Песец

Yep, another stock-trading post, just to keep putting off talking to you about the HVAC situation.

So, I sold my bullish position on July 29 and then the market tanked — yay!  While it was tanking, I bought more shares on July 31, Aug 01, and Aug 04, which I then sold on Aug 12 for a profit — yay!  I scalped another +0.8% out of the other traders, even though price just came back to where it was before.

Okay, now the bad news.  The US market participants liked this morning’s report on the consumer price index.  A lot.  My sell-price (yesterday’s upper blue line) got hit and then the market kept going skyward without me.  Today’s big white candle suggests that price will probably stay up for several days on momentum, even though I have only a bearish position now.

Oh well.  My algorithm is supposed to get me lots of profits, not big profits.  It leaves a lot of money on the table.  I win again!  That’s the good news.  If only it were real money.

Lawyers:  The wrongful-death case will be going to trial.  The court date has been set for January 2025, seven years after my aunt’s death.  There’s no way to know how long the appeals process will take.

Oh boy!  Another good month in imaginary stock-trading.  I bought repeatedly at the lower blue line, then sold at the upper blue line for a nice +1.1% profit over 12 market days!  This trade-set could have been a +5.0% gainer if only I had had more imaginary money for purchases on the other four days (see below).  I am done with my bullish trade; Rome may now begin burning ad libitum.

For 2024 I have decided to record purchases and sales as translucent circles, centered on the trade-price and sized so their area is proportional to the transaction size.  This makes it harder to read the prices but easier to see the sizes.  (Price is generally the previous day’s blue line or the open, whichever is better.)

This pale green dotted/dashed line represents a trend to which prices keep returning.  It replaces (at least temporarily) the dashed orange line that we were watching for much of last year.

Oh dear.  This has been a terrible quarter for imaginary stock-trading.  I was actually starting to feel good about things during the last week of October, which should have been my clue to quickly close the short before the good mood evaporated.  But no; I was greedy and added twice more to my position due to “Fear Of Missing Out”.  So instead I missed out on the big run-up during Q4!  Oh well; there are some traders online, who have far more experience than I, who have also reported bad fourth quarters that ruined their trading years.

The economy is so bad in China, they stopped publishing ‘youth unemployment’ after it hit 21.3% back in June.  In December, the government of China started publishing a new ‘non-student youth unemployment’ figure, which was 14.9%.
      On Jan 16 we were told that manufacturing in New York State, which had been expected to be down -5.0%, was instead down -43.7% for its worst performance since 2020.
      And so the stock market is… up?  Yes, Rome refuses to burn and we’re seeing new all-time highs these days.  But I expect that the market will roll over and start facing reality after faking everyone out and maximizing their pain.  Late 2024 could be really bad for bullish investors.

I am continuing to hold that 180% short position that I told you about on Nov 08.  Since I allow myself to go to 300%, that means I had only 120% unused buying power available for this month’s contrarian long bet.  But actually, my spreadsheet showed lots more available money than that.  When you sell short, you get the cash immediately for the shares you borrowed and sold — and that cash can be used to buy something else!  Except, as discussed on Aug 29, I don’t believe I can actually short stock for the profit levels being shown on this blog.  If I buy TZA instead of shorting IWM, that is a ‘purchase’ and so the money is not available for re-use.

Standard advice is never to hold TZA for more than a day and especially never hold it for many days in a row when the market is moving against you, because the daily re-leveraging will surely eat your profits alive.  If I had really shorted IWM last quarter, my current unrealized loss would be -27.8%.  But if I had stupidly bought TZA at those times, which you should never ever do, then my unrealized loss today would be a whopping -22.7%.  Which, um, isn’t as bad.  You know, there’s a lot of bad advice floating around on the Internet.

Finally, here is a summary of last year.  Remember when Silicon Valley Bank went bankrupt in March, giving us that dashed orange line that continued to be meaningful for months?  Well, the market might possibly bounce off that line yet again on its next downswing.  The new dashed/dotted green line connects the last two peaks, but I don’t know yet how meaningful it will be.

Note that the last three peaks have been getting higher, while the last three troughs have been getting lower and are nearly aligned.  This is the Broadening Top pattern, which Bulkowski says is a “poor performer” and not worth betting on.  Hopefully the market will now mosey back down to the bottom of this range so I can close my short and be done with this thing.  Maybe in six weeks?

(Subject is the title of a book by Douglas Adams.)

