when a stock moves in gaps on significant volume. It is clear that although BWLD was approaching overbought levels, it was going much higher on strong momentum. I really get mad when an analyst downgrades a stock directly after it breaks out. I can imagine the weasle-eyed little analysts snickering while they plan to crush the breakout buyers. They assuage their impotence by timing their reports to create maximum pain.

The other part of it is one can never trust anyone on Wall Street. If the downgrade was truly due to valuation, then why not go to "Sell" rather than "Hold?". If the target is $57.00, do the analysts really expect their clients to hold a stock for the next 9 months while it does absolutely nothing? If the stock is fully valued, then sell it!

As always, nothing is truly what it seems.

As for my BWLD position I still feel good about it. The stock did close above $58.00 which was very positive, and the volume was fairly light for a downgrade event. I see more support around $56.00 My feeling is that the stock will work off the overbought condition fairly quickly and resume the uptrend. I am looking for a 6-8 point move for my target of $65.00-$67.00

The Nasdaq Follows Through

See a previous post of mine about the Follow Through Day here.


I have to say that I'm really suprised at how quickly the markets have righted themselves. I have surmised that Blue Tuesday and the subsequent days' action was so shocking that the sentiment changed to contrarian levels of bearishness much more quickly than in the past. I believe the extreme bearishness and the resulting record level of puts and short bets that were made effectively drained the firepower of the bears in a very short time. High levels of bearishness and record levels of "bear bets" could only mean that the sellers had exhausted all resources, hence any news that is not negative is good enough to cause a rally.

The low relative volume that has accompanied the double bottom and today's follow through move suggest to me that the bears have significant positions yet to be unwinded. When they will be spurred to unwind these bets is anyone's guess. The chart suggests that a gap-fill is a given, but I expect the Nasdaq to encounter serious resistance at 2500.

As noted on the chart, the Fibonacci lines have been uncanny in their ability to mark areas of support and resistance. I see no reason why they will not continue to do so. The 2433 area will likely provide support tomorrow should some profit-taking and shorting occur.

The fact that the Nasdaq has regained 2/3rds of its drop from the previous 52 week high and successfully followed-through does not mean that traders should let down their guards. There are still significant questions as to the strength of the economy, the sub-prime debacle is still in its infancy, and inflationary risks are still a threat. The amount of short sales and puts left in the market may be enough to push the Nasdaq to new highs sooner than most expect, but the trepidation that exists regarding the economic front may just provide enough of a braking effect to preclude the market from getting ahead of itself. Ultimately it will be better for the bulls if they can avoid creating an overbought situation over the next few weeks.

Evening Wrap Up

- $245.00 This small loss was due to MVIS and BWLD. Otherwise I feel I made some great trades today and should be well-positioned for the future.

More posting tonight about what this 1.98% Nasdaq follow-through day could mean.

Exhilirating Day

So I breeze in my office at 2:15, just in time to see my quote screen start going nuts. I gave a quick glance at the Fed report, and made a decision to buy, buy, buy.

NIHD 100 @ $73.35
NIHD 100 @ $73.96
TALX 200 @ $33.36
SWHC 500 @ 12.99 - looks like it might have bottomed here, so I bought it back. It did bounce nicely from the 20 day.

I've still got ~10K in cash that I might put to use before the close.

The Nasdaq is sitting at 2443. I can't wait to analyze the chart tonight. After reading over posts over at Vix and More and watching today's action, I can't find very many reasons not to be bullish.

Good Morning World

Unfortunately I have two meetings today, one at 9:30 a.m. and then another at 11:30 a.m. It is really a terrible day to be out and away from my desk. I feel it could be a pivotal day. I hope to be back in the office before the Fed releases their notes.

I see that already BWLD is set to open down 1 point due to Jeffries cutting it rating from Buy to Hold. I would like to see BWLD maintain its strength and hold 58.00, as that is the pivot point. MVIS also has a PR about a shelf registration which is likely to bring the shorts out in droves.

I will be setting some sell-limits this morning to lock in some profits, and will be using some emergency stops to get out breakeven on the rest just in case the volume returns today to take us back to the downside.

10:20 a.m. ***Update*** Sold 750 GIGM @ $13.89. This was half my position.
Sold 500 SWHC @ 12.97 for a ~$300.00 loss. I'm tired of waiting on it, and the fill-the-gap traders look to be in charge at this point.
Off to my next meeting.

