S&P500 Stocks Market bottomed!

Dear friends,

Its been awhile since my last post in May22 when I called bottom then, since then markets (S&P500) rose & peaked in mid of August 2022 before stumbling down to lower low, right at 200weeks Moving Average (MA).

& once again, another reversal has finally been confirmed at the close of this trading week.

On weekly chart (left, below), we can see a nice close above previous week's top in S&P500. This has coincided with triple bullish divergences in RSI, MACD-Histograms & MACD-signal lines which all ticked up at higher high despite a lower index low; thus indicating this bear is weaker & the upcoming upwave probably as strong as the last one May-Aug22 or possibly back to uptrend to 5k in 2023!

On the daily chart (right, above), yesterday's 2.37% rise had entered into value zone marked by 20days & 40days Exponential MA (EMAs). Some pullbacks might be expected, but for mid-long term investing (1-4months horizon or longer) it would be good to buy at any such pullbacks.

In terms of my portfolio, my realized profits year to date (YTD) is $37,369, yet to account for calls that expired yesterday, about $3114/month. However, even after accounting for the realized profit, my unrealized loss stand at -25.1% though after converting to SGD, the loss was lesser at -21.6% due to early pumping of bulk of capital into US TD Ameritrade account.

The biggest drag to my portfolio continues to be Alibaba (BABA) which had fallen new low just the past week though recovered slightly. Its funny as previously there was fear of falling ecommerce volume when China lifted its lockdowns nationwide, as people went into revenge shopping at physical stores. Now with periodic lockdowns at various cities, the market was bearish over the continuing Zero Covid policy. Nonetheless, I still maintained my holdings (800shares) at average cost of $187.50, after accounting for call premiums earned in the past 1.5year, my average cost is closer to $150 which is still doubled the prevailing price. However since its over allocated, previously at 50%, now after injecting of some capital in past year, its about 26% (see Morningstar portfolio view below). 

Although it shows I am 39% in cash, this cash portion are collateralized for the puts that I've sold. In fact, if a unlikely "armageddon"scenario if all my puts are assigned, it would cost 3.26x of cash in my account. Thus I am somewhat "stretched" in taking on new trades, however, if I do nothing to take advantage of the upwave (or possibly uptrend) ahead, I would beat myself for missing to ride this.

I am pondering between using bullish synthetic or buying bull call spread; or perhaps 1 contract of each to contrast how the profit/loss looks like. Though for a trade like this, I must remind myself a cut loss is compulsory as my portfolio could go belly up if the "armageddon" scenario do happens...

See how...

May the trend be with you...

URGENT PUBLIC SERVICE ANNOUNCEMENT: US Markets had bottomed!! Rare 5-10years chance to buy good quality stocks that will 2x-5x in next 5-10years

 Dear readers,

This is a public service announcement as the market signal of a bottom has appeared. 

The signal I'm referring is the RSI indicator on the weekly time frame. This signal, when it gets near or preferably below its 30 line indicates the stock or market is oversold. The bottom signal appears when it tick up when the stock or market make the first weekly gain that signalled a bottom has been reached.

Combined with other indicators such as long term moving averages (MAs) like (100, 150, 200) helped to establish the depth and key areas of support / resistance based on these long term MAs.

Lets take a look at the major indices like S&P500 & Nasdaq.

For S&P500 (SPX), RSI only went below or touched 30 oversold line 3 times in past 5years. The RSI tick up marked the reversal in the previous 2x, so what about this time?

For Nasdaq (NDX), similar to S&P500, 3x in past as well, what about this time?

How about companies stocks? I've selected some good quality companies with great consistent earnings & growth over many years; see & decide for yourself...

First off, ADBE, the must have design software suite that design professionals must have. For ADBE, its actually hard for ADBE to reach 30, the previous 3x in past 5years RSI did not reach 30 but its troughs had nonetheless coincided with major bottoms as boxed. On the right edge, there's actually 2x RSI hit 30, the first time it "failed", just like all indicators, no indicator is 100% working. But when the first signal didn't work, the chance for 2nd signal, particularly this one with bullish divergence (lower price troughs, but higher indicator troughs) post a even stronger signal of the bottom, especially when it bounced up from a long term 200weeks SMA.

Some of you might challenge, hey but it failed once, how can I trust this if it fail once before. All I can say is, the signal still sort of catches a "bottom", just not the final low, even if you have got in the first signal, you hold it for 5-10years, you would still profit tremendously as you would have bought it at near to the bottom.

Lets see a few more, next ICE or Intercontinental Exchange which owns the NYSE itself, the futures & equity options exchanges and OTC energy, credit and equity markets.

This RSI signal only appeared 2x, what would you do with the current one that had just bounced above 200week MA?

Lets one last one, Nike shoes (NKE) stock.

I purposely included this which had a recent fail signal, wonder why? the signal happened when NKE only felt to 150week SMA, so not low enough like the first signal which pierced below 200week SMA before it bounced up sharply. So the current signal, is this it?

