October 15, 2014

10-15-14 – Morningstar Report

10-15-14 – Transaction Record

What a day!  The market was down 2%, then rallied back.  The headlines read that the S&P had given back all of its gains year to date, and while that makes a good headline, it’s not really true. Including dividends, the S&P is still up around 4.14% for the year.  Including cash, trading costs, dividends, etc… my portfolio is up 6.31% for the year.

The S&P held a key support level of 1850.  1850 is significant because it is the lower level channel trend line for the 6 month & 1 year daily chart, as well as the 3 year weekly chart.  To find the next channel level support, we’d have to look at the 5 year weekly, which has the next level of support around 1688!  Watch out below…

The late afternoon rally today was HUGE… because that key support level of 1850 held. This is a potential bounce / bottom point here and I’m ready to fire away if the signals are right. I fired yesterday, but I suppose today was the day to fire. Yesterday I bought quite a basket of stocks, but most of them worked out. Those purchases were made because those stocks were at good technical levels and looked ripe to “bounce”, and some did: small caps, Twitter, Chipotle (did well relative to the S&P all day). I’m playing this as a bottom until we cross 1850 to the downside.

Today marked my conviction that we are entering the same territory we did in Q1, the “hunt for yield”. Enterprise Product Partners (EPD) & Alerian Master Limited Partnerships (AMLP) was just getting hammered along with energy prices over the past months. I held them but cut my position a while back. If you read my twitter feed, I was in pain yesterday and contemplated selling yesterday, but did not because they were at the lower channel support level. Today, these yield names they roared back, with EPD moving 5.19% to the upside and AMLP moving 2.89% to the upside. This re-established my lead over the S&P, which was gone just a few days ago. This tells me that yield & technical support levels trumped the drop in oil prices for these names. today. Master Limited Partnerships may be decoupling from oil prices… I really hope that happens! Today was a huge divergence, overlay the chart of EPD with a crude oil ETF, October 15th is where 2 lines moving in tandem diverge like 2 electrons near one another.

There’s been a lot of trading in the portfolio, and to be honest, poor trading. The short term moves I’ve made have probably cost around 0.5% to 1% in returns, which is really big in the investment world. I should have stuck to writing covered calls and slowly wading into positions via ETF’s and other diversified plays based on macro predictions, which I had been doing quite successfully this year and which would have worked wonderfully over the past few months.

For the month of October, the portfolio is pretty even with the S&P, both being down about 4.7%. On downturns, I should very much over-perform, chasing the summer boom with high beta names cost me early this month. I hope this is a turning point and I’ll be able to put the index far into the rear view mirror.

I like the positions right now. I’m a believer that yield plays combined with picking securities at or very near their technical support levels will work well. I am favoring utilities again (like the first quarter). Healthcare should be good, but I was stopped out of that today! Up is down in that regard, the yield for XLV isn’t great, and Ebola is scary for that sector.

My company specific bets are Chipotle because they are always packed, low commodity prices help them, and they are U.S. focused with little international exposure. I did sell Dominoes Pizza a few days ago and converted that to Chipotle, which was a mistake because Dominoes blew out their numbers and shot up about 10% yesterday, doh… but Dominoes has international exposure. I’m sticking with Chipotle until they report earnings on October 20th.

I’ve been adding to Macy’s as well because they are a great retailer and “cheap” in terms of stock valuation in my opinion. The stock keeps sinking, but that’s OK, I like the company.

Kroger is a stock with great “stats”, but I’m watching that one closely.

The other 3 picks that are not ETF’s are Apple, Enterprise Product Partners, and Twitter. I have quite a bit a tech in the portfolio still, and will look to lighten up on that in favor of yield moving forward.

This is a highly volatile “trader’s” market in my opinion. The best way to win here is with yield plays and bets made on trader mentality towards using support levels as a compass.  That’s my plan for the next few weeks to next few months.