Stockalicious Part 2

In a quick review of the Stockalicious widget and portfolio tool I suggested I would like to be able to add commissions and be able to see profits in $$$, not just percentages. The very same day the crew had made the changes.

Hovering the cursor over the percentages listed in the widget now opens a small pop-up window with the actual gains or losses in dollars. It really is sexy. And for trading while working, it makes it easy to get a quick read on how the portfolio is doing.

The crew also made it easy to enter commissions for every trade.

Having tried to record trades in many other web-based portfolio tools, I have usually found the applications to be inefficient, cumbersome, and generally not very fun to work with. The result has always been that I quit using the tool. I'm finding the Stockalicious site to be a very efficient tool for logging trades. And I dare say it is almost fun to use, which is a great thing because it will make it more enjoyable to journal every trade and track account statistics.

Evening Wrap Up

+$1556.00 and you can see the percentage gain on my cool Stockalicious widget.

Today was an excellent day with man-sized gains in GIGM and SMSI. I only had one loser, SWHC, but I think it is going to come back to me soon.

I know when I feel like I feel today that I should be selling. A feeling of elation after a great day in the markets is almost certainly met with disappointment the following day, at least in my world.

I need to execute on my plan to play the 3-day bounce leading to the Fed meeting. Execution of the final phase will be to dump most of my holdings into any Fed-induced weakness.

A Thing Of Beauty

I'm wondering if I can squeeze a few more percent out of GIGM tomorrow. I bet the late to the party crowd will jump on in the morning, giving me a good place to take some profits. I do want to be careful here though as this is momentum from an earnings report, and could last well into the next quarter.

Good Morning World

I decide to get short this morning on ANAD. I've been watching it make a double top.

Short 500 @ $12.47

***Update*** Covered 500 ANAD @ $12.51 but I will be watching this one closely.

GIGM is strong again today, as expected.
SMSI is finally attempting a move.

Nasdaq Again Meets Resistance at 2400

I mentioned earlier today I wanted the Nasdaq to close strong and on good volume. It did close strong, but volume was anemic. Again its advance was halted at 2400. If you choose to use price and volume as your primary indicator, then you cannot trust this rally.

Evening Wrap Up

The account closed up today +$717.00

Two of my positions which were supposed to bounce, SWHC and SMSI, have not bounced. I will let SWHC retest $13.00 before I decide to dump it. SMSI printed a very bearish candle today. Had I noticed that going into the close, I would have sold it.

GIGM was very strong. I bought 500 more @ $13.00 just before the close.

Watch Volume and 2400 on Nasdaq

Well it looks like my plan to play a few days worth of bounce leading up to the Fed meeting has come together nicely. That being said, we want to watch the markets closely today for 3 elements:
2400 (Will the Nasdaq retake it?), Volume (volume has been slight on up days, and bigger on down days), The Close (will the Nasdaq close near its highs?). If the Nasdaq can close near its highs on an increase in volume, then I will consider holding my positions through Tuesday. If the market loses some strength in the afternoon session, I may start booking profits.

By the way, don't you love that Stockalicious widget? Now you can see what everything is doing and I don't have to write about it!

ONSM did release news a short time ago.
GIGM I believe will trade somewhat independent of the indexes as the earnings report was great. I am looking for a breakout to new highs soon.
BWLD has broken out to new highs.

*** Update ***
My stop for ONSM was just hit. Sold 2K @ $2.59 The candle being formed today is very bearish. I'm happy to take this little bit of profit, but still should have sold the spike this morning. So it goes. Be careful if you are still long this as it bounced from resistance off the 50 day. I keep watching it for another re-entry, especially if it re-tests the lows.

My Blog Was Mushroom Clouded by Fly

Argggg. . . so last night I posted the video of my domain being mushroom clouded by Fly. And then this morning, I open up the blog, and it truly was blown up. My sidebar was at the bottom, my text didn't fit right, etc... So I deleted the post of the bomb, along with Fly's comments about naked pictures, which is truly a tragedy to not have that fine piece of literature for the archives. I thought that maybe the video screwed things up. But it didn't help. I went in and adjusted some html, and got my sidebar back on the side, but things still aren't quite right. Any help from any bloggers out there as to what could be going on will be greatly appreciated.

