HOW ONE iTuliper IS INVESTED?

[raja]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

Thanks for sharing your investing info . . . .

My thinking on agricultural commodities went like this:

No matter what happens, people have to eat, so my first thought is that agricultural commodities would be a great investment.

However, in the upcoming recession/depression, there will be a demand drop in oil, and a dip in oil price. (Short-term, Lukester, not long-term ;) )

I don't have data, but my impression is that farming requires lots of oil -- for chemical fertilizer production, machine operation, transportation, etc.

So my fear is that with oil going down, the production cost of agricultural commodities will go down, and as a result, the price of agricultural commodities will go down.

My conclusion was that agricultural commodities are a good investment, but it would be better to wait for awhile . . . .

I would like to hear other's thoughts on this . . . .

[jk]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

Thanks for sharing your investing info . . . .

My thinking on agricultural commodities went like this:

No matter what happens, people have to eat, so my first thought is that agricultural commodities would be a great investment.

However, in the upcoming recession/depression, there will be a demand drop in oil, and a dip in oil price. (Short-term, Lukester, not long-term ;) )

I don't have data, but my impression is that farming requires lots of oil -- for chemical fertilizer production, machine operation, transportation, etc.

So my fear is that with oil going down, the production cost of agricultural commodities will go down, and as a result, the price of agricultural commodities will go down.

My conclusion was that agricultural commodities are a good investment, but it would be better to wait for awhile . . . .

I would like to hear other's thoughts on this . . . .

part of the agriculture story is the process of upgrading diet quality in the developing world. it takes 10 units of vegetable product to produce 1 unit of animal product. thus, during an expansion, there is a multiplier effect on agriculture- as the developing world gets richer it causes an accelerating demand for agricultural output. on the other hand, this process should work in reverse if there is a global recession. chinese who developed a taste for pork will quickly reduce their pork consumption if their incomes drop, and this will cause a leveraged drop in the demand for animal feed.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

I was just looking again at some things in order to consider what may be the next step to consider with these short positions which are 27.59% of my portfolio. Of course they are no immediate problem if the market were to continue to trend downwards.

The issue is one of stop-loss points if the market resumes its upward trend.

The bearish price objective using Point and Figure charts at stockcharts.com for indices shows

Bearish price objective DJI 11,500
SPX 1260
NDX 1630
RUT 580

Those numbers are comforting, the only problem with them is I find their predictive value to be useless. So no help here.

I mentioned above a concern I had was adding to my short positions, which I in fact did on Friday 1/11/08, when the CBOE equity put/call ratio was 0.97 on 01/08/08, and that generally such high readings were indicative of "fear" amongst the small investor and readings in the vicinity of 0.97 or higher had marked good entry points for upside movement in the indices over the past year. That still concerns me.

The American Association of Individual Investors data for last week from todays Barron's showed 19.6% bulls, 58.9% bears. The Bu-Br difference is -39.3. I track that number each week, divide it by 5 (if I remember from long ago, so that it would fit into a graph of some sort). At any rate my calculated (Bu-Br)/5 for the latest number is -7.86. That is the lowest number I have going back to 6/30/89 which is as far back as my data go.

The previous low was -7.38 for weekending 2/21/03, ~2weeks before the indices generally tested their 10/02 lows and then kicked off on the 5-year bull market. On a contrarian basis looking just at the AAII number for the past week, I don't guess it can get much more bullish.

Investor's Intelligence (II) numbers for last week were 48.5 bulls and 25.8 bears

http://www.schaeffersresearch.com/streetools/market_tools/inv_intel.aspx

I don't have a long database on II numbers, but I consider the last reading as rather neutral.

The Nasdaq advance-decline numbers are slightly more oversold than before the big move up Wed. and Thurs. NYSE numbers are a bit less oversold over the same period.

The Value Line Geometric 19-day EMA is still very oversold being -5.17% below the index value. That is bullish.

