27
Oct

Small Cap Power Period for 2016 $IWM $TNA $RUT

This is getting to be a broken record isn't it? I know I haven't posted at all in the past year, so I will just call this my annual post on the Small Cap Power Period and hope for the best. The good news is I am changing jobs and have accepted a position with a fintech start-up company in the Silicon Valley that is making tools for traders, so I am pretty excited about that.   I should be around more in the trading blogosphere with my new focus, but enough of my babbling. Without any further ado, The Small Cap Power Period for 2015 2016.

I have been writing about this fourth quarter seasonal trading for many years now and I have attained excellent results applying it to my strategy. Tomorrow, Friday, October 28, is the first day to buy in the first of three sub-periods of this year's Small Cap Power Period.  These "sub 'power' periods are especially potent and consistently positive. They are:

Power Period #1: The last two trading days of October and first two trading days of November

Power Period #2: The last six trading days of November and first three trading days of December

Power Period #3: The last seven trading days of December"

I first read about this some years ago as it is described by AlphaIM for their Alpha Bonds Strategy. They use index funds that give them a beta of 1.5. Quotes/italics in this post is the work of Alpha Investment Management. There are plenty of ETF's out there that track the small cap index fund - The Russel 2000 or the RUT. The directly correlated index fund that can be traded is $IWM. I have previously used $TNA successfully which gives a beta of 3x. This strategy can also be played by finding bullish patterns of small cap stocks that are likely to have a stronger edge during this period. In my experience, it is best played with all three sub-periods.

"These three periods exploit other lesser known 'seasonal factors' in addition to small cap dominance at year end. For example, it is well established that the market does better during the month-end and month beginning period than other times. Also, the market tends to produce above-average returns around holiday periods (Thanksgiving and Christmas).

AlphaIM has been tracking these statistics since 1979. Over the past 36 years, "the 1.5 Beta Statistics shows that the two historical losses have been minor while the average trade has generated gains of 3.2%. Overall, the three power periods have produced an average gain of 9.6% per quarter while exposing assets to market risk just 8% of the time each year.

We know of no other market-based factors which come close to delivering this kind of return with such unerring consistency.

Disclosure: Past performance is not a guarantee of future performance. The Russell 2000 is an index and cannot be used in actual investing. Index funds which replicate the index may not produce returns exactly matching the index. The data presented does not take into consideration fees, expenses or trading costs. Hypothetical or model portfolios also cannot reflect management decisions which may deviate from the methodology presented."

Here is the IWM chart which has certain taken a dip just in time for an entry.

iwm2016

12
Nov

Market Update - $SPY $DIA $IWM $QQQ

Overall markets recovered toward the end of the day and SPY closed on a doji and still the held the 8 ema, this tells me the potential for a break out to new highs in the indices is still there.
DIA also put in a doji giving the same indecisive sideways bent - waiting for some momentum - mid-day bears were getting a little jiggy but they were only trapped without the support of any major distribution.
IWM closed green above the 8 ema and above yesterday's close - looking like it is ready to turn the corner - not too surprising as the small cap power period is looming.
Qs put in a doji sandwich and just closed over the 8 ema but it is certainly a bullish signal and it appears that markets are just holding off on taking their next move while they digest reaching new highs.
Markets correct in one of two ways - they can either go down or they can go sideways - sideways action acts as healthy consolidation and allows bulls to be ready for the next move.
 
In the chat room, JJ just pointed out that markets have been going sideways since Oct. 30 but this is the easier way to correct over the alternative. I'll take it.
All in all, the markets like those few leaves on the tree in my front yard are "not dead yet...."  Please enjoy this clip from Monty Python and The Holy Grail.

13
Sep

The Morning Report - Healthy Action

The small pull-back in markets yesterday gave us some healthy consolidation in a strong bull market. A little profit taking allows the 8 ema to catch up some and gives traders a breather in an otherwise strong environment. A little more sideways action would not be unwelcome. Currently futures are up slightly after good retail sales numbers but we will have to see what the tape brings as the day waxes and wanes.

I made a few changes to my portfolio yesterday, taking profits in KBH, RAS and half of XOOM as well as a small loss in second half of SUNE when it closed below the 8 ema. The initial profit on the first half was double the loss I took yesterday, so overall, the trade was still a winning one.

I am running a little late this morning so I have populated Finviz with some charts I will be watching. I will put out some other charts later in the day. Good Luck. http://www.finviz.com/screener.ashx?v=211&t=TMHC,PCRX,OOPEN,ANGI,SOHU,GDP,HOLI,INSM,NQ,YOKU,INCY,DLTR

27
Jun

$ENPH Chart

enph

6
May

$JRCC Chart

jrcc

29
Apr

$NQ Long Idea

nqday nq

29
Apr

WFR Chart

wfr

29
Apr

A Few Charts to Watch

ddd jcp hrb bas spn

25
Apr

Past Performance Update

I recently updated my past performance page.

  tech-update (1)

When I first started filling it in this past January, I knew that one of the stocks I had taken a hit on had only been a half sized position. I never would have bought a full size of GEVO. But I let it go and figured it was par for the course and would probably all come out in the wash in the end. I did not want to make the loss only half because I considered that this would look devious, so I let it go.

As the months progressed, however, those half sized positions that I sold when they had huge gains started to go beyond the size of losses I had in other half sized positions. As such, the performance started to skew in my favor. The point of providing performance is to be transparent and I didn't want to be the guy who pretends to be transparent but really isn't. On the other hand, I now understand why other trading sites don't often provide performance. It's hard to do save for showing one's actual portfolio and that plays on privacy.

At this point, I have decided to add position sizes to my past performance as well as my trade alerts to members. This has brought my overall performance down but still gives a good indication of my results which are acceptable to me. 

On an other note, I also discovered that my short trades were showing as losses when they were gains and gains when they were losses, so the whole thing was screwed up. It is fixed now.

The Past Performance Page is not perfect. I have come to realize that it is impossible to make it perfect but I will do my best to keep it as accurate as I can going forward. Position sizes will never be perfect as my real portfolio size is continually changing and I round off the number of shares. Also I enter numbers so fast in multiple locations that it is easy to make a mistake. None the less, I have decided that a basic idea of my work and its performance is better than nothing.

So there it is. I hope you all agree. 

25
Apr

Charts, Charts, Charts...

The Bulls are clearly in charge of this market. As such, there are a plethora of good looking set-ups out there. Here are a few to ponder.

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