Stockalicious!

I have searched several weeks for a widget to display my portfolio holdings and update gains (or in my case, losses) in real-time. I experimented with the widgets Yahoo and Google offer to track stocks, as well as some user modified versions. They did not do what I wanted, and I found that they were hard to update and maintain.

Then I found Stockalicious. Even if you do not desire a widget for the general public to monitor your portfolio, you should still check out their homepage. While I think their widget is really freaking cool, a visit to the homepage will show you that Stockalicious has much more to offer for traders and investors.

The portfolio tool is easy to use, and allows one to log purchases at multiple prices. While the widget only displays the average at which all shares were purchased, there is another tab for the portfolio owner which will display each purchase separately. While I have not used the "sell" function yet, I understand that it allows one to track sells to see what happened to the stock price days or weeks after the sell.

I emailed Stockalicious because the standard widget they provide did not fit well into my sidebar. I received a very cordial email from them several hours later (on a Sunday, no less) with the new code.

The only suggestions I have for Stockalicious is to allow the user to include commissions, and I would like the tool to calculate actual dollar figures for profits and losses, rather than only percentage gains or losses. This would save me a few seconds on the calculator, and would truly make their portfolio tool a one-stop shop for managing trades.

All in all, this is a really cool widget backed by a very well-done web site.

New Research from Journal of Financial Planning

Improved Study Finds Index Management Usually Outperforms Active Management

by Millicent Holmes

Executive Summary

This study seeks to improve in several ways upon previous studies examining the relative performance of index management versus active management. It concludes that index management outperforms active management in most asset classes.

• To make comparisons between index management and active management as accurate as possible, the study segregated funds by style and then compared funds of the same style. This "apples to apples" comparison is the most accurate methodology. Many other studies suffer from some level of benchmark mis-specification or "size bias," as they compare all actively managed funds, which include Large-, Mid-, Small-, and Micro-cap funds to a Large-Cap Blend index, the S&P 500.
  
• Many studies on indexing versus active management have used only gross returns, which tend to overstate active manager fund performance. By contrast, this study examines fund performance net of management fees, expenses, and the impact of taxes.
  
• Also, these studies typically have used commercial mutual fund databases as their investment universe. Unfortunately, all commercial databases suffer from survivor bias, overstating the returns for the universe of active managers that have survived to the present date. This study uses "survivor-biased minimized" data to help solve this difficulty.
  
• In general, index management outperformed active management in the Large-Cap Blend, Value, and Growth asset classes. The results in Mid-Cap were mixed, with active Mid-Cap Value outperforming index management for most periods. Active management also outperformed in active Small-Cap Blend and international Mid/Small-Cap Blend.
  
• Surprisingly, indexing outperformed active management in the active Small-Cap Value and Growth asset classes, precisely the asset classes in which one would expect active management to outperform index management.

Millicent Holmes is director of research at Brownson, Rehmus & Foxworth Inc., a firm in Chicago, Illinois, that offers comprehensive wealth management, including investment consulting and multi-family office services. Her past experience includes working with fund of hedge fund managers, developing alternative investment products for international institutional investors in the United States and abroad, and trading options from the floors of the Chicago Board of Trade and Chicago Mercantile Exchange.

MVIS Head and Shoulders Bottom?

Trading Goddess asked over at Fly on Wall Street about the possibility of MVIS forming a reverse head and shoulders pattern. This is a pattern formed at a bottom. Stockcharts has a good explanation of what this pattern looks like with a reference chart here.

I'll let the readers decide if this is a Head and Shoulders Reversal.

Good Morning World

Well I'm throwing some dice this morning to catch a few days worth of bounce from some select stocks. This morning I bought
ONSM 2K @ 2.47
TALX 200 @ 32.76
BWLD 100 @ 57.34

MVIS looks strong. I don't know if it was Broker A's post about his meeting with them, or if there are other meeting participants who are buying, but the stock is moving.

More updates in a bit.

***Update***
SWHC 500 @ $13.55

Evening Wrap Up

I missed the entire day in the markets today. Honestly it was a really nice break from things.

