Can we break the resistance?

Please read the October 20th post, as why I am bullish now.
I think the market is still struggling with the resistance lines. The good news is the close today is much closer to those lines than the Friday close. Therefore a push to get across them is easier. Will it happen this time, I am a bit skeptical. The market hit a high around 3:30 and sold off some on a bit higher volume. The market is still uneasy in my mind.

But I still believe the bottom is most likely in! I still have some powder dry, but would like to make sure I don't miss much of what I think has a likely potential to be a very nice run up. I could be very wrong on this!

The good news is that support is not far below the market, if I am wrong. But swings can be very violent with the support and resistance so close together.


My current Rydex position is, after shifting to a slightly more market bullish posture tonight:

13% - DIA: RYCWX (2v) 17%, RYCVX (2^) 83%
37% - S&P: RYTPX (2v) 17%, RYTNX (2^) 83%
50% - QQQQ: RYVNX (2v) 24%, RYVYX (2^) 76%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 17% the proportion of the 13% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN UP! 83% the proportion of the 13% leveraged to the BULLISH side.
The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.


As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

AVI Biopharma (NASDAQ: AVII)

Please see my comments at: http://themicrokidstocks.blogspot.com/

feeling better, but locking in a touch of profit on the Diamonds

Please read the October 20th post, as why I am bullish now.

My current Rydex position is, after shifting away from 100% in RYCVX at market close tonight:

13% - DIA: RYCWX (2v) 17%, RYCVX (2^) 83%
37% - S&P: RYTPX (2v) 34%, RYTNX (2^) 66%
50% - QQQQ: RYVNX (2v) 35%, RYVYX (2^) 65%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 17% the proportion of the 13% leveraged to the BEARISH side.

RYCVX, the 2v^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN UP! 83% the proportion of the 13% leveraged to the BULLISH side.
The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

I currently have 9% of my portfolio devoted to Rydex trading in this manner. By balancing bull and bearish positions, I am currently at only 3.1% of my portfolio that is exposed to moving twice as fast as an index.

Some of you may wonder why, I don't have more exposure to this strategy? The answer is simple, I want to control risk! And in this case, I am clearly trading off returns to control the risk. As I become more comfortable with using these funds, I may decide to increase this as a part of my portfolio, but for now I am comfortable with where I am at. I control risk by having a diversified portfolio and limiting investments in any category.

It is great when you see the market has moved 1% and your funds have moved 2%, but there is also the case where the market moves 1% up and your funds move 2% down. At present, I prefer to accept a lower return to reduce the possibility of a strong negative move.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Interim reality check on the month

My Rydex leveraged index fund trading strategy is up 1.47% month to date. Doesn't sound to bad for a month where the Dow is down 4%, S&P down 3.4%, and QQQQ down 2.3%. On the other hand, if I had understood how ugly October would have been and just mover everything into the leveraged DJIA bear market fund. If I had taken these funds and made an investment in only RYCWX, it would have provided an 8% return!

On the other hand, if I had just bought an index fund at Vanguard for the S&P 500, I would be down about 3.4%. And if I had been bullish, for this period and invested all in the 2X leveraged fund rising as the index rises, I would be down 6.8%!

Okay, I left lots of money on the table, but I protected and grew my money unlike an index fund strategy. The strategy I use is to normally keep between 0 and 2/3 of the fund in these accounts exposed to 2 times the index. Looking at the 1.47% month to date, if I can average do this every month, doing this 12 times gives a compounded return of 19%. When I realize this is a return for 2/3 rds of the month, it compounds to 28% in a year.

Therefore I am happy with 1.47% for this period! And the compounding demonstrates the importance of keeping money out of harm's way!

So far this month, I have made exchanges of funds on 7 days. Normally I move money from 3 funds to 3 funds on these days. There are no costs for these exchanges at TDWaterhouse, the broker I use, or at Rydex Funds. One disadvantage of using TDWaterhouse for this is the cutoff time is 3 pm.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

so far so good

Today I sold all RYCWX the bearish Dow fund and moved proceeds to RYCVX the bullish Dow fund. Both leveraged at 2x.

65% Bullish on the 2x S&P and QQQQ funds.

Roughly 50% on the QQQQ, 36% S&P and 14% on DJIA.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The tea leaves may be ready to sprout a rally

As always, I have fallen behind in things I have to do and things I want to do.

Natural Gas, I think this is a buying opportunity and I have been adding to positions. I also added to CGMFX who makes heavy concentrated investments and was last seen as heavy in petroleum and housing. Sharp manager who has made me money!

I will probably be moving my Rydex positions today from slightly bearish to moderately bullish. Even when I have a bearish Rydex position, I typically have an overall bullish market posture. Maybe, I will be posting later what those positions are.

