The Tasgall Group

The equity markets right now are extremely volatile. The VIX has more than doubled just in the past few months, and this presents some opportunity if you’re willing to buy during the dips. Before I go further, let me be clear that I’m only considering buying broad market indexes when buying dips - not individual stocks or niche ETFs or mutual funds. I feel buying into dips is only advisable when considering a broad basket of equities. So, to simplify the discussion below, assume that we’re talking about the S&P500 only (although this should apply to any index funds, ETFs and mutual funds that focus on a large basket of equities) and that we’re discussing using market dips to augment long-term holdings only.

The 3-part question I’ve been grappling with is: (1) what constitutes an actionable dip, (2) when to exploit this dip, and (3) how much to invest in the dip. Volatility helps create really nice dip opportunities, but it requires some speed, available funds, and some previously determined strategy to effectively capitalize on volatility. (more…)

I heard a piece on Market Place (with both audio and transcript) over the weekend about investing in Cuba via the Herzfeld fund. It’s a closed end fund, trading at a much higher premium to NAV than I’m comfortable with (nearly 40%), but it does have a tantalizing investment strategy, and the fund is up 50% so far this year. Herzfeld focuses on businesses in the US that are poised to profit when US/Cuba relations are restored. Here’s a great quote from the piece that highlights this principle: (more…)

Interactive Brokers announced today that they would offer options priced to the penny: Penny Priced Options. IB is well ahead of the other brokers and exchanges on this one, so there are some interesting footnotes to be aware of, but nothing to scare me away.

Before this announcement, the smallest increments for options was $0.05, so it should be interesting to see how the spread collapses (or doesn’t collapse) on the most heavily traded options, like the options on the QQQQs and the popular day-trading stocks.

Since the bulk of my investments are in index funds, fed regularly by scheduled payments based on a pre-set asset allocation, it probably sounds strange when I express concern about taking profits and shifting my asset allocations. Obviously, rebalancing is essential to maintain appropriate asset allocations according to my plans, but a little over a month ago I performed an action that seemed to fall outside my asset allocation strategy. Jason has requested that I explain and expound upon my actions. (more…)

The subject of stop-losses is such an intensely difficult topic to discuss.  I’ve had many latenight debates in trading forums and chatrooms and I’ve been through every camp in my experience as a trader.  The best answer I’ve ever been able to come up with is that answer famous and frustrating for its truth: it depends. (more…)

No, not the blog (or rather the blog of other blogs).  I mean specifically the alpha that they are seeking.  What is it? (more…)

Of all techniques used to analyze markets, the one that I find underappreciated is market profiling and auction market value theory.  This style was first codified by CBOT as Market Profile.  But the basic principal is finding areas of price that generate more ticks of trading than others.  I’ve talked of this before as “density” areas. (more…)

I feel like most people don’t give weekly charts their proper respect. Take a look at the daily and the weekly charts for the NDX. While many people will look for various moving averages or other technical indicators to show trend and direction of price, sometimes it just pays to simply zoom out to the weekly chart.

In the case of the NDX’s daily and weekly charts, it seems like the weekly chart smoothes out a lot of the daily noise, but it still captures the entire range for the week in its high and low marks. It also shows nicely that the trading ranges each week are fairly wide, and only in a few specific weeks did we really have strong movement significantly beyond the previous week’s trading range. (more…)

A topic that I played around with extensively over the weekend is trading sector ETFs on a small scale.  Now I know the general guidance is to avoid trading sector ETFs since there’s a great deal of market forces unbeknownst to many when you get into sector trading.  The general guidance is to stick to major classifications, like large-cap, mid-cap, small-cap, etc. since it’s too risky trying to time buying and selling sectors.  While it’s true that the risk is greater trading sectors, I think there’s a higher chance for profit as well and ETFs present an attractive medium for trading sector ETFs.

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Yes, Virginia, you can time the markets. It begs more careful research but this is an interesting read for the more passive investor. You have to be careful about ever-changing cycles and transaction costs etc. but I like the idea that this is based not just on observed correlations but on a logical explanation for the occurance of this correlation.