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2021, the Year of the Monkey. $SPX #markets #trendfollowing #trading #investing #funds #heikinashi #WealthManagement

January 3, 2022 Comments off

Each year, around this time, everybody has an opinion about where the markets will end next December. Very few are right, with the Lady Luck on their side. As everybody knows and as few admit, forecasting the markets is pure entertainment.

In his book A Random Walk Down Wall Street, Burton G. Malkiel describes a dart throwing stock selection method as “Taken to its logical extreme, it means that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”

Five years ago, I recreated this simple random stock selection to generate a series of funds and compare their performance with a benchmark, in this case S&P-500. At the of each year, I was running it, with similar results: the Monkey beat the Market and most of the fund managers.

Input

  • The S&P-500 stocks universe.
  • The stocks selection is 100% random.
  • 100 funds are generated.
  • Each fund has 30 stocks (an optimal value for risk diversification).
  • Buy (at close on the last day in December) and Hold (until the last day of the next December).

This is how one set of randomly generated 100 funds performed in 2021: 73 were better and 27 worse that the benchmark S&P-500. The lowest performance was +13.18% and the highest, +47.81%. (Note: one can generate any number of sets. The results show the same positive tendency as above).

How many professional fund managers beat the lowest performance of 13.18 in 2021?

And here is an animation of the process, with S&P-500 in yellow:

Why should we care?

  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to human fund managers?
  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to Artificial Intelligence/Machine Learning-driven funds?
  • Despite its simplicity and performance in good and bad times, no fund manager will sell funds based on dart throwing. They and their clients won’t accept the fact that a simple random stock selection performs better that most of the highly-paid human or automated fund managers.

Next step?

  • Let’s follow in 2022 a randomly generated fund. It’s fund #50 in 2021, with a performance of +31.26%.
  • Its components are TRMB GOOG CMI IEX FLT CVS UNH HWM ABMD VFC FE AAPL WELL WYNN WFC BMY LH QCOM CHTR NXPI WMB ABBV CVX HRL TRV VZ CMCSA K MMM SYY.
  • At the end of each month I will publish the buy-and-hold performance since the start of 2022. Better or worse that the benchmark? Time and the Monkey will tell the story.

Disclaimer: This is not a recommendation to buy or sell financial instruments of any nature. It is just a reenactment of a dart throwing stock selection method based on the book A Random Walk Down Wall Street by Burton G. Malkiel.

A long-term view for $SPX #heikinashi #markets #trendfollowing #trading #investing

January 2, 2022 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

SP-500  ($SPX) – quarterly

  • (+) Uptrend with a stop @3,848
  • (!) A slowdown (haDelta).

SP-500  ($SPX)yearly

  • (+) Uptrend with a stop @3,854
  • (+) haDelta is overextended.

An X-Ray of the Market: S&P 500 and Heikin-Ashi $SPY $SPX $DIA $DJIA

January 31, 2013 Comments off

Daily chart:

  • Despite the extended price advance, haDelta shows weakness
  • Bullish but weak

 

An X-Ray the Market: S&P 500 and Heikin-Ashi $SPY $SPX $DIA $DJIA 1/30/2013

Weekly chart:

  • Close to the apex of the consolidation triangle
  • Bullish and undecided

 

An X-Ray of the Market: S&P 500 and Heikin-Ashi $SPY $SPX $DIA $DJIA

Monthly chart:

  • Bullish

An X-Ray of the Market: S&P 500 and Heikin-Ashi $SPY $SPX $DIA $DJIA

How Far Will $AMZN Run? $QQQ $EBAY $SPX $SPY

January 25, 2013 Comments off

Daily chart

  1. Comfortable vis-a-vis its trailing-stop
  2. Despite the sustained uptrend, the haDelta :: SMA(3) bullish crossing offers indications of a strong trend ahead

 

How Far Will $AMZN Run?  $QQQ $EBAY $SPX $SPY  1/24/2013

Weekly chart

  1. Difficult to overcome the haDelta resistance
  2. Caught inside a medium-term consolidation (haDelta is inside an ascending triangle)

 

How Far Will $AMZN Run?  $QQQ $EBAY $SPX $SPY  1/24/2013

Monthly chart

  1. Caution: haDelta is approaching the first resistance level.

How Far Will $AMZN Run?  $QQQ $EBAY $SPX $SPY  1/24/2013

$AAPL Head-and-Shoulders – Target: 320 $QQQ $SPX $SPY

January 24, 2013 Comments off

Apple weekly chart (see below)

Upper pane

  1. Waiting for a resolution of the bearish Head-and-Shoulders following a sustained long uptrend
  2. Price objective: 320 (based on H&S characteristics)
  3. The thickness of the Ichimoku cloud in the next 13-15 weeks suggests a resistance difficult to overcome
  4. Note the change of trend 26 weeks in the future on the Ichimoku chart: Usually, such points warn about a strong trend to develop during this time

Middle pane

  1. The haDelta average SMA(3) was negative (yellow area)
  2. haDelta and SMA(3) failed to become positive (bad sign)

Lower pane

  1. Failures to go above the oscillator’s resistance (50-60 area) = Weakness

 

$AAPL Head-and-Shoulders Target: 320 $QQQ $SPX $SPY 1/23/2013

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