DIA: RYCWX (2v) sell some, RYCVX (2^) buy some
S&P: RYTPX (2v) sell some, RYTNX (2^) buy some
QQQQ: RYVNX (2v) sell some, RYVYX (2^) buy some

(2v) Means it goes up twice as fast as the index goes down and goes down twice as fast as the index goes up.

(2^) means it goes up twice as fast as the index goes up and goes down twice as fast as the index goes down.

Why the change? I think the bottom is probably in! We may retest it, but I think we are near it. My primary concern is that there is a lot of congestion between limits to the trend lines and lots of support and resistance around the averages.

But there are some strong positive technical indications for a rally.
1) Q4 is traditionally a strong quarter.
2) NY Stock Exchange Record High Percentage Indicator spiked down to near zero! This has happened 3 times in past 2.5 years: October 2002, May 2004, and October 2005.

There are other lows in the area of 10. Feb 2003 and March 2003, which led to a giant rally. April 2004 which would lead to a 1% ish drop, prior to the May rally of
1% or a touch more. August 2004 which was the signal of a 15% ish rally.

These are eyeball %'s folks, so don't get excited, if you come up with different numbers. This indicator really seems to favor a lot more reward than risk.

3)The Bullish Percentage Indicator just made a nice dip. It has only done this with rallies at hand in the past 30 months.

4) The 14 day RSI just made a nice dip into oversold territory. Rallies tend to only start with low RSI's. But low RSI's aren't really sufficient to signal a bottom.

5) The Ultimate Oscillator just made a nice dip to below 30 and that is a signal that the start of a rally may be close.

6) The Put/Call ratios have been favoring puts, this usually happens before the market is ready to turn up, but again this alone is not sufficient to signal a market bottom.

7) Robert Drach, who is one of the best market timers, in my opinion, just signaled a buy. His statistical method based on historical stock movement and various ancillary indicators seems to work over and over. He has a demonstration portfolio at http://www.nbr.com/drach/. Over the last 10 years, has an annualized return of over 20% without a loosing year. Though he often holds out of favor stock for substantial amounts of time, it is hard to argue with the results. All the trades are there, if you click on model portfolio. The buy was in his newsletter portfolio. There is a summary I wrote a year ago or so, of his methodology at http://members.aol.com/eartifacts/GAS/drachsum.html.
He subscribes to the two rules of investing. # 1 Never knowingly place money in harms way. # 2 Never forget rule #1."

In investing there is always the potential of putting money in harms way, but the goal of every investor has to be to control the risk.

There are I am certain other indicators showing the market is in trouble. I am just letting you know my thinking.

Good Luck!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Rydex, Meander To The Sidelines!

I have moved my Rydex position as follows:
DIA: RYCWX (2v) 55%, RYCVX (2^) 45%
S&P: RYTPX (2v) 55%, RYTNX (2^) 45%
QQQQ: RYVNX (2v) 55%, RYVYX (2^) 45%

Just a little run to get near the sidelines! I think the market is ready to bounce and run to the upper line of the down channel, but it is not running yet. This position offers little protection to other funds I have, but will give me little Rydex losses in case we spike up. I expect another adjustment on Monday, but right now in my mind the market must prove itself again. As the market proves itself the plan is to lose a little bit. If this wasn't an October Friday with a lot of nasty things happening, I would have made a shift to a mildly bullish stance.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Rydex , Micro's Report Card

For the past few days, I have been discussing specific trades I have been making using Rydex funds leveraged to 200% of an index or its inverse. I have been using these to a small extent for 21 months. There are no fees at Rydex for making these rapid trades. At TD Waterhouse, there is only a fee if I withdraw money from the Rydex fund family on a short term basis. Therefore I only move money back or forth or add. I have been adding as I become more comfortable with this technique. Other brokers will have different policies.

The beauty of index investing is the removal of specific equity or sector risk from investing. The goal with funds such as this is to lower the time risk and to be leveraged primarily in the direction the market is moving.

A review of how well, this has worked in my case. These results assume placing a fixed amount of dollars in the fund family and no withdrawals. Seventy exchanges were mad over this time period. Typically, if one set of funds is exchanged, I exchange all three.

	SPY	DIA	QQQQ	Micro
March	-1.8%	-2.4%	-1.7%	5.4%
April	-1.9%	-2.9%	-4.4%	10.3%
May	3.2%	3%	8.8%	8.7%
June	0.1%	-1.7%	-3.3%	1.7%
July	3.8%	3.9%	7.6%	3.4%
August	-0.9%	-1.3%	-1.5%	0.4%
September	0.8%	1%	1.2%	8.9%
Compounded	3.2%	-0.6%	6.1%	45.3%

In my case I only captured 16% gain. The reason for this was one early withdrawal and significant increases (Added 3 times the initial capital) in the July, August September time frame.

There are no guarantees that Rydex or the Profunds equivalent will achieve their goals. But they are pretty good at it.