Let's see, where to begin. First of all, I was not honest with my readers yesterday, as I made one trade and didn't blog about it. Honestly, after my recent run of bad luck, I didn't want to jinx it, and it was a small position anyway, 100 BWLD @ $55.59 right before the close. But now that I see it was up 3.2% today, I'll go ahead and pat myself on the back, retroactively. I would consider buying another 100 tomorrow, but it is quadruple witching. BWLD's max pain is $50.00, and while I don't see it going there, the next logical pain point is $55.00. Or, it could just go crazy and head for $60.00. Who knows. Regardless, I'll buy more at some point. I like the chart and I like that there is a catalyst with March Madness.


I set some limit orders this a.m., and they filled. I bought 500 SMSI @ $15.82 and 1000 GIGM @ $12.42. SMSI has some really interesting things going on. It is entirely possible that the Sprint announcement could be a sell-the-news event, but if it isn't I see SMSI going for $20.00 As for GIGM, I finally had a chance to skim the conference call and glance at the numbers, and I liked what I saw. GIGM has a nice chart, and looks like it is ready to sneak in a breakout, barring another meltdown of the Asian markets. It can currently be bought near value, as options expiration will likely keep it pegged to ~$12.50 tomorrow.

I see that IMOS, the chart I posted last night, got punished when it missed and guided down, and I also see that bastard AOB made a nice rebound today. In fact the chart is showing a fairly substantial bullish divergence in the MACD.

While I don't believe that the correction in the general markets is over, we have found a near-term bottom and are probably in for some sideways action until the Fed speaks next week. In my opinion, it is time to go long some select stocks and try to squeeze 2-3 days of gains out of them before the Fed. wrecks everything. Let me be clear that I may dump everything Wednesday, and that trying to trade Quadruple Witching is probably stupid.


All that being said, I really like the following for gains over the next few days.

TALX (may buy in the a.m. Trading at $33- max pain at $35.00. See chart in previous post.)
TZOO- keep watching it!
ONSM
SWHC

And just so Mdawsz can see how a real man's blog looks, I will leave with a chart of SMSI.

This May Move GIGM

Frank May Draft Bill to Repeal Internet Gambling Ban (Update2)

For The Fly and Ragin' Cajun

I went over to Ragin' Cajun's blog for some light reading, and saw he was bullish on NYX. I also recall The Fly buying some. I pulled up the chart, and noticed a really nice bullish divergence in the MACD. Its a nice chart, so I'm posting it.

Some Charts

Took me a while to get some time, but here are some charts that I like. I have included a variety of long trades.

I have a meeting tomorrow from 8-4 and will not have access to internet, so it is doubtful I will make any trades.

Don't forget the Producer Price Index is out tomorrow, and anything higher than the expected 0.2% could add some serious color to how the markets trade.

This chart is for those of you out there who like to play the 50 day bounce. TALX had a high volume event, has retraced to a possible revisit of the pivot point, and is approaching a convergence of 3 levels of support.





If you want to play a Semi, in a nice trading channel with the 50-day for support, here's one for you. IMOS has had several high volume events, which leads me to believe this trading channel may continue to profitable for some time.




How can you not like Smith & Wesson? And the chart is beautiful. If I were to put in a buy at open tomorrow, it would be for SWHC.








TZOO is worth noting simply because this technical pattern can lead to very big moves.

Evening Wrap Up

- give or take $1000.00
This loss was due to MVIS gapping down.

Overall, today was a very bullish day. I believe the volume picked up as the markets advanced, and volume was slight as the market was getting punished. Looking at the chart, it looks like a textbook double-bottom reversal day, with today's low taking out the previous low. There was also solid buying going into the close.

I hope I have some time tonight to review and post more charts and start considering some set-ups. Hopefully what I will find is not charts that look like they are in limbo, as they did last week.

Bought More MVIS

After doing the math concerning my potential losses should MVIS go to zero, and weighing the upside potential, I purchased another 1K of it at $3.24.

I will continue to stand on the sidelines of this market otherwise.

Good luck to all today.

***Update***
I see someone has a bid for 400K shares of AOB @ $9.00

Evening Wrap Up

-$6816.00

Well I think that number says it all. My account is now five figures for the first time this year.

I'm going to continue blogging, but I will be trading less until I get my confidence back.

I'm now listening to the MVIS conference call. Every time I hear footsteps coming down the hall, I have to turn the speakers down...I hope I don't miss something critical.