I don't normally track the daily percentage change of any of the indices, but I went back tonight and calculated the daily percentage change for the DJI back to 10/2/2002. On a closing basis, the largest one day loss was -3.61% back on 3/24/03, right after the market had hit a significant low on 3/11/03. The largest one day gain in the same time frame has been 4.80% on 10/15/2002, the next biggest gain was 3.59% on 3/17/2003. After that the largest one day gain by the DJI was 2.84% the market day before the -3.61% loss that was just noted.

The intraday low 1/8/08 to the intraday high 1/9/08 of 428.96 points or 3.43% compared to the big positive moves noted above qualifies it as being a "big" gain. I wish I had the data at hand to look at the magnitude of swings from intraday lows to the next day's intraday highs in order to have an apples-to-apples comparison, but I don't have that data. In the absence of that data, it is possible that 3.43% would not be such a "big" gain in the DJI.

My assessment right now is the best bet must be that the market is near some sort of an intermediate low--not a good time to be short, though that is where I am.

I have mental stops for all my short positions. The stops are the intraday lows of each inverse fund from the last 4 days.

	STOP	TO STOP	LOSS @ STOP
SRS	119.24	-6.16%	-2,985
SKF	107.19	-3.23%	-1,572
DXD	52.57	-5.01%	-2,541
QID	41.78	-6.74%	-3,435
SDS	56.64	-3.67%	-1,858
TWM	75.76	-7.49%	-3,831
		TOTAL LOSS	-16,223
		% LOSS	-5.40%

These are not entered as stop-loss orders. It they are hit, I will enter "sells" as the hits occur. It is impossible if I get hit on these and sell the positions that I will end up with the exact losses in the table.

I think the most educated estimate I can make right now is that the markets ought to rally. The surprise will be if they don't.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Four days since the note above, and no rally.

I mentioned above John Hussman's observation/warning that investors should not be surprised to see a big one day upward move ("clearing rally") in the markets. I jiggered that "one day" into the big move off the intraday low of 1/9 to the intraday high of 1/10 and when the market moved down ~225 point from the 1/10 intraday high, I added to my six -200% funds: SRS, SKF, DXD, SDS, QID, and TWM.

Then I read Hussman's note from the this past Monday in the section Market Climate: http://hussmanfunds.com/wmc/wmc080114.htm

Frankly, I am surprised that the market's compressed oversold condition has not resulted in a material “clearing rally.” Typically, when the vast majority of stocks are trading at the lows of their recent range, the market clears this with an advance averaging several percent over the following 4-6 sessions. The heaviness of the market's action, coupled with increasing volatility at 10-minute increments, continues to suggest significant risk. My impression is that a further decline of several percent from here would increase the probability a sharp clearing rally enough to warrant covering part of the short-call side of our hedges (leaving the put options in place to defend against further weakness), while a strong clearing rally from here would be a good point to raise our put option strikes and establish a stronger “staggered strike” defense against subsequent weakness.

My reaction to reading that was, "Oops!" Shoot, I thought we had one--a clearing rally, but not apparently by whatever Hussman makes his judgements. Nevertheless, things are even more conducive now to the possibility of such a scenario as Hussman has described. No one should take it that I am betting my life's savings on this observation of Hussman's. I'm not. I think smart people who look at a lot of things about markets, both technically and fundamentally, see things that those of my ilk do not see. I still am willing to be prepared for such a move as Hussman has expressed as a possibility.

I considered selling all my long inverse fund positions today, then 50% of them, and ended up selling right at a fourth of each of the six positions. Told wife if I sold all them, surely the market would crash in the next several days. So I think I have protected all investors from a crash in the next several days. Maintaining 75% of the inverse funds, probably insures a rally--joke, nothing is certain.

The II bull bear numbers from Wed. are still neutral, and certainly not indicative of any serious bearishness amongst investment advisors.

The 19day EMA of the $XVG, Value Line Geometric Index is the lowest it has been since 10/10/2002. It was lower a few days at those Oct. 2002 lows, and unfortunately for me, I don't have these data all the way back to 2000 tops. All I can say about the present reading of -7.62% below the index is that it is rather oversold and suggests a bounce in here--which of course may not happen.