Honestly, no one can predict the future, but I go with probability & indicator served this purpose based on its structure & price action history to "indicate" potential bottom. Now that we have looked at the market (SPX, NDX) and 3 good quality companies from various industries; my personal view is that the US market has likely bottomed & this would be a good "stock market sale" that is probably ripe to enter now.

All the best to your trading & investing, may the markets be with you ( * v * )") 

Review of 2021

This will be a long post as I reflect on the following:

- CPF Interests

- 2021 Investment Results (YOY)

- 2021 Achievements Reflection

- CPF Interests

First off with the good news, our trustworthy CPF continued to deliver compounding interests along with another year of good employment. A total of $14,376.31 interests is credited, this is $1,508.46 higher than 2020's interest of $12,867.85 from government.

At age 37+, hopefully another 23-28 years employment (assuming lifelong employment at same or similar work till 65 retirement), hopefully the CPF balance could break the million dollar mark while cost of living do not rise too much when I retire then. With the combined balance of $411k, continued contributions & compounding interests, it should double within the next 18years (rule of 72 divide by 4% interests).

- 2021 Investment Results (YOY)

Next, on to the bad news, my investments (paper loss) did badly in 2H2021.

A total mark to market loss of $36,137.63 is booked, this comprised of $15k which was realized mainly from my exit of hospitality counters (Duty Free International & OUE Com Reit) early in the year, the rest of $21k loss are unrealized in US Options (based on Think or Swim's Net Liq.balance) which fluctuates wildly $10k+ each day depending on my Alibaba's price (if rise $22 from $118, I would breakeven my paper loss).

I continued to struggle with the psyche of managing options risk & its not an easy issue.

Eg. When you sold put, one's hope is that it may expire worthless.

Eventually, one would experience greed & tried selling naked weekly puts & start maximizing your available balance's leverage, the money came in fast during 1H2021 when weeks after weeks of options expired worthless, and I piled on new puts selling. Until when the price move against me (SI, TSLA, BABA etc.), even a 30-50% available balance (ie. $100k against a $200k portfolio) is insufficient as price went below your strike & deep ITM, every dollar drop is mark to market of $100 per option. If one have weekly puts sold, at some point, it would be impossible to roll down & out for a credit unless one roll more than 1 year out which would results with huge balance tied up in slow time (theta) decay.

Also, psyche wise, it mess up my past years of trading rules. If I hold stocks & it moved against me say 3-5% of cut loss rules, then I would cut loss for trading. Of course, I still mixed up with investing rules occasionally (I never really learn at times), like my OUE Com REIT & Duty Free that I cut loss too late. Anyway back to options, because of the desire to hold puts until expiry to avoid cost of buying back to close, when price pattern reverse, most traders of stocks would take profit but for options it messed up my psyche & the wishful thinking that the puts sold would expire worthless before price come down to the strike. Reality is one can identify turning points easily but one can never identify how low it might go, until it finish its falling trend. 

Even a fundamentally strong counter like BABA could be down for years (since 2019), as my TOS screenshot showed, my BABA shares (assigned at average of $192.50) & deep ITM puts sold took up the bulk paper loss of USD45k which literally vaporised my profits clocked 1H2021. I had to "deleverage" down & closed some BABA Puts then.

Lessons learnt: risk management is really personal emotions & character management; stick to cash secured or defined risks trade (like Diagonals, spreads) & never allow puts assignment risk to exceed 2x of cash holding. Very often, strikes that seem far at entry can come close or deep ITM... as the saying goes... the market can remains irrational longer than you can remain solvent. Having the ability to hold is an important risk pillar to support the whole investing / trading business.

- 2021 Achievements Reflection

Despite the poor investment returns, which turned my 9 years of track record to negative. I managed to achieve my financial goals set for 2021 (the first version, not the revised July 2021) where my 3 pillars (liquid assets, CPF/SRS retirement and HDB residence) each about $300+k, totalling over $1mil. Of course, in Singapore's Asset Rich Cash Poor structure, the home HDB residence is a depreciating asset as it would eventually become worthless at end of its 99years lease. However, any assets that has worth, consider good if it could generate income, but also not too bad if it could avoid expenses. Imagine if one do not have own shelter over its head, one would need to incur rental expenses each month to rent, that will definitely be a huge drag on one's financial journey to freedom.

Out of these 3 pillars, my liquid assets which include my savings, investments & retained earnings (from work & training) grew much slower than previous years (primarily due to investment realized & paper losses). My CPF & SRS retirement asset grew the most at $50k year on year which comes naturally from employment's contribution & interests. Although notably, the HDB residence also grew quite abit based on SRX appraised value though I expect it to stagnate in 2022 due to rising interests rate. 

To conclude, my focus for coming year will be on family building & trying for babies. As the "head of the household" (pardon my masculine tone to the ladies), I need to plan finances & grow them no longer for my self but for my family & future children's future education & maybe retirement (if I deposit their money to their CPF SA... Mmmm... still thinking).

Lastly, health is our greatest asset of all times, the fact that we survived the Covid-19 endemic 2nd year, we are the luckiest winners to continue to be alive and enjoy life's ups & downs.

Happy New Year 2022 & may all your goals come true, take care & stay safe!