Sunday

TheInflationist Weekend Summary: 230809

Post a Comment August 23, 2009 – 1:06 pm |   | Permalink |  Print This Post |

Western markets resume their uptrend this week whilst Asian markets continue to show weakness. Whilst SPX made higher highs to close above the 1018 pivot quoted on many EW blogs, China H-Shares, which have been leading the rally, closed almost 10% off their intraday peak of 12488 at 11450. Many are reading too much into this, suggesting that Asian markets are leading the rest of the world - and so this weeks confirmed decline in China is a sign of further weakness in western markets. The way we see it: Asia fell the hardest (China H Shares fell from >20000 to ~5000), hence bounced the most (5000 to 12488), and now are pulling back by a greater degree.

Our indicator is still off its recent peak shown in our previous Trading Summary despite markets going higher. This suggests that our indicator is holding up well. The limitation is it does not provide a day to day trading guide, instead it provides a big picture of where markets are heading. And it still points down. Our indicator was very close to breaking the upper trendline a week ago when markets were around this level (Dax was 5500 and the ASX 4500) - a convincing break above the upper resistance channel would invalidate our indicator. Instead of using our indicator to time the exact turning point, we use it to lay our short-anchors. We will continue to hold our existing short positions of the index and our selected stocks in our portfolio as buffer if markets continue rising. It is concerning though, to see emerging markets close to previous peaks (Check out Turkey iShares). If this is a hint of what to expect, then Western markets could easily head up 30% higher.

A quick update on our selected stocks. We bought some Village Cinema (VRL.AX on Yahoo) May 12 2009 at 0.80. We believed the cinema business could benefit from a recession, as evidenced by recent results. Since then, VRL is now trading at 1.37, thanks to resumed interests from management in privatizing the business. Troy Resources (TRY.AX), a small cap Gold company trading close to cash backing when we first spotted it, have risen from 1.35 to 1.90 along with the rest of the market.

Our short in JBH at 18.40 is a relatively big trade for our portfolio. At 1000 shares, this $18400 position is currently up $1200. We look to partially lighten our position at $16. Bear in mind that if March lows were to be retested, the profits from our shorts in JBH could be substantial (and the 18.80 intraday high could be the top for years to come). We continue to search for an undervalued stock to long by the same degree (ie $18000 position) - preferably Agriculture/commodity based.

Our Natural Gas play continue to look ugly - this marathon is far from over. We will continue to pace ourselves and open more long positions. This should offset our JBH short position.

Our portfolio sits at $86317 (including all unrealised positions), up 115% since its inception 1.1.09 where we started with $40000.

www.theinflationist.com

www.theinflationist.com

For those who are new to our site, we started TheInflationist Trading Challenge in January 2009 with $40000. Unlike any other stock trading website, we trade publicly LIVE, track our performance transparently, and make actual trades in our personal portfolio (yes, we own every stock and trading position in our portfolio). We stick our necks out on the public chopping board and feel actual pain when our positions are in the red (No, this is not virtual trading for us!)

This phenomenal 93% result is reproducible for all readers as trades are published live at prices available to readers. Applying our own fundamental and technical analyses with our conservative risk management strategies, combined with the views of some of our favourite investment analysts (Jim Rogers, Mr Magik, Tony Caldaro, Brian Shannon, Guy Lerner, Marc Faber and Philip Manduca), we formulate trading plans both short and long term. We do not rely on any one source, and not uncommonly trade contrarion to these technical experts (with all due respect).

Feel free to join us - the first website on the web where you can take a position in anything, long or short! Trading is as easy as writing an email.

1. Register

2. Go to “My Portfolio” (top column of links)

3. Add stocks (search for stock codes using Yahoo here) - for Australian stocks, add (.AX ie dot AX) as an extension (eg: BHP.AX for BHP; WPL.AX for Woodside); enter the purchase price and quantity.

4. For trading indices or commodities, simply click on “Add New” under the “Posts” section in your Author Dashboard (www.theinflationist.com/wp-admin).