Prosper Portfolio Update

My Prosper loan portfolio is now up to 21 loans after I made five new loans in the last couple weeks. All loans are current, although I did have one loan payment go more than 15 days late this month but it has been paid.

The average interest rate of the portfolio is 13.89 percent. Credit ratings of the borrows are as follows: AA (3), A (3), B (14), C (1).

As you can see, I tend to favor B-rated borrowers, who seem to be in the sweet spot in terms of risk/reward. A higher credit rating would lower the risk of default but provide lower returns, while lower credit scores provide unacceptable risk of default given the potential payoff, in my opinion anyway.

If you are interested in bidding on loans, or obtaining a loan from Prosper, please consider clicking on the Prosper banner to the right. By doing so, I will receive a referral fee of $25 to $50 if you become a lender or borrower. So far, I have received one $25 referral fee. Thanks!

Triple MA Cross Over Update

Too Funny Not To Share

I avoid politics like the plague around here, but this is just too funny not to share. If you're a fan of Obama and thin-skinned, then just move along. For those of you who enjoy good satire, read on:

And it came to pass, in the eighth year of the reign of the evil Bush the Younger (The Ignorant), when the whole land from the Arabian desert to the shores of the Great Lakes had been laid barren, that a Child appeared in the wilderness.

Read more here.

Go Long, Short, or Both?

Don't know about you, but I'm a natural bull. 

The glass is always half full. Problems are opportunities. And stock prices will always be higher in the future than in the past, so go long and let the pessimists wallow in their misery.

However, as an aspiring day trader who hopes to someday make a living playing this game, I am developing an affinity for the dark side short side of the trade.

So, it was only a natural progression that while trying to develop a long-only swing trading strategy, I decided to reverse the criteria to see how the system would perform on the short side.

The long-only system in question is the MA 50 Cross Over. 

The rules are simple, buy when price closes above the MA 50, exit with a five percent profit, or when price closes below the MA 50, or when price triggers an eight percent stop loss, which ever comes first. Maximum number of positions is five.

Annualized return on investment of such a system year-to-date: 46.64 percent. 

Here are the details:

As long as you can live with a win/loss rate of about 50 percent, give or take, this system can be very profitable, especially in a sideways market that goes to and fro.

But doesn't being long-only expose a trader to nasty drawdowns or extended periods of time with no actionable buy signals? Yep.

So, let's reverse the MA 50 criteria into a short-only swing trading strategy and see how well it does.

Again, the rules are simple: Sell short when price closes below the MA 50, exit with a five percent profit target, or when price closes above the MA 50, or when price triggers an eight percent stop loss. Maximum number of positions is five.

Annualized return on investment of such a system year-to-date: 40.85 percent.

Here are the details:

I've been tracking these two systems for months and must admit that I am very intrigued by the idea of going long and short at the same time. Think of it as pairs trading at the system level.

I still have a lot more research and backtesting to do over multiple timeframes before committing resources to these two systems, but thought I would share the year-to-date results out of simple curiosity.

RSI(2) Buy Signals

Markets are still short-term overbought and today's rally from the abyss didn't help matters much.

Both RSI(2) buy signals are for inverse ETFs, specifically, SDS for the S&P 500, and MZZ, for the S&P Mid Cap 400. 

Given how strongly financials have rallied, I suspect the July lows are an intermediate term and very tradable bottom, but I think the markets need a pullback before going higher.

Triple MA Cross Over, 2006-2008

Here are two-year results for the Triple MA Cross Over system. According to StockFetcher's calculations, a $100,000 portfolio on July 18, 2006, would now be worth more than $170,000 as a result of trading this system.

Triple MA Cross Over Update

It has been weeks since I provided updates for the swing trading strategies I track, but I intend to get back into the habit of posting these results on a weekly basis. Herewith, the results for the Triple Moving Average Cross Over system.

RSI(2) Oversold Signals

Two ETFs popped up on the RSI(2) oversold scan tonight.

First up is SDD, the double inverse ETF for the S&P Small Cap 600, which is registering an RSI(2) of 9.58. Small cap stocks are apparently short term overbought now, so it may be time to go short. Careful though, we may have a big gap down at Friday's open, which would not be an ideal entry point.

Next up is USO, the long oil ETF. For months an RSI(2) reading on this was a license to print money. Now, I'm not so sure because today the price closed below the MA(50) for the first time since February. Yeah, I know, one day does not a trend break make, but it does ask for your attention.

The August oil futures contract has shed $17 over the last three trading days, and it gained considerable speed to the downside on Wednesday when the oil inventory report showed a 3 million barrel increase in supply when everyone was expecting a 3 million barrel decrease. Yep, inventories came in 6 million barrels higher than expected!

The end result was massive selling and a Thursday close below $130.

The new fear hitting headlines now is that a recession will reduce energy demand that will result in higher oil supplies, thus driving the price down. A more realistic answer: there are now more sellers than buyers and the why is irrelevant.

All that being said, nothing goes down in a straight line, just look at the last two-day bear rally in stocks to learn that lesson. So it is entirely possible that oil rallies here, and since the great Googley Moogley blew up after hours today, commodities may be back in fashion Friday morning.

As always, be careful out there and always use protection, especially stop losses when trading stocks.