One Hell of a Day

After selling AOB this a.m. all I had left was GIGM and NIHD. GIGM reported this morning, and work has been so busy that I didn't have a chance to analyze the report. But the way the stock was trading tells me there is some doubt. So I sold it all at break even- 11.32. I also sold my 100 shares of NIHD at 71.62, or a small loss. This was all before the general indexes started to slide. I saw BWLD broke above resistance at 58, so I nibbled on some of it. Then, the markets started to turn, BWLD hit my entry price, so I sold it. I know-schizophrenic.

So here I sit entirely in cash (minus 5K or so that I had yesterday due to AOB) except for MVIS.

At this point, if MVIS craters this evening after the CC, I'll be pretty damn depressed. I am now down about 4% YTD, and that really sucks.

Got Crushed in AOB

I waited for a bounce, and couldn't get a decent one from AOB this morning. When it was trading around $9.20, I put in a stop, just in case it decided to continue cratering into the 8s. Well my stop hit. So I sold 2K AOB @ 8.93 for a total loss of $3250.00. That really really hurt. I considered holding it for a while, but after listening to the CC last night, it seems that mgmt. is not being clear about the numbers and whether organic growth is slowing as much as the numbers make it seem. Lack of clarity from mgmt. makes it hard to put a timeline into place as to when the share price might recover. Rather than having my capital tied up for a long time, I decided to take the loss, get back on the horse, and try to make the money back.

Evening Wrap Up

+$1,644.00, or 1.3%.

Although as soon as the markets open tomorrow, I will lose double that, as I lost a round in the earnings gamble.

AOB reported today, and it seems as if the market didn't like something about the guidance. I'm not much of a fundamental analyst, so I'm having trouble figuring out exactly what is so terrible. I feel that it is probably the high short interest and the fact that the stock completed a head and shoulders pattern has caused it to be punished severely (down over 2 bucks and ~20%). I have seen this happen before, and I know that this reaction is overdone, so I bought 500 at $9.15 This brings my average to $10.55. My gut tells me that if I can get anywhere near that level tomorrow, to take it and not look back. Although my head tells me this is a real company with real products and real revenue, and if I want to wait around long enough, I'll get my money back, and then some. I guess I could always sell half to recover some capital and let the lest ride to recoup some losses. Anyway, tomorrow morning is going to suck.

GIGM reports tomorrow, and now I'm skittish as hell to hold it through the report.

MVIS reports tomorrow too.

The good news is that the Nasdaq closed above major resistance at 2400.00 I need to shake off this AOB hit and start finding some new plays.

Nasdaq at 2400

This number must be defended by the bulls. A close above 2400 will bring about more short covering as the Nasdaq continues to move up, testing higher resistance as it climbs. Overall, I feel very bullish about how the day is progressing. I will consider adding more positions this week if the Nasdaq can regain 2400. Let's see what the close brings.

GIGM and AOB

As expected, both positions are up over 3% today as the earnings run culminates.

MVIS is taking a breather after Friday's gains, but I expect it to firm up into the close.

I will likely not be trading today, as it is difficult to manage puke and positions at the same time. I will be holding GIGM, AOB, and MVIS through earnings. Yes, I'm betting the farm that all 3 will have stellar reports.

MVIS- Conference Call Run-Up

Weekend Blogging at Fly's Place

You can read my 2 weekend posts here: www.flyonwallstreet.blogspot.com.

My oldest boy is still sick. I will be home with him Monday. I might try a daytrade or two if the conditions are ripe. If you have any stocks you are watching for a daytrade, leave me a comment and tell me about it.

Evening Wrap Up

+$1320.00 or 1.2%

I only made one trade today. Since I was home, I tried a scalp trade. I got 1k of AOB at 3:30 in expectations of it running into the close. I scalped .14 cents on it, selling it at 3:59.

My MVIS did well today and was responsible for the bulk of my gains.

I feel the market action was healthy today. Barring a meltdown over the weekend, the markets should attempt another run at overhead resistance on Monday.

Short and Sweet

I will play "Daddy Daytrader" again and head home about lunchtime to take care of my sick boy. No updates until then.

In the meantime, MVIS is finally moving, on volume.

Oh, and I'm confident AOB will explode before the close.

