Slip sliding away, Grade C

A hard down week in US equities close this option cycle. Other subject lines to describe the action include, Tech Wreck, I’m Melting (Wizard of Oz), as QQQ gives up most of its 2024 gains. Tesla, Apple are among the losers. I lose about 2% in my trading account, which sounds bad, but SPY, QQQ did worse.

Here are some ETFs 2024 calendar stats:

SLV silver 20.3%
GLD gold 15.6%

SPY SP500 4.2%
QQQ Nasdaq 100 1.3%

EEM emerging mkt -1.2%
IWM Russell 2000 -3.8%
TLT US20 yr -9.8%

My trading account +5.4 for 2024, so I am holding my own. The correction feels worse than that because there were higher highs. In fantasy land, I buy the low, and sell the high. Real life trading tends to be a lot harder for most of us. Precious metals had a good month, and now lead the pack, after years of underperformance. 

Bonds continue to lead lower. If yields go up over 5 percent, they start to be a significant headwind for equities. My big picture plan has been and continues to be to add to SPY and QQQ longs on significant dips. We are at 5% from the highs, and I added a smidge. At 10% off the highs and maybe 20 percent off the highs, opportunities look better. No one knows when the short term bottom is, and how big a bounce we might get from there.

I close positions in CRM, NFLX, reduced longs in AMD. I also went net short for a brief while on TSLA. The TSLA play was debit put spreads, which I closed at 30% profit on the tiny position. After several down days and earnings next week. I decided to book one of the few winners. NVDA saw a vicious correction. I remain overweight long NVDA. It is difficult to stomach the 20% decline off the 964 highs. I delta hedge shares by selling way out of the money calls, but am still overweight long.

Tough week for bulls. Good luck to all. Several big tech names report earnings next week. I have small long positions in META MSFT and other big cap techs, along with QQQ.

Live by the Sword, Grade C+

The cliché is Live by the Sword, Die by the Sword. Being overweight tech is great on the way up, turbulent on the way down. Grade C+. I did okay, but feel like I mis-managed my NVDA position. One lucky thing I did was close longs in Adobe before it fell on earnings.

Here are some ETFs, 2024 calendar performance:

SPY SP500 7.3%
QQQ Nasdaq 100 6.0%

SLV silver 5.7%
GLD gold 4.5%

EEM emerging mkt 1.4%
IWM Russell 2000 0.8%

TLT US20 yr -6.0%

My trading account +7.7, so I am staying ahead. Still doesn’t feel good during those down days towards the end of the option cycle. The most likely scenario for QQQ and some other leading stocks is choppy horizontal trade. I reduced long positions in AAPL and TSLA, got out of ADBE entirely because they are two of my worst holdings for 2024. I initiated tiny long positions in Ferrari RACE, and Toyota TM. These two auto stocks are doing well, while EV oriented auto stocks have been falling.

I remain overall bullish, overall tech heavy, lots of cash in reserve, looking to add longs on signficant dips.

One stupid mistake, Grade B-

Stocks rally then dip, then recover. Bulls are still mostly in control, though there are pockets of weakness. My trading account is up 5.8% for calendar 2024. My one stupid mistake was selling calls on ARM. It is too volatile a stock for that. My position was complex, but I covered the long calls for a huge percentage loss.

Here are some ETFs 2024 calendar performance so far:

SPY SP500 5.1%
QQQ Nasdaq 100 5.1%
IWM Russell 2000 0.5%

EEM emerging mkt -0.3%
SLV silver -1.9%

GLD gold -2.5%
TLT US20 yr -6.2%

My trading account up 5.8%. So despite the ARM loss, I am ahead of the major indices. I continue with the thesis that AI is a big deal. It will have a positive impact on the earnings of many companies.

I was tempted to use the title Tale of Two Cities, best of times, worst of times. McDonalds and Starbuck report that customers are starting to balk at the higher prices. Chipotle reports their customers have not flinched. SuperBowl tickets started at $8000 per ticket. Huge demand from San Francisco, and their many wealthy fans. Not many regular folks can afford $20k for a weekend in Vegas and the SuperBowl.

