Fortunately, I'm not in the business of predicting where the markets will go, but where the markets are not likely to go. They sound similar, but think about it. They are totally different animals. I can accommodate my predictions however I want, for example, I make the bold, historic prediction right now on May 9, 2015 that the S&P500 will not hit 50,000 next month and I am 10000% sure I will be right. I'm willing to bet my girlfriend on that prediction (I'm actually willing to bet my girlfriend on many other things but you get the point). Of course, I will get no money for playing such a prediction in the Options markets because no lunatic would ever take the other side of that bet and that's why we've got to get closer to the danger in order to make it all worth it.
In any case, whether you believe the markets are predictable or random, whether you are affected by recency bias or not, the fact is that the Russell Index rebounded right on the lower end of the uptrend channel. Right there, like magic, by the books, and I swear I haven't re-drawn my lines. These are the same lines I have been displaying for a few weeks now. Was it luck? Maybe. I prefer to think that I've become good at identifying trend channels. Let me live my dream.
(Click on image to enlarge)
McClellan: -32 (neutral)
Stocks above their 20 Day Moving Average: 41% (neutral)
Do not sell Calls right now. Do not sell Puts either. The VIX is below 13. This is the perfect moment to keep doing nothing.
RUT 1100/1110/1330/1340 unbalanced Iron Condor
1 week to expiration, 99% probability of success. Will expire for max profit this week. This is the only position in May. It won't be a spectacular month, I haven't had that this year. Just another +2% month. I'll take it.
RUT 1130/1140/1340/1350 unbalanced Iron Condor
6 weeks to expiration and 82% probability of success, up from 73% last week. This is starting to look good now. It should give me no problem in the days ahead.
Action plan for the week
In the end I didn't have to defend my positions as I had planned in the Getting ready to defend. No reason to panic article that I wrote after market close on Wednesday. Things are looking good now for both my positions. They should give me no trouble this week and May's monthly expiration options will be in the books by the end of the week. It will be another discreet cycle but little by little we climb the mountain. The portfolio growth will go up to +11.63%. That's after fees and still with 7 more months ahead.
As for new positions, same as last week. I don't want to enter anything else on Russell. I don't like the idea of having 3 different Put spreads on there, nor Call spreads. Enough with the exposure in RUT. So, my focus for new trades is SPX. Unfortunately, during this week's sell off, SPX never hit an oversold condition. Nothing changes, same plan as last week. So, let me quote:
"If SPX hits 2050, I will sell Put spreads in the mid 1800's using June Options.
On the way up, if SPX reaches 2150 or so I would like to sell Calls above 2230, also using June options."
Long term Investing
I recently sold my shares of WSP Global, which I had purchased back in September last year. I bought at $34.56 and sold at $42.84, for an almost 24% return. In addition to capital appreciation I received 3 dividend payments during the time I held it, which elevated the total return to 27.2%. The reason for selling was that WSP does not totally align with my long term investing philosophy of dividend growing companies with a solid history of increasing dividends year after year, with manageable payout ratios and low debt. This was more of a speculative play.
I also bought 25 shares of TransCanada this week at $53.67. Still on the pricey side, but not as terrible as it had been for so long.
My TFSA is the only investing account I have left in Canada, which I don't lose after my move to the US. I cannot make any more contributions to this account but I can trade inside it, receive dividends, sell covered Calls. Just no fresh capital additions. I have just about 37 grand there and little by little I will try to move towards a less speculative and more solid portfolio. My goal is to include the 9 companies I profiled in A basic Dividend Growth oriented Canadian Investment Portfolio. In addition to those 9, I would also like to add Canadian National Railway which I believe is another solid core Canadian holding.
Of course patience is the name of the game because everything is so expensive right now. I also want to get rid of Black Diamond, Crescent Point Energy and finally reduce my position size in Suncor Energy. Then it will be my sleep well portfolio and we'll see what happens 20 years later.
Wednesday: China's Industrial Production, Europe's GDP, US Retails and Core Retail Sales.
Thursday: US PPI, Initial Jobless Claims
There are days when I love trading. There are some other days when I love it even more.
Stick with the Lazy one!
Talk to you soon.
Check out 2015 Track record