Good trading to all today.

Leading Stocks Hesitating: Exhaustion, or a Rest Before the Next Leg Up?

Screens run this evening, searching for both breakouts and breakdowns, are worth noting. A great majority of the charts are at levels which could easily be the beginning of a breakdown, or a breakout. What I mean is that leading stocks, or stocks that have held up strongly above the 50 day SMA, or stocks that have bounced solidly from longterm support (major moving avg. or trendline) seemed to be searching for confirmation of the most recent move.

GSIC rocketed to new highs in February, and pullback sharply, retracing almost 50% of the breakout move. It has since gained traction, moving in tandem with the Nasdaq. Today it met resistance at its December highs. This stock looks like it stands an equal chance of going up to new highs, or retesting the 50 day.

Here are several stocks printing a similar pattern. Click on each symbol for the chart.
CAM
WBD
TIE

These charts suggest that we will soon find out whether this bounce will be sustained, or whether we will retest last week's lows.

Evening Wrap Up

+$270.00 for the day.

I believe I will have sometime tonight to post some charts for some shorts and longs.

MVIS

MVIS is pushing past resistance. Earnings is Tuesday, March 13th. I'm not looking for any revenues or great sales, but I am expecting an update on the laser projection devices for cell phones. Put it on your list if it not already.

The Microvision Blog is a great place to start reading if you are interested in this company.

Nasdaq Hits Resistance at 2400

Keep a close eye on that number folks. As identifed in previous posts, the Nasdaq may find surpassing that number to be a serious obstacle.

***Update***
No panic selling for me this a.m. when I saw the futures were up. No siree bob. I've learned a good deal from watching Mdawsz over at Get Short. So I waited a bit and was able to get rid of my QID and DXD on a bounce. These were gambles I put on right before the close yesterday as it looked like we might have a weak start this morning. I got out with small losses.

Sold 200 QID @ $55.36
Sold 200 DXD @ $59.73

I picked up 1500 AOB this a.m. and will hold through earnings on Monday.
700 @ $10.98
800 @ $11.055

***Update***
Bought 100 NIHD @ $72.58
Bought 1000 GIGM @ $12.32

Evening Wrap Up

+1,300.00 today, or 1.2%

And I didn't make any frantic crack addict-like trades today. Right at the closing bell I picked up some QID and DXD. Today's action was very bearish, and my gut tells me there will be a gap-down at the open. The only positive that I can determine from a technical perspective is that the volume was low. But that is like saying, "You got shot in the head, but the good news is that it was only one bullet."

200 QID @ $56.37
200 DXD @ $60.53

Took Some Profits

Well finally I get some action going my way. Me making money, coupled with Shortdabull's about-face in the comments section must mean the stars have aligned, if only for this morning. He gave me some good advice, and honestly, I've been telling myself the same thing. So what I did was closed out half of my SMSI (500 @ 16.66) for a nice .81 cents gain, and I closed out half of my GIGM (500 @ 11.953) for a small gain of .22 cents. I put stop losses on the rest of both positions. AOB is still struggling for a direction, so I'll let it ride for now.

Long story short, I booked some nice gains right off the bat this morning and have stops to protect the rest of the gains. If the market continues to move in my favor, I'll still make money. I will now relax a bit and hopefully end my streak of "trading like a crack head looking for crack." Thanks for that one Fly.

***Update*** 11:14 EST
Stopped out of GIGM 500 @ $11.83
Stopped out of SMSI 500 @ $16.77
Sold AOB 1000 @ 10.53

I am completely in cash now, except for MVIS. Going to stand on sidelines and continue game-plan development.

Nasdaq Update- Bounce

Over at Fly's Blog I posted a chart of the Nasdaq last weekend. In that analysis I remarked that the 38.2% Fib. retracement level would be a likely place to pause or bounce. There is a good amount of congestion at that level going all the way back to April of last year. The bounce did happen right at those levels. What should be watched for next?

The next level of resistance is very obviously 2400. That area should be closely watched. Should the Nasdaq easily surpass 2400, I would expect the next resistance to be around 2425, and then at the 20-day simple moving average, or roughly in the area of 2450.

The distance from the high of 2531.42 to the bottom of the current correction at 2340.40 represents a drop of about 7.6%. The huge volume on the drop makes me leary to believe that all the downside is finished, and I think the bears will probably not be satisfied until they see something on the order of 10% or more.