The McClellan oscillators on NYSE and Nasdaq are both < -100 and in the territory where some upward market movement could be at hand, but they have at times been much more negative than the actual reading now of -122 for NYSE and -119 for Nasdaq. Everything I look at says the markets are oversold here, but the fact is they could still become moreso, nothing is certain.

There have also been put/call ratios for Equity Options of 1.05 on 1/15 and 0.99 today 1/17. Those are aligned for there to be some upward market action.

12/11, 12/27, and 1/15 have all been days in which the volume and points down for the NYSE were 90% or more negative. Such reading have not been recently (last year or so) infrequently reversed by the occurence of up-moves with 90% of the volume and points being positive. Generally periods of negative market action after such -90% readings go on for some period of time. If we were to get an up-move with positive 90% readings in volume and points on the NYSE, I would vacate my inverse fund positions. In fact if there seems to be some strong up-move off today's intraday DJI low of 12125.56 say to the tune of +200 points early in the market day, I'll probably close them out and wait for another re-entry point to the downside.

I booked a profit of 28.7% on the partial positions I closed today using first in-first out accounting, but I could turn around and lose that much in several hours of strong up-action.

[GRG55]

Re: HOW ONE iTuliper IS INVESTED?

Four days since the note above, and no rally.

I mentioned above John Hussman's observation/warning that investors should not be surprised to see a big one day upward move ("clearing rally") in the markets. I jiggered that "one day" into the big move off the intraday low of 1/9 to the intraday high of 1/10 and when the market moved down ~225 point from the 1/10 intraday high, I added to my six -200% funds: SRS, SKF, DXD, SDS, QID, and TWM.

Then I read Hussman's note from the this past Monday in the section Market Climate: http://hussmanfunds.com/wmc/wmc080114.htm



My reaction to reading that was, "Oops!" Shoot, I thought we had one--a clearing rally, but not apparently by whatever Hussman makes his judgements. Nevertheless, things are even more conducive now to the possibility of such a scenario as Hussman has described. No one should take it that I am betting my life's savings on this observation of Hussman's. I'm not. I think smart people who look at a lot of things about markets, both technically and fundamentally, see things that those of my ilk do not see. I still am willing to be prepared for such a move as Hussman has expressed as a possibility.

I considered selling all my long inverse fund positions today, then 50% of them, and ended up selling right at a fourth of each of the six positions. Told wife if I sold all them, surely the market would crash in the next several days. So I think I have protected all investors from a crash in the next several days. Maintaining 75% of the inverse funds, probably insures a rally--joke, nothing is certain.

The II bull bear numbers from Wed. are still neutral, and certainly not indicative of any serious bearishness amongst investment advisors.

The 19day EMA of the $XVG, Value Line Geometric Index is the lowest it has been since 10/10/2002. It was lower a few days at those Oct. 2002 lows, and unfortunately for me, I don't have these data all the way back to 2000 tops. All I can say about the present reading of -7.62% below the index is that it is rather oversold and suggests a bounce in here--which of course may not happen.

The McClellan oscillators on NYSE and Nasdaq are both < -100 and in the territory where some upward market movement could be at hand, but they have at times been much more negative than the actual reading now of -122 for NYSE and -119 for Nasdaq. Everything I look at says the markets are oversold here, but the fact is they could still become moreso, nothing is certain.

There have also been put/call ratios for Equity Options of 1.05 on 1/15 and 0.99 today 1/17. Those are aligned for there to be some upward market action.

12/11, 12/27, and 1/15 have all been days in which the volume and points down for the NYSE were 90% or more negative. Such reading have not been recently (last year or so) infrequently reversed by the occurence of up-moves with 90% of the volume and points being positive. Generally periods of negative market action after such -90% readings go on for some period of time. If we were to get an up-move with positive 90% readings in volume and points on the NYSE, I would vacate my inverse fund positions. In fact if there seems to be some strong up-move off today's intraday DJI low of 12089.38 say to the tune of +200 points early in the market day, I'll probably close them out and wait for another re-entry point to the downside.

I booked a profit of 28.7% on the partial positions I closed today using first in-first out accounting, but I could turn around and lose that much in several hours of strong up-action.

Nice profit Jim. You've got a nice trading touch and a damn fine feel for the charts. Not being much of a trader I'm envious!

