I sure left the party early. Now am I getting trapped?

I have been very busy lately and expect to be busy through most of December. Trades and updates will be sporadic. Tonight was the first trade on the Rydex equity funds since my last update here.

It is very clear that I left the rally party early and shifted to neutral. Now I am setting up for a mild correction. Possibly only a few days. I think it is possible we have another run at new highs, but we could also go into a serious correction.

I listened to Richard Arms (Arms Index/TRIN) and John Bollinger (Bollinger Bands)on CNBC today. It was interesting to observe two of the Deans of technical analysis have very divergent viewpoints on the present market condition. Arm's TRIN indicator suggests the market is more overbought than it has been in a few years. Bollinger on the other hand had little concern about the present market condition.

Robert Drach, who I put more stock in than most in the business issued a second sell taking his newsletter portfolio from 46% to 10% and now 7% cash. But his investment philosophy is quite different than most of the pundits and he has proven that you really only have to be in stocks for relatively short periods of times to beat the indexes and inflation.

I find though his methodology often leaves lots on the table. But it it very hard to argue with 96% profitable trades (1609/1675) since 1977 with annualized gains of 19 to 20% and holding periods of about 19 weeks.

The most encouraging thing for a market rally in my mind at the moment is there seems to be a lot of people looking for a correction. Maybe I am wrong and it won't happen.

Only time will tell. I have decided after perusing the matter to act like a mild correction will happen.

My current Rydex position is, after shifting to a slightly bearish posture tonight:

32% - DIA: RYCWX (2v) 60%, RYCVX (2^) 40%
35% - S&P: RYTPX (2v) 57%, RYTNX (2^) 43%
33% - QQQQ: RYVNX (2v) 56%, RYVYX (2^) 44%

To show what this means, 32% 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! 60% the proportion of the 32% 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 UP! 40% the proportion of the 32% leveraged to the BULLISH side.


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. This is only a small part of my investment portfolio.

Okay, I was shook out to soon! Diversification

I am sitting with the Rydex equity portion of my portfolio in "molasses mode."

Even though, the pre-Thanksgiving days are likely to be bullish, I am staying somewhat sidelined at the moment.

If the market really breaks out, I will probably take some action. It will be late and I will have less gains.

I have a number of things going on for the next 3 weeks or so and may not have time to work with the market, Rydex Funds, and to post a lot.

PLEASE UNDERSTAND, This Rydex equity trading strategy is only a part of a diversified investing process. I also have mutual funds and stocks I rarely touch. I have stocks that are frequently traded.

Most people view diversification in only two or three dimensions. My thesis is diversification has many dimensions and exploiting more than the sector, market cap, and location dimensions may help one increase gains, while reducing risks. What are some of these other dimensions? Price, Time, Quality, and Beta.

I just posted a link to a great blog on the right, The Real Returns, This blog focuses on mutual funds and value oriented investing.

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.

3.86% & I am protecting profits!

I just checked my gain for the month to date on this strategy and it is 3.86%! The market is at a critical point, It needs to break through resistance, it has been toying with it. I think it is likely the mouse escapes the cat at least temporarily. We will see on whether the market has another pull back and try this year. I suspect it might. And the market might make it through resistance. I just don't want to give back much when I don't need to take the risk to have a good month.

Therefore I sold for cash 38% of my position in the Rydex account and rearranged my portfolio to just slightly bullish. I probably should have done this earlier, but wanted to give the market a bit more chance. Unless the market turns up in the last hour I will give up some of the 3.86%.

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

32% - DIA: RYCWX (2v) 45%, RYCVX (2^) 43%
47% - S&P: RYTPX (2v) 46%, RYTNX (2^) 54%
21% - QQQQ: RYVNX (2v) 36%, RYVYX (2^) 64%

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! 9% the proportion of the 26% 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 UP! 91% the proportion of the 26% 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.

Rally on??????

No Rydex changes since the last report.

DJIA - The 10700 area has turned back advances multiple times this year. It may be different this time. Though we may hesitate and even retrace before climbing over this. Then again maybe the rally fails. I am staying long for now and not even looking for the door to get out. Of course I can and will whiplash in a moment. Some of what I see in the Wilder's ADX chart is promising.