Evening Wrap Up

I've got to say that it is really really difficult to post my trades on this blog. Of course it is easy when I'm making money. But to put out all my dumb mistakes for all to see is painful. That being said, somehow it is cathartic.

So here we go.

Today the account ended down ~$800.00 from yesterday. I'm so damn frustrated to have made 500.00 yesterday in the falling market, and the market screams up today and I'm down. That being said, I feel good about covering my index shorts, though I should have waited about 15 minutes after the open to dump them. It is hard to know at work if I will get a chance to trade, so sometimes I am stuck dumping on the open.

I did initiate 3 long positions this afternoon. I still feel the market correction is not over. I feel there is much more downside ahead. However, I am looking for this bounce to continue through tomorrow. GIGM and AOB report next week, and I am expecting stellar reports from both. I am banking on a run-up this week from oversold conditions and earnings expectations for these two stocks. SMSI just continues to be strong as an ox.

1000 SMSI @ 15.85
1000 GIGM @ 11.73 Earnings next week
1000 AOB @ 10.66 Earnings next week

Buffoonery

Well I dumped all my index shorts this morning. Bad move. I didn't get good prices on the fills. I expected the bounce to be stronger than what it was this morning. I would have been better off to just hold everything. Bottom line- my account is now a new YTD low. Ouch. I am going to sit out of the market until this afternoon, and then look at making some trades.

Good Morning World

Looks like the Yen Carry Trade is back in style. I was able to unload 25 shares of my 200 of FXY in the premarket at $86.23. I had a good laugh at that. I mean by all indications, the FXY should gap down this morning, yet somebody decides to buy 25 shares at only a .22 cent discount off of yesterday's closing price. Anyway, this morning I will look to dump my index shorts and my FXY and go long a few stocks. I'm not saying I'm bullish. I'm saying we are due for a bounce. My overall sentiment is bearish. This bounce will be sold, but it might not get sold until tomorrow, or Thursday.

Night Cap

I made $534.00 today, or ~0.5%. I'm really terribly happy about that. Making money in a down market is difficult.

I believe the markets are ready to bounce tomorrow. I expect a gap-down on the open, and a rally into the close. Depending on what work is like tomorrow a.m., I might sell my QID, DXD and my SDS on any gap-down, in hopes of getting it cheaper on Wednesday. Also, if the markets rally into the close tomorrow, it will be time to get long a select few stocks after 3:00 p.m., and for that I'll need some cash.

This evening I've been trolling for a few short candidates. What I'm finding in the charts tells me we will bounce. More on that in the next post.

Clients Made Me Miss My SMSI Sell

You see my loser's platform won't let me have a "one cancels the other" order. So I erred on the side of caution and put a stop in for SMSI, rather than a limit order to sell at my target. Well don't you know some clients came in here all yappity yap yapping about something that I can do nothing about. So I play the good guy, all concerned with good listening skills. Meanwhile, someone starts to sell the turds out of SMSI, and I can't do anything about it because these two whiners are still sitting in my office. Finally, much to my chagrin, my stop hits at $15.33, effectively netting me maybe $40.00 Now I see SMSI is now trading above my stop. I am so damn frustrated. I really wanted to bank that ~$400.00 in profits I had before those clients ruined my best trade of the day.

***Update*** Someone needs to get hurt for making miss my SMSI profits. It will be GES. Sold short 100 @ $78.25

Sell The Spikes!

Bought 100 DXD (double inverse Dow) @ $61.38
Bought 100 SDS (double inverse S&P) @ 61.965
Bought 500 SMSI @ $15.22
Bought 100 FXY @ $86.41 - I am now controlling 2 million Yen.

***Update*** Bought 500 more SMSI @ $15.35

***Update*** SMSI in liftoff mode and looks ready to challenge $16.00

Late Night Thoughts-"Big Money Blues"

I am so glad right now that I'm not "Big Money." Big money has got to stay in this market, in one form or another, no matter what. When someone gets paid to manage money, he or she can't report back to clients, "I'm 100% cash. This market sucks and I'm not touching it." In fact, I don't have to justify my trades to anyone, except to myself.