I hereby raise my bet to 150% short.  I hope this turns out to have been a good idea.  Today’s closing price is higher than I would have preferred, but at least we are still within the lime-green channel.  If we hit that ole’ dashed orange line again (or even exceed the lime channel significantly), this trade is toast and I will need to cancel it at a loss.  Right now I’m sitting on an unrealized imaginary gain of +1.6%, hoping for more.

On Aug 29 I wrote: “the red line came very close on Aug 25, … so I think I’ll skip the contrarian trade on the next downswing.”  But then on Sep 07 I wrote, “Meanwhile, the red line has since fallen away…, so why not trade long here?”  This utterance is my chief contender for “stupidest thing said all year” and a solid reason for you to always remember that you are watching 🐔 🪛 ⚾ (The Crank Channel).  A quick scan through recent years (which I could have done at any time) shows that long trades after falling red lines do not do well.  This makes sense: a falling red line means there have been no new highs in a month, so maybe not a good time for a bullish bet?  If I add a new rule “needs to have been a new high within the last 22 days before beginning a long trade” then the entire -14.6% loser trade would have been skipped.  What an expensive lesson!

Lawyers: nothing.

Lawyers: So, the deposition finally happened last Tuesday, 67 months after my aunt died.  The most surprising thing was the effect of the 1,100-page book on Unicode that I had submitted, which was never mentioned — but it became my credential as a linguist.  When I told them that I used to have a job finding typos in medical books, despite a lack of specific training, by “approaching the task as a linguist”, it was like I had struck gold — I could say anything I wanted about my aunt’s medical records, even though I couldn’t speak to whether the medicine had been performed correctly.  So I summarized the records as “she died of treatment delay”, and then mentioned repeatedly the nursing home’s policy document (which I haven’t actually seen) in which they had said they wanted to be the kind of home that would call a doctor on a weekend (which they did not in her case).
      My sister gives her deposition this coming week, then some staff from the home will be deposed by ‘my’ side (who are my opponents on most/every estate matter other than this wrongful-death lawsuit).  I guess that will all wrap up around American Thanksgiving; then we wait to see whether the lawyers want a jury trial.  Meanwhile, everyone suffers.

My bullish imaginary bet: Well, that didn’t work out well at all!  My loss was -14.6% when I finally closed the position at 9:48am on Oct 04.  I should have closed Oct 03, but I was busy with the deposition.  This loss is so big, it wipes out all my profits since March.  Ouch!
      On Aug 29 I wrote, “the red line came very close on Aug 25, … I think I’ll skip the contrarian trade on the next downswing.”  Well, I should have stuck with that idea, which would have postponed the start of this trade until Sep 20 (three weeks after the almost-hit on the red line), which I believe would have reduced the total loss to -5.0%.
      On Sep 07 I wrote, “I’m expecting another bounce at the dashed orange line”.  Wrong!  We fell to that line on Sep 20, then gapped down rather than bouncing upward; this was followed six days later by a bounce-down from the underside of the orange line — which is extremely bearish.  Note that price spent some time below the lower blue line, then crossed the channel but did not hit the upper blue line, then fell to new lows.  This is my “crash signal”.
      Also on Aug 29 I mentioned that there was a “4-month-wide head-and-shoulders” pattern, which has completed.  Unless something drastic happens, that dashed orange line should act as a lid on prices for several months, maybe until spring.  It’s amazing how much predictive value that line continues to have (it’s pinned to the Silicon Valley Bank bankruptcy in March).

My bearish imaginary bet: That bullish trade ended with a ‘capitulation’, which suggests that I should immediately bet the opposite way.  So I bet 100% of capital at the open on Oct 05 that the market will be going down.  Of course, it immediately went up!  But Friday is often the most bullish day of the week and Friday’s high was still below the EMA(10) average (shown here as a solid blue line).  I plan to wait 4 days (until Tuesday) and then start using the EMA(10) as a daily trailing stop.  If price is already above that on Tuesday that I’ll cancel this trade with another loss.  Shit happens.

War: Meanwhile, Hamas has decided to invade Israel.  What effect will that have on the US stock market?  I’m guessing a ‘paradoxical’ rise on Monday, but not much else — I think this market really wants to do an October crash and doesn’t care about the rest of the world right now.  But we’ll see.

After 2 months of silence, my blog shall speak again!

Latest trade was not so hot.  The market took too long to get going with its downswing, so I didn’t have enough buying power left when we got to the bottom, so I only got +0.9% for all that time and risk (the maximum drawdown was -9.1% on Aug 25).  Still, I managed to walk out of the casino with a profit even though the cards did not break my way.