QQQQ - Skies not seen since early 2002 are above us! If the DJIA and the S&P join the QQQQ's the rally could have a ways to go. The PE's may be lower in many areas than they were when the charts hit bottom in 2002 & 2002. I am cautiously bullish.

S&P 500 - The S&P is visiting an area that has repelled it a couple times this year.
Will we make it?

Something to think about!
If GP - Georgia Pacific is worth a 37% premium to its present share price, isn't WY, KMB, and IP worth a premium to their present prices? http://finance.yahoo.com/q/co?s=GP

Could we be ready to start a new run of mergers? If so the market could turn hot!

To have a convincing rally, we do need the volume to grow though.

I will be the first to admit, I don't know what will happen. Those who think they do continue to amaze me.

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 day seems healthy, but.......

The volume is very low, the relative strength is trying to round, +DI in Wilder's ADX is flattening, the ADX line isn't rising. None of these things say the rally won't continue, but it raises some concerns.

We could well continue up, but I am going to be a bit more conservative till the rally proves it is still alive and healthy.

Therefore I am selling 50% of my RYTNX position for cash and taking 29% from the RYVYX position and transferring it to the RYCVX. This takes about 11% out of these positions. My thinking is the RYCVX leveraged to the Dow will be less volatile than the RYVYX leveraged to the NASDAQ.

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

26% - DIA: RYCWX (2v) 9%, RYCVX (2^) 91%
45% - S&P: RYTPX (2v) 13%, RYTNX (2^) 87%
29% - QQQQ: RYVNX (2v) 11%, RYVYX (2^) 89%

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! 9% the proportion of the 26% 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 UP! 91% the proportion of the 26% 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.

A slightly bullish churning day

No change in Rydex equity positions.

Today’s break from moving rapidly up feels bullish. The market hesitated, considered a trip to the red to leave more concern over the weekend, and then rewarded us with a slightly green close. This doesn’t say we won’t go down.

On another matter, the US Dollar Index hit the highest point since May 2004. USD Index A rising US Dollar may threaten the US’s already weak export posture. The good news is it may help with oil prices and imports. This rise suggests that Greenspan is having an effect. The bad news is Greenspan normally puts on the brakes till someone goes through the windshield.

I have been short the USD for some time via a 2x Rydex fund – RYWBX. This is clearly a painful position, but I intend to hold for a bit longer.

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.

October report card

Recall on October 20th, I stated the market might have put a bottom in!

The tea leaves may be ready to sprout a rally

I still think so. I was not the earliest to conclude the bottom was in, but I was earlier than many market timers. I am seeing information from timers just turning bullish now. We are still likely to see some volatility and possibly even a test of the bottom. More likely we will just tread some water and scare folks.

Assuming we close the market green today, even though we have given back much from the daily highs raises confidence in the rally.

October was a good month for my strategy of using the Rydex funds. The index funds all lost money and I managed to eke out a 2.1% gain. The beauty of gains is they compound.

	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%	1.0%	1.2%	8.9%
October	-2.4%	-1.7%	-1.5%	2.1%
Compounded	0.8%	-2.4%	4.5%	46.2%

During the month I made exchanges of the funds on 10 different daye. A total of 26 fund exchanges. Often these are little tweaks. There is NO CHARGE for doing this at the broker I use, since I do exchanges rather than withdrawals.

I still left lots of potential money on the table, but prefer to control risk.

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.

Micro's comments on AVI Biopharma (NASDAQ: AVII)

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.

Climbing on up! Still may hit a roughish spot

I shifted my Rydex equity position to an almost fully bullish stance. I was a bit slow in doing this and may see a painful day on this, but I will chance it. We may see some roughish spots as we take out lines of resistance.

I think if the market goes up and I expect it to, we will see people jump on board for a Q4 rally.

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) 10%, RYTNX (2^) 90%
50% - QQQQ: RYVNX (2v) 10%, RYVYX (2^) 90%

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.