The wealth gap is an issue. At some point it becomes politically unstable, and revolution becomes much more likely. There is so much anger out there. I will spare you the soap box speech.

The big picture strategy remains, buy QQQ on major dips. Be on the watch for a 5% or 10% correction at any time. Enjoy the bull ride, but keep a healthy cash reserve to add more on dips. I am not a fan of protective puts. It is so hard to decide when to cash in the puts and go without protection. For retail traders, much easier to keep cash in reserve and buy the dip.

NVDA pulls the bull train, grade B+

Stocks start the year with a minor dip. Then the bulls take the wheel, with record highs in many major US indexes. Other investments such as bonds, gold lag. I make decent gains, self-grade B+. About half my gains are from Nvida. I have a small position in shares, and lean long with options. Tesla is a laggard. I maintain large cash reserves, waiting and watching for clearer opportunities.

Here a few ETFs 2024 year-to-date:

QQQ Nasdaq 100 2.8%
SPY SP500 1.5%

GLD gold -1.7%
IWM Russell 2000 -4.1%

TLT US20 yr -4.8%
EEM emerging mkt -4.5%
SLV silver -5.1%

My trading account +2.5%, so better than SPY. I remain over weight big tech. I believe the AI revolution is only in the second inning. There will be any number of small or new companies that become large companies, that aren’t even on my radar yet. With this in mind, the strategy of buying QQQ on dips. SPY might be good too. American companies are more likely to embrace the new changes. 

European governments may try in vain to save human jobs, with the unintended result of their big companies lagging those that embrace AI. It isn’t all puppies and rainbows. There have already been and will continue to be significant disruptions. People on the short end of the stick will need to adapt or suffer. 

There is a dark side. Dictatorships will have no qualms about weaponizing AI. This is down the road, but will almost inevitably come. Hopefully, the ethical side will prevail, but there are no guarantees. Think about big inventions such as the steam engine, or electricity, and how much those changed the world. AI is on the same scale. Unlike industrial inventions, AI is mostly about ideas and processes. Any changes are potentially much quicker.

It is always prudent to have some emergency supplies, food, water, meds, barter goods on hand. I’m not talking about massive stock piles, but two weeks worth, cost near nothing and will get a person through average disruptions.

Year in Review, grade B+

A very good year for the bulls. SPY +24%, QQQ up over 53%. My trading account a little bit better than SPY. I feel like I’m taking less risk than buy and hold SPY, so coming out ahead is a good result. My self grade is B+. Almost everything worked. Winning tickers were everywhere, led by NVDA, BRKB, AMZN, META, AAPL. 

As I often write, I am older than most, and my account is not some small throw away account. I have to be deliberate, because I can’t earn enough from wages to make up for big losses. After the margin call during the Covid year, I am especially careful. In my retirement account, I picked several value stocks using a fundamental screener. Those did poorly. 

In my trading account, I leaned heavy towards mega cap tech, and BRKB. That worked well, so my limited equity exposure turned into a good return. 

I remember telling some others to buy on dips, that a 20% percent dip would be a golden buying opportunity. QQQ touched 11 percent then went up. Hard to be so precise.

Going forward, I lean bullish, but will keep huge reserves until more is revealed. A five percent correction can happen at any time for little apparent reason. Last year’s strategy of buying the laggards for the year probably won’t work so well. For now, I lean cautiously bullish. I am grateful for the good year. I know a lot of people are hurting financially. Some of that is choices made. Some of that is disposition. Some are the cards you are dealt.

Some new year questions: Highlights, lowlights of 2023. What did you learn? What do you want more of, less of? What new activities would you like to start or perhaps resume? These are more life questions, than trading oriented, but still can be useful.

Highlights, a good solid year, low drawdowns. Low lights? Missed opportunity because huge gains were out there for those willing to take on the risk. What did I learn? I am an old dog trader, so not much new material to learn. Perhaps, learning to be happy with the half a loaf that I get. I'm never going to be an all in, all out, or all short kind of trader, not at my age and life situation.

Whatever your situation, I wish everyone of you, peace in the new year.