From Jul 11 until Aug 03 there was an upswing that I could have traded for a +1.7% gain, but I skipped it because of that green line. One of these days I have to review the data supporting that line — it seems to skip too many good trades.  But the red line came very close on Aug 25, and I have somewhat more faith in that line, so I think I’ll skip the contrarian trade on the next downswing.  Meanwhile, we’re going up, so I should start short-selling tomorrow.

On Jun 25 I wrote, “I also don’t account for interest on cash balances (over 4½% now at IB!), margin interest (7½%), nor the fee for borrowing shares (¼% per day, so 62½% annualized)…  a short trade that drags on for a month would yield significantly less than my charts are showing.  Perhaps some improvement in simulation accuracy is warranted.”  Years ago, I used to trade TNA and TZA in an IRA account, instead of doing IWM in a margin account as shown here.  Those tickers are basically pre-packaged short-selling/trading on margin, with insurance against losing more than 100%.  Everyone says those fees and insurance are very expensive and surely it would be better to borrow from your own broker?  If I had used TNA for the trade-set that ended today, the profit would have been only +0.5%, not +0.9%.

Let’s review the trading for 2022, comparing the use of IWM (🐂 long on margin, 🐻 short borrowed shares) vs. TNA (3× 🐂) or TZA (3× 🐻) for each trade-set.  So instead of betting 300% of my money on IWM, I would bet 100% on TNA.

Bottom line up front: it’s a wash.  Using TNA/TZA (with prepackaged fees) gives roughly the same results as using IWM and imagining that there won’t be any fees.  So it seems that, if I ever try this with real money again, I should either use TNA/TZA or demand that my broker beat their effective cost.

The two approaches mostly trade on the same days, but TNA/TZA trades more often because the ±0.75⋆ATR prices that I look for come up more often on these leveraged investments, perhaps because they are preferred by irrational gamblers who are too willing to trade at prices that are far from true value.  These extra hits add more heft to some of my trade-sets, so they gain more vs. the IWM versions.

For simplicity, I think I will continue to show IWM trades here until the end of the year, but with confidence that equivalent results to these paper-trades could realistically be obtained, by using TNA/TZA in a retirement account.

I’ve been watching that dashed orange line since Mar 10 and yammering about it since Jun 02.  We didn’t bounce off it again this time, but maybe we’ll come back to it next month.  If so, that will create a 4-month-wide head-and-shoulders pattern.

On Jun 29 I wrote, “For my next trick, I will predict a double-top: price will hit $189.24 around Jul 5 or so.  I will not be betting on this prediction.”  See solid green line. It actually got back to $188.84 on Jul 03.  That’s 0.2% lower than I predicted, which is not good enough!  Good thing I didn’t bet on it.
      Speaking of double-tops, look at that beautiful dotted-turquoise line! Nearly a year later and the same price recurred to within a penny — that’s an error of just 50 ppm! — but only the dividend-adjusted IWM chart shows this 50-week double-top, which would be a very bearish sign if other stock funds agreed.

Lawyers: they’re back!  Still with nothing to say about the deposition, but apparently they’ve managed to make contact with my sister in Israel.

I didn’t take this short trade and I didn’t get the +6.5% gain shown here, not even in my imaginary hobby game spreadsheet.  Back on Jun 02, I wrote “The green line got pierced today, so the market is rising rapidly and I should not bet against it with a SELL-SHORT order.”  Well, the green line scares me off many trades that actually would have been perfectly profitable; there are some occasional very nasty ones that it saves me from.  The line is just a guess as to what might count as “rising too fast”, based on the formula MIN(22)+4*ATR(22).  I used to use 6*ATR in this formula, same as for the red line, but that didn’t trigger soon enough and I wasn’t saved — so I pulled the replacement coefficient 4 out of my butt.  Remember, folks, you’re watching 🐔 🪛 ⚾ (The Crank Channel)

On Jun 22, price got down to only 6¢ (that’s 0.036%) above my blue line without actually touching it.  I debated calling that ‘close enough’ and then beginning the long trade on Jun 23, but I didn’t.  We’ll see if my next imaginary stock-purchase happens tomorrow.  Short-selling remains off the table, due to the recent piercing of the green line, even though that overlay has failed me here yet again.