Big Money is still trying to unwind positions, and everyday they are losing more and more money. It is absolutely one of the most unsung advantages of the retail trader that he or she can usually liquidate an entire portfolio over the course of a day or two, often paying very little in commissions. Big Money takes weeks to get repositioned after a week like last week, while it may take me a day or three.

Anyway, for tomorrow, I will exercise my right to be quick and nimble-footed in the markets. While I suspected that we might get a bounce tomorrow, the meltdown overseas continues which should buy us yet another down day. If you are looking to get short, you might have 1-2 more days before the first spike up. The patient trader may just wait for the first spike up before initiating or adding to any positions.

While most traders out there are familiar with the QID, I haven't seen the DXD mentioned often. The DXD is the double-inverse ETF for the Dow. It has recently seen a surge of volume, and the added liquidity should make it more popular. The SDS is the same for the S&P 500.

Just remember that any shorts of the indexes initiated at these levels will probably go in the red on the first upspike. Never fear, that is when you add to the position. When the spike-selling takes over, you'll be glad you did.

I am also closely watching the FXY. See my post on the Yen Carry Trade at Fly's blog. It seems as if the Yen might have enough juice to provide some bullish movement to help balance out global market bearishness.

So, I can trade tomorrow, but I don't have too. And if the whole thing gets too much, I can go 100% cash and close up shop until things stabilize. But then that wouldn't be any fun.

Blogging In Fly-dom

Will be posting some charts and analysis this weekend over here.

I hope you enjoy!

Evening Wrap Up

Well I think the trend has emerged.

Today was a good day for me as I've got about 60% cash, and the rest is in the QID and MVIS. I did pick up 100 shares of FXY, mainly because I figured if I bought some it would make me do my homework on the Yen Carry Trade. I know how the whole scheme works, but this weekend I intend to figure out whether a larger position in the Yen will be beneficial.

This weekend look for charts and analysis for short setups.

***Update*** I will be doing some guest blogging at another site. I'm not going to say where...It will be a nice surprise. It is someone on my blogroll. So look for some charts over there.

Good Afternoon World

Made some jingle this morning with SMSI. It has been a standout the last 3 days. I would encourage you to keep it on your radar. All of my QID is in the green. I'm thinking about adding more if the Comp. bumps its head on 2400.

Other than that, the day has been uneventful. Both bosses are gone. The secretaries are all hanging out with each other gossiping. I think it is going to be a great Friday.

Look for this blog to get back to normal with more charts and setups soon. I think there will be some money to be made next week.

Today's Buffoonery

Lesson #1: It is damn near impossible to trade profitably from home when my youngest boy is home sick. It seemed everytime I placed a trade that his "Spidey Sense" picked up on it, and then he had to be hanging on me, or needed a bottle, or a diaper change. Today was a day where one had to stay on top of things second to second, and take profits quickly. Trying to accomplish that while taking care of my boy was foolish.

Lesson #2: Shorting Goldman Sachs is just crazy. Next time I think about shorting them, I think I'll just wire them some money instead.

Seriously, today was a total bust. I waited for GS to bounce after the huge gap down, but it just kept going down, and I'm watching the market puke on itself, and I'm thinking, its just gonna keep on going. So I short 200 shares. Within a few seconds my position was underwater. I didn't cover because I thought it was just the typical bounce that happens after an issue gaps down. 4 points later I was satisfied that it was not a bounce, that the gap was going to fill entirely, and so I covered, losing 4 points. Now I don't normally day trade, but I'm well aware of how to do it. Not having a well-defined risk or stop was just foolish. It was like being a deer in the headlights.

So by the time I covered GS, my whole mindset was screwed. I panic sold LWAY, not far from the LOD. Then I did the same with ONSM.

The only bright spot in the day was getting in fairly early on SMSI, and making over 1 point. That point saved the day. I ended up losing about 1K, or just under 1% from yesterday's close.

I felt really really bad about my buffoonery, until I read some other trader's blogs. They will remain nameless, but they seemed to suffer from some of the same buffoonery- namely, shorting into the morning gap down.

I go into tomorrow holding only 200 QID and my MVIS position.

Good Morning World

ONSM news!!!

As I remarked last night, I picked up some ONSM yesterday at a bargain price in expectation of news. Well the news is here.

I am home with a sick baby who is now screaming. More blogging to come.