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Nice profit Jim. You've got a nice trading touch and a damn fine feel for the charts. Not being much of a trader I'm envious!

Don't give into envy, it is a really bad thing, makes people do things they would not otherwise do, sort of like easy credit. Thank you.

[GRG55]

Re: HOW ONE iTuliper IS INVESTED?

Don't give into envy, it is a really bad thing, makes people do things they would not otherwise do, sort of like easy credit. Thank you.

I paid a high "tuition fee" learning that I am not much of a trader. Although I largely gave it up years ago, and try hard not to forget those expensive lessons, occasionally I lapse like a reformed gambler walking by a slot machine...

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

I turned around Friday morning and the DJI was up over 175 points, whereupon I sold all my -200% positions based on DJI, SPX, RUT, and NDX. That turned out to be right at the intraday high.

The profits on these last liquidations were 17.03%. The profits for the liquidations on Thursday (25% of six -200% ETF's) plus those above netted out to 20.7%.

I don't normally spend time figuring out "what if" scenarios, but I did on these sales from Thursday and Friday. Had I maintained all positions held last Wednesday, then at the close Friday the paper worth was right at 18% more than I gained by selling the positions. So I "lost" 18.5%% of possible profits. That is acceptable to me.

At about noon Friday, I opened ~1.3% positions in the +200% ETFs DDM, SSO, QLD, and UWM. My bet being that there is going to be a bounce upward hopefully before I should get stopped out of these long positions.

As I wrote

Thursday

a lot of indicators were oversold and that remains the case using daily and weekly closing data. I wrote a note last afternoon detailing more about how oversold some of these things are, and then I "blew" it away into cyberspace. Woe is me. I cannot generate the enthusiasm to do it over.

Suffice it to say some of the indicators are at levels not seen since the markets lows between October 2002 and March 2003.

I have noted elsewhere the assessments of others about what may lie ahead, short and longer terms. None of these men do I consider to be crackpots; however, they all are wrong sometimes.

Carl Swenlin

Sy Harding

Mike Burk

Below is my current allocation. If there is a rally in here somewhere sooner rather than later, I expect I'll sell my -200% SKF (Financials) and SRS (Real Estate) with anticipation of buying some of them back at lower prices.

I am short-term bullish but remain bearish longer term.

1/18/2007 ALLOCATION %		GAIN/LOSS	PERCENTAGE
SRS	3.54%	6,583	20.0%
SKF	3.83%	9,460	28.4%	7.37% -200% INVERSE ETF'S
DDM	1.26%	167	1.2%
QLD	1.37%	-156	-1.0%
SSO	1.35%	134	0.9%
UWM	1.35%	150	1.0%	5.33% +200 ETF'S
CEF	0.72%	2,041	33.8%
GLD	2.35%	4,905	23.0%
SLV	1.43%	1,801	12.7%
GTU	1.21%	3,862	40.2%	5.71% PM'S
RJZ	0.87%	50	0.5%
DBA	0.98%	1,080	10.9%
RJA	0.92%	180	1.8%	2.77% COMMODITIY
FXY	10.06%	10,502	10.3%
RRPIX	2.01%	-2,571	-10.3%
HSGFX	18.47%	3,988	2.0%	30.54% OTHER
TOTAL	51.72%	42,176	7.87%
CASH	48.28%
	100.00%

[raja]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

I notice that you own CEF, GLD, SLV and GTU.
Can you tell me your rationale for owning all four? Diversity?

I recently switched completely out of GLD and SLV and bought CEF and GTU because of the tax advantages of the latter.
I can't see any reason to hold GLD and SLV . . . but maybe I'm missing something.

Thanks

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

I notice that you own CEF, GLD, SLV and GTU.
Can you tell me your rationale for owning all four? Diversity?

I recently switched completely out of GLD and SLV and bought CEF and GTU because of the tax advantages of the latter.
I can't see any reason to hold GLD and SLV . . . but maybe I'm missing something.