Just as this strategy can provide lots of upside, it can provide lots of downside, if you are leveraged on the wrong side of the market. My goal is to not make perfect trades, just make more trades with more positive impact to my balance than negative impact. As I write this, I am slightly on the wrong side of the market and must face my daily decision.

Please do not consider this as a recommendation for you or anyone you know to trade these funds or in this matter. As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, Reading the tea leaves

On September 21, I wrote: "The case for a sidewise or a bearish move is setting up."

In a sideways or bearish movement, we will probably see 3-5% movements from the bottom of the channel to the bottom of the channel. At that point, we were near the bottom of the channel. Today, we are also hopefully near the bottom of the channel.
If we drop through the bottom of the channel, another 3-5% could happen quite easily within 10 days or so. I think it is more probable we bounce near here and test the top of the channel 3-5% above the present level.

Until we break the top of that channel or significantly through the bottom I see the indexes in a slight downward channel. There are many events that could cause the market to move either way. In reality it is more the interpretation of the events, than the events themselves.

The percentage drop in the indexes in the past 3 days is not unusual over that amount of time. In the past 2 years this size and slope of drop has happened several times.
Twice this drop would not be a significant statistical event.

Realize that these interpretations are little more than reading tea leaves. In the process, I look at a number of technical indicators. Sometimes I draw lines every which way on the chart. Hopefully, the process gives me a slight advantage over a coin flip. Knock on wood! Each day I look at numerous and often contradictory judgments on the market condition. At some point in the process, I formulate my own thoughts and make my trading decision on the Rydex equity funds.

I expect very soon I will be racing to move from my current bearish posture on these to a neutral or a bullish posture. It is quite possible I will be making the first move in that direction today.

I have moved my Rydex position as follows DIA: RYCWX (2v) 63%, RYCWX (2^) 37%, S&P: RYTPX (2v) 73%, RYTNX (2^) 27%, QQQQ: RYVNX (2v) 80%, RYVYX (2^) 20%, Just a bit more bearish than yesterday and even more likely to be wrong.

(2v) Means it goes up twice as fast as the index goes down and goes down twice as fast as the index goes up.

(2^) means it goes up twice as fast as the index goes up and goes down twice as fast as the index goes down.

I was very happy today to see that my mutual fund portfolio was green! The contributors to the green were the RYCWX, RYTPX, RYVNX, HSGFX (fund that does some aggressive things to maintain stability and seems to do a good job of it) and the RYBIX (weakening dollar fund was a star, though I am still a bit red on it).

My Rydex equity gain for October is just over 1.5%. Unfortunately my energy intensive and relatively volatile portfolio has sunk back to late September levels.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, will the bottom of the sideways channel hold?

Will the bottom of the sideways channel hold, is the question we are now facing. I have tweaked my Rydex position to 70% bearish 30% bullish, from 63% bearish 37% bullish. Just a slight and possibly dangerous course adjustment.

Any glimmer of promise and I will be moving back towards neutral. Just trying to capture a little bit on the swings. Also providing a bit of protection to long term positions in my portfolio.

This is 3rd down day for the DIA and SPY, but only 2nd down day for Nasdaq. If tommorrow is another heavy down hit, the DIA will lose support at 103.25 and the SPY at 119.75. The QQQQ's need to visit 38.00 to get past the most recent support. From here, that seems a challenge.

If we bounce, then we may get another chance to test for a channel top, about 3-5% above the channel bottom. When using the leveraged funds, the 3-5% becomes 6-10%. My goal is each swing to try to capture just a bit of that.

When trying to deal with these little quick swings, the exercise is largely anticipation oriented. Despite this, I examine numerous technical indictors to make a decision.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, This market just wants to frustrate!

I have been gradually shifting towards a more neutral position as the market feels like it is failing in the rally. I think we will test the down side as we continue a sidewards movement. The market seems locked in a range of a few percent, typically the longer it stays in the range, the more interesting the exit will be.

If this rally really has failed, I am more interesting in the down side than the upside.

It may be that the market is recognizing that there will be third and fourth quarter pain based on energy. Especially natural gas.

I think if we lost just 5% of GOM production for the winter and have a relatively harsh winter, we will have issues in Feburary. There seems to be a lot of indications that the loss will be much more than that. If we have a mild winter, we might be able to take a 20% loss.

There is some elasticity in the supply demand curve for natural gas.

I have made moves on 9/29 and 10/3 to move towards a more neutral Rydex position with a slight bearish posture. Today, I have moved my Rydex funds to 37% bullish, 63% bearish. This will keep a move either way from hurting to bad in terms of this part of my portfolio.

Everything the market has done in the past couple weeks feels like a head fake. Overall, my portfolio is very happy with things at the moment, though.

I continue to increase a position in RYWBX. It goes up twice as fast as the US Dollar drops. This keeps going against me, but someday it will rebound!


As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.