This morning we closed all our open blog picks (6 longs and 1 short) and went neutral on the portfolio for a total gain of 2.5% since September 3, and an overall portfolio gain of +8% since July 30. In contrast, if you were to buy and hold the S&P in the same period you’d have a loss of about -2% today.
The clear patterns we were seeing in the markets earlier are starting to change. This is could simply be some large portfolio re-balancing, or it could be the start of a period of volatility due to government shutdown. Either way we expect many other investors who are seeing the same things we are to take the same action and go to cash. We do not expect a market crash by any means, but at some point when this volatility is over there will be some good names available at good prices so it’s best just to keep the powder dry.
We are therefore moving to cash until the current environment resolves itself. During this time we will continue to perform algorithmic scans to identify any new patterns that might be emerging this season. Brief commentary on each of our closed positions is below:
This was our punishment for making a call contrary to one Jim Cramer. When our algo picked up the sell signal we wrote:
Far be it from us to go against Mr. Cramer, a person we have come to greatly respect… We are adding this call to our performance tracker, but only taking a small position as it is contradictory… In algorithmic terms we have assigned an extremely low confidence rating out of 10 which reduces the exposure on the trade, as we are torn between wanting to be right and wrong on this signal.
In relative terms our 10% loss isn’t large as the total cost of the position was $500 and loss was $54.00.. but this one stings nonetheless. Lesson learned.
Although this had a run up after our long call, the stock fell below our entry price. A break even stop would have prevented loss, but we opted instead to let it run as the size of our position was small and therefore our risk tolerance was higher.
Our algorithm sufficiently called the bottom on the current leg up, and while we expect more upside gains we are pleased with the current gain at exit.
We had many positive patterns show up in the solar sector and this stock was in the mix. While PCG did run up over $2 since the long call, we exited with a small loss (preventable with a break even stop). Like the mining sector, it seems the solar sector can’t seem to catch a break.
Long banks, even with the JPM settlement and credit bubbles abounding? Our algo bought this ETF on Sept. 9, and after a $2.00 run up, the price pulled back and is currently trading close to our entry.
This was our algorithm’s best pick of this crop, calling a short signal near the top of a range. The stock dropped nearly $5 after that (likely on the back of weaker oil demand) and looks to have further down side.
The run-up on UAL was 10% before it retraced 6% after a disappointing earnings release. Further upside gains are possible but we’ll lock it in for a +4% gain.