Thanks

I own CEF and GTU outside our IRA's and GLD and SLV within one IRA, thus as you mention there are tax considerations. GLD and SLV are more highly traded than CEF and GTU. I tend to suspect that there is less room to be ripped off in some manner in CEF and GTU than in GLD and SLV, but that is just a feeling.

[raja]

Re: HOW ONE iTuliper IS INVESTED?

I own CEF and GTU outside our IRA's and GLD and SLV within one IRA, thus as you mention there are tax considerations. GLD and SLV are more highly traded than CEF and GTU. I tend to suspect that there is less room to be ripped off in some manner in CEF and GTU than in GLD and SLV, but that is just a feeling.

Jim,

Thanks for elaborating on this . . . .

I have the same feeling about "less room to be ripped off", probably because of CEF's long history as a "safe" investment.

Do you thing being "highly traded" matters in some way?
One thought I had is that, when the gold bubble pops, it will be easier to pull out in GLD and SLV because of the volume . . . whereas with CEF, and GTU in particular, it might be hard to find buyers . . . .

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Jim,

Thanks for elaborating on this . . . .

I have the same feeling about "less room to be ripped off", probably because of CEF's long history as a "safe" investment.

Do you thing being "highly traded" matters in some way?
One thought I had is that, when the gold bubble pops, it will be easier to pull out in GLD and SLV because of the volume . . . whereas with CEF, and GTU in particular, it might be hard to find buyers . . . .

That is exactly what I meant, sorry I was not more explicit. If you watch GTU's volume it is very thinly traded and the spread between buying and selling is relatively high. My attitude about CEF and GTU, they both are in my wife's account, is that perhaps I or she will hold them for a reaonably long time--and I have no idea exactly what that means.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Tuesday, 1/22/08, day of 0.75 reduction in Fed Funds Rate.

I added ~1.25% to my allocations to the long side by buying additional +200% ETF's DDM and QLD. These are bets that there will be some degree of upside reversal from the ongoingly very oversold conditions in the market now. Though it didn't feel like it today, these purchases seemed to be during an uptrend from the lows, using the DJI, earlier in the day. The DJI ended up 336.37$ off its intraday low. In many scenarios that would be a big move up--and in reality it was today.

I also added to my RRPIX by ~ 1.1%. At its low today, 4.221%, TYX was bumping down against multi-year lows, previously 4.135% on 6/13/03 and 4.151% on 6/3/05. Based on those two dates, perhaps I am about four months too soon, but it seems crazy to me that anyone is going to keep buy 30 years bonds with yields at these levels. As with everything I buy, I'll see what happens.

[Jim Nickerson]

Re: HOW ONE iTuliper IS INVESTED?

Wednesday 1/23/08

When the SPX moved up to 1330 today I added ~1.3% to my SSO and UWM +200% positions based on the SPX and RUT.

I've been handed my head by not having sold my -200% SKF (Financial) and SRS (Real Estate) positions. Lack of logic on my part. For the moment I have a small loss of 1.3%, but I have given back ~16.5K in paper profits in two days. Not good.

I read somewhere here today Stephen Roach saying you can't believe in globalization and decoupling at the same time. Regarding SRS and SKF, I have until today held the notion that I would hold on to the reduced positions in SRS and SKF I have had and wait out a correction, but I'm thinking the error is that interest rate cuts are targeted to help financial and real estate probably more than anything else, and today I think, regardless of a longer term out come, the markets reacted to that , and SRS and SKF suffered mightily.

There likely will be more interest rate cuts at the next FOMC meeting, so it is finally dawning upon me I would better rid myself of SKF and SRS for a while.

Usually when I decide to sell something, hell, I just put in the sell order at the market and get out. When I sit around to see if I am going to get a better price as the day goes on, I usually don't get a better price.

My bet now is that the equity markets are going to go up for a while--5, 10 or perhaps 20-30 days. No one knows how long or how much. It was quite a recovery today--from 12:45 to 4PM the DJI picked up 625$. I expect some follow through, and I am not sure that even today's opening price will be retested.

[jk]

Re: HOW ONE iTuliper IS INVESTED?

jim, i think part of what's happening is short covering and the unwinding of quant trades. the quants were all long tech and short financials. now all the movement is in the other direction.