Three Indexes Oversold

Three market indexes triggered RSI(2) buy signals after today's close, they are DDM (Dow 30), SSO (S&P 500), and MVV (S&P Mid-Cap 400).

There is no question stocks are oversold short-term, but today's bounce after the morning sell off felt more like short covering than long-term investors rushing in to buy bargain-priced stocks. The afternoon sell off confirmed it, at least for me.

Adding to the uncertainty is the inability of the financials to get on their feet. They tried to rally today but were clubbed into submission at the close. Oil dropping $7 helps, but financials need to rally for the broader market to move higher.

With that being said, look for a bounce within the next day or two. Watch tomorrow's open very carefully and be prepared to buy any morning sell off, or jump on a rally if one materializes out of the gate.

Finally, I noticed that NQ, the Nasdaq 100 futures contract, opened for trading at 4:30 p.m. above the pivot point, a positive sign, but I haven't looked at the chart since then so I don't know if it is still poised for a possible rally or not.

Radiohead: House of Cards

Radiohead breaks new ground with its latest music video, which was created without the use of cameras. Instead, the video data was collected using three laser scanners and then the data was enhanced on a computer.

Here is the video:



And here is more information on how it was made, including a behind the scenes video explaining the process, as well as a link to the laser code. Radiohead is hoping fans will download the raw data and remix the video.

Very cool.

Natty Oversold, Too

Forgot to mention natural gas via UNG. The RSI(2) is 3.29 and price closed smack dab on the MA 50 today.

Oil Oversold

The price of oil has dropped about $9 over the last two days and that has the oil ETF USO printing an RSI(2) reading of 6.1, well into oversold territory. The price also is closing in on the MA 50, which has provided very reliable support since February.


Oil and other commodities have been knee-capped over the past few days, which has Damian at Skill Analytics taking a closer look.

Oversold Stocks in Nasdaq 100

Of the 100 stocks that comprise the Nasdaq 100 index (NDX), 25 of them have an RSI(2) reading below 10, indicating an oversold condition.

Those 25 stocks are, in no particular order: NVDA, INTC, JAVA, UAUA, XLNX, GILD, ALTR, ATVI, HANS, STLD, TLAB, WFMI, CTXS, PTEN, MNST, NIHD, DISCA, CHRW, CDNS, MCHP, DISH, MXIM, LOGI, PDCO and ISRG.

Extreme RSI(2) Readings

After a month of near constant selling, many stocks and market indexes have returned to their January or March lows.

Oversold conditions based on RSI(2) readings are a dime a dozen in stock land, but tonight I want to bring to your attention three ETFs that are not just oversold, but extremely so.

MVV, the Ultra ProShares ETF for the MidCap 400, has an RSI(2) of .87; SAA, the Ultra ProShares ETF for the SmallCap 600 has an RSI(2) of .46; and UWM, the Ultra ProShares ETF for the Russell 2000 has an RSI(2) of 1.30.

Naturally, an extremely oversold condition is no guarantee of a rally, but in the event markets do rally sometime this week, buying the most oversold sector funds can be a profitable move.

Sunday Photo Blogging

The merchant vessel St. Mary's Conquest backs out of the Grand River into Lake Michigan Saturday night. The barge is 437 feet long, 55 feet wide and carries 8,500 tons of cement per load.

Saturday Photo Blogging

Earlier this week, a line of severe thunderstorms rolled across Lake Michigan bringing 85 MPH wind gusts, marble-sized hail, and some pretty decent waves to the Grand Haven beach.

This was the first thunderstorm that I've experienced where a dramatic and sudden change in atmospheric pressure caused my ears to pop just like they do on an airplane.

As soon as the storm passed, about a dozen people descended on the lighthouse pier with surf boards in hand. I took this shot as the setting sun peaked out from behind the clouds.


Meanwhile, in Chicago the National Weather Service issued a seiche warning for the Lake Michigan waterfront after the lake level on the Illinois side dropped two feet. The water returned to Illinois over the next 24 hours without causing any harm.

Wednesday Photo Blogging

Patriotic toes

Striking a pose along the Grand River

Incoming storm kicks up waves along the lighthouse pier

View of the lake and lighthouse on the pier

Severe storm moving in on an empty beach

What is Four Million Percent?

Apparently it is the unofficial rate of inflation in Zimbabwe, where a pint of milk now costs 3 billion Zimbabwe dollars, or about 30 cents U.S.

Yikes.

Sun, Surf & Sand

Colors by God, Photo by Kate, Age 7

We're back at the cottage in Grand Haven, Michigan, this time for two weeks. Blogging will be light, but you can expect vacation pics on a regular basis.

We got here about 9 p.m. Monday, just in time to carry all of our things into the cottage, grab a sweatshirt (mid to low 50s at night), and then head to the beach to watch the sunset. We also took a walk to the end of the lighthouse pier, which is shown above.

My plan for the next two weeks is to day trade in the morning, quit by 12:30, then play the rest of the day.

I brought along fishing poles and expect to spend a fair amount of time fishing from the banks of the Grand River with my seven-year old.

Tonight I saw one guy leaving the lighthouse pier with a large salmon in a bucket. It looked to be about twice the size of the 14-inch largemouth bass my daughter caught last week. We won't be angling for salmon on our light gear, but there are plenty of pan fish and bass waiting for us in the river.