It varies, sometimes I get it wrong and sometimes I get it right (like most folks).
Technical analysis is sort of far down on my list of priorities but not ignored. I tend to gravitate closer to buy and hold than anything else. When I buy a stock for clients I tend to buy what I think is and will be a good proxy for that sector, country, cap size, style and so on for a long period of time. The Google trade from the summer of 2005 would be an exception to this.
I have written about a few of the sales, or more correctly position reductions, I made earlier in the year. I wrote about reducing energy and emerging markets in late April. There were two catalysts behind those trades; chart action and sentiment.
I am using EEM and XLE just to show what was going on generally at the time.There was euphoria around both parts of the market. They had both come along way and being cognizant of both contributed to the decision to reduce.
A negative example would be not adding to tech at any point in the rally thus far. I have been very underweight the sector all summer and while the sales were pretty good I missed adding more exposure in a timely manner. I suppose it is possible this turns out to be a suckers rally but I missed some return.
Another trade that did utilize some TA was the gold trade from last February. I had clients in Anglo Gold for a long time. I felt that the miners had generally moved a lot more than the metal and thought some sort of reversion was likely. This was a decision made based on price movements of Anglo Gold vs. the GLD ETF.
I know that certain technicians utilize just a few indicators which I would not criticize but I tend to think that the indicator that matters today may not matter six months from now. Six months from now some things may matter instead of the thing that matters today.
5 comments:
Roger, roger.....
Not only do you have to make the correct call about when to lighten up, but you also need to make the call as to get back in.....Not easy, and you prove it with your examples.
For example, on EEM, you gloat about getting out in April, but missed the Q3 runup of 3.1 %, and a nice October run. EEM is up over 10% YTD. Your April trade has also created realized cap gains that will need to be paid this year.
After taxes and trading costs, I'm betting a buy and hold on EEM will out perform your jumping in and out....
Your advice to lighten up on equities this summer (at the low) seems similarly flawed....
Roger,
Do you ever use sector, cap/style, or country momentum to a part of your investment decision making process?
I get CNBC Worldwide Exchange in my part of the country. This morning, Bob Mckee of Independent Advisors spoke about the soft prices in some commodities ie soybeans, corn, cotton, coffee, sugar as a buying opportunity (wheat is at 10 year highs due to a drought in Australia). Part of his reasoning was that the true cost of production with higher energy costs has not been passed through yet. The second half of his analysis is that China will increase imports of softs over the next few years. Seems like a reasonable theme. Corn looks like it is at a 5 year low and has the best argument of returning to a mean price. Bob Mckee said that these would be not short term investments. Fascinating stuff. Tom in Indy
In the latest 5 year plan, China has said they want to achieve a balance of trade with the World by the year 2010(11?). IMO this would be major shift in direction of the chinese economy away from cheap manufacturing. What are the logical areas the Chicom government would like to move towards? Services? Tourism? Tom in Indy
Tom K...processing role of China, if you have an inside track, has got to help investment planning. But, getting good info has got to be a problem. That's just a lay perspective. As to the soft commodities, it's hard for me to imagine that China does not plan to be self sufficient. Do you really see a balance of trade, or just tongue n cheek?
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