On Jun 07 there was a dividend issued of nearly 51¢ per share.  I don’t normally show dividend payments on these charts, nor do I account for them in my spreadsheet.  Back when I used Interactive Brokers paper trading, I treated their imaginary dividend payments as random events that gave me undeserved extra money, due to long positions I happened to have been holding weeks earlier.  I don’t recall ever having to pay dividends, even though that is supposed to happen if you are short coming into ex-dividend day.  I also don’t account for interest on cash balances (over 4½% now at IB!), margin interest (7½%), nor the fee for borrowing shares (¼% per day, so 62½% annualized); all of these were around 0% for many years but have become significant again since the last time I did any real-money trading.

I wasn’t aware, until just now when I looked it up, just how gigantic the borrowed-shares fee is.  That makes my simulation quite unrealistic.  The margin rate seems reasonable to enable going beyond 100% long for a week or two, but the borrowed-shares fee means a short trade that drags on for a month would yield significantly less than my charts are showing.  Perhaps some improvement in simulation accuracy is warranted.

Another +0.6% win in my imaginary hobby game!

Last time I said that this swing would last for “several weeks” and the market would drop by “oh let’s say 4%”.  Well, the swing is now over after one week and the market is up over 4%.  Remember, folks, you’re watching 🐔 🪛 ⚾ (The Crank Channel).  I managed to make a profit, yet again, by ignoring my own predictions and just trading the algorithm.

Of course, the big news last night was the US debt ceiling, a nearly-fake political battle where it seems the Republicans always win and the Democrats can never manage to explain the actual rules of the game.  So now the stock market is getting a “relief rally” after the resolution of the cliff-hanger in our debt ceiling soap opera.  This rally probably won’t last long, maybe three days.  But my algorithm does not require me to predict how long it will last.

Worst thing for the bears would be if the market stays up for a couple of days, then kisses the dashed orange line from the topside, then heads upwards into the stratosphere.  Ow!  We could be looking at a June blow-off top to begin our summer.  (The orange line is the gap from when Silicon Valley Bank had its liquidity crisis.  We stayed below that line for nearly three months.  If we quickly go back down then I expect we’ll stay below it until fall.)

What trade orders for Monday?  The green line got pierced today, so the market is rising rapidly and I should not bet against it with a SELL-SHORT order.  On the other paw, the market is so high right now that if it gets down to the lower blue line as soon as Monday or Tuesday that would be a crash-signal, so I shouldn’t bet against that with a BUY order.  So, no orders for Monday!

Why yes, there were several things I could have done about the inheritance nightmare during the time I wasted on this post.  But I wasn’t going to do them!

The only thing worse than stock-talk is lawyer-talk.

The 27+-year saga of 𝑀𝑎𝑠𝑠. 𝐵𝑎𝑟 𝑚𝑒𝑚𝑏𝑒𝑟𝑠 vs. my family continues.  (Note the use here of Unicode “math italic” characters in order to emphasize the evil kitten-eating reptilian overlords from outer space aspect of the attorneys of Massachusetts.)

In was back in 1996 that we found out that my aunt A₁’s inheritance from her aunt A₂ had been stolen by a lawyer.  For 20 years after that she could never escape from him.  Try as she might, hiring attorney after attorney to go fight with him, in the end he would always win because that’s just how the judicial process works.  It seemed to me that her lawyers weren’t really working for her so much as for the Mass. Bar, trying to maximize the billable hours collected by all its members while never quite obtaining her freedom for her.  A Mass. Bar member may charge a trust for his billable hours in defending himself against claims that he is mischarging that trust!  For a normal person, donor-trust money can only be spent on charity — but a lawyer can spend it on their own ‘work’.

The wrongful-death lawsuit continues.  The plaintiff attorney (who assures me that he is 𝓷𝓸𝓽 𝓶𝔂 𝓵𝓪𝔀𝔂𝓮𝓻 even though my sister and I are the named beneficiaries of his work) was happy to receive my compendium of emails between A₁ and Wifey, which he seems to think do actually prove (like I’ve been saying for 5½ years) that Wifey was A₁’s favourite relative and should have been appointed as her Personal Representative and should be the one to decide how her condo money gets split up, assuming that the ‘charity’ whose lawyers grabbed that money can ever be convinced to let go of it.

Ho hum.  Playing the stock market is so much easier than dealing with lawyers.  I won again!  Another +1.5%.  Took only three weeks, unlike this endless lawyer-saga.  Although the lawyers would surely say that the saga would go faster if I would just hire one of their members — but A₁’s experience suggests otherwise.

On Apr 25 I said, regarding the price of IWM, that “This week I expect that we’ll be continuing downward…”  But actually prices have stayed about the same ever since.  My lovely trading algorithm, with its two arbitrary lines-in-the-sand drawn in blue, has sucked profit out of these directionless fluctuations in the stock market!  If only there was any way to extract money from lawyers, such as the one who set up A₁’s perverse estate plan, which really didn’t combine well with the wrongfulness of her death.  Um, if your client orders you to “break every law you can get away with,” could this perhaps be a sign that your client is daft?  It’s illegal to notarize documents for crazy people, but laws don’t apply to lawyers.

As you’ve probably forgotten by now, I like to play the stock market.  Last year, since there was no money available, I just did paper trading.   It went reasonably well and was somewhat enjoyable, although it takes only five minutes on 250 days of the year.

A hobby should bring good news into your life.  Keeping track of Trump’s lies, or the latest Global Warming trends, or the disease status of the Cavendish banana — these are not good hobbies.  I want a system that wins often, which means it won’t win large amounts.  I want the trades to be completed in a couple of weeks, so I don’t have to wait for months or years to find out whether I chose well.  I want it to be mechanical and not require me to figure out which politicians/impresarios/pundits are lying (assume it’s all of them) or which news stories were planted (all of them) or which inventions actually work (some of them).  I need something that’s appropriate for this bear market (and my perma-bear disposition).  So I have settled on “contrarian Keltner-channel swing trading”.

Well, if you’ve been following along at home, you got a realized gain of 4.2% today!  The swing took 12 market days, so an annualized gain of 87.5%!  And all you had to do was to take stock-trading advice from 🐔 🪛 ⚾ (The Crank Channel).  We don’t even charge for it.  So how did your sensible investments do today, hmm?
      A lot of people bought stock at 9:30am Eastern this morning, presumably because they did their end-of-year portfolio reviews and then entered MARKET BUY orders over the weekend.  Oftentimes these annual investors will pump up the market for several days at the start of a year — but not this year.  Today’s rally opened strong, banged our gong (upper blue line) within the first five minutes, then sank into the red for the rest of the day.  You see how important it is to enter your trade orders in advance, just in case something happens quickly?
      Let’s remember once again how much fun it was at the open on December 13ᵗʰ, when the market gapped up and gave us an immediate 2.8% profit.  The market price continued higher for a little while, then spent the rest of the day falling — after we had gotten off the ride at the open.  And we had predicted only a 2.0% win that day for a blue-line hit.
      When using LIMIT orders, price-gaps between days are your friends!  You wake up (if you sleep late) to better news than you were expecting when you went to bed.  Those girly-man traders who use STOP orders have to put up with getting worse news than they had expected.  What fun is that?  And when a gap-down gives us a cyan trade for a better-than-blue-line price, well that’s just 𝙜𝙧𝙖𝙫𝙮 added to our final profit.
      So, what trade orders should we enter for tomorow?  We just use the same algorithm every day!  Since we are currently all-cash, we’ll take a long or a short position, whatever the market offers.  Buy-limit at the lower blue line or sell-short-limit at the upper blue line, whichever happens.  Or both the same day!  Or neither!  It’s all copacetic.  As per our algorithm, we’ll bet 10% of available capital on each trade order, so as to have some skin in this game but not be too committed this early in the new run.  And if that sounds at all reasonable, I would like to remind you that you are watching 🐔 🪛 ⚾ (The Crank Channel).

As shown by places like r/wallstreetbets, it is only too easy to get people to follow your investing advice.  You just spout overconfident bullshit, ignore the consequences of your actions, and keep on spouting.  But the problem with this is that people believe you, lose their money, then blame you.  So I imagine the broadcast would have a silly name and make frequent references to the fact that I am a crank and you have only yourself to blame if you ape my financial moves.  Do your own research, paper-trade before committing real money, yadda yadda.  But of course nobody will and so I need for the system to not hurt people too badly if they choose to overtrust it.

I really like the current algorithm.  It did quite well in my end-of-year review and I decided not to make any of the changes I had been contemplating.  It takes relatively little risk, despite the lack of protective-STOP orders.  It buys only very-safe Russell 2000 index funds (surely the 2,000 component companies aren’t *all* frauds?), and helps anxiety-sufferers by providing absolutely nothing useful for you to do while the market is open, although of course you can do “status checks” all day if you truly must.