Short Selling Portfolio

[eeehhhaaa]

I would like to see one or more portfolios dedicated to stocks that are on the decline for short selling or puts.  In the current market it's not difficult to find but eventually when the market recovers, there should be opportunities for decliners as well.  So what say the SSP administrators?

Hello,

Our portfolios' historical performances and the recent stock market crash clearly indicate that we can improve our performances if we can reduce the volatility of our strategies. Also, smaller drawdowns are important to help people stick to our strategies without unnecessary stress.

Our idea is then to introduce a Market Timing indicator that generates UP and DOWN signals based on the TSX trends. Obviously, when the trend is UP, it indicates that it is a good time to be invested and when the trend is DOWN, it is the time to stay on the side lines.

Our indicator is based on the TSX because this is the best available index that tracks our portfolios' broad market. Our indicator is then generated by using a few moving averages.

So, by definition, this is a trailing indicator. That means that we are not trying to guess the future, but we simply look at the recent past to extract the current trend. It is not perfect, it does not detect the exact tops and bottoms of the market, but it does a great job of extracting the most important trends. You'll see how it helps our volatile strategies to stay on the right side.

We have now made enough progress in our research to share those preliminary results with you. You comments and feedback will help us to make it as useful as possible for you.

In the next post, I will show you the results of this indicator on the TSX from 04 to Oct 08.

[Super Stock Picker]

Hello eeehhhaaa,

Indeed, this is a good idea that has already been proposed on this forum.

We are working on elaborating short portfolios, but this will still take some time. The current priority is the implementation of the Market Timing indicator.

[garilou]

Hi

I am being warned that this topic is very old...
Indeed.

Since the MTI is now perfectly implemented, (and other nice improvements to the site) will the "short" portfolios come back in the priorities of SSP?
We might be in a DOWN MTI for a while.

In a DOWN MTI, I guess the short portfolios would not be affected by the signal, but even if we were in a UP signal, there are always stocks that cry  "Please, short me!" 

Louise.

[Super Stock Picker]

Hi Louise,

Yes, this is still on our To-do list. Unfortunately, we don't see it out any time soon.

The MTI still requires some effort to share historical signals, historical alert levels and applications of the MTI outside the SSP portfolios.

We could also include other markets into our indicator as it has not been tailored to the TSX only by conception.

As you can see, still some fun ahead...

[garilou]

It's OK, SSP,

Anyway, I guess to plan a good short portfolio "generator" would be more complex than the other Momentum portfolios, because momentum and general TA indicators are way not enough to make a stock a good candidate for shorting.
Before I short, I have a very long check list to go through.

We do appreciate all the other things that you have added to the site.

Louise

[debile]

How about just buying shares of SQQQ (Ultra short NASDAQ) or SDOW (ultra short Dow ETF) when the market indicator is down?

No need to short, easy to buy, easy to sell and you get 3x the percentage of the major markets movement!

First I would need to check the historical return before doing this... Anyone got spare time? :-)

[garilou]

Hi debile...
I always have more or less shares of HXD in my RSSP portfolio, and one or 2 stocks that tend to go up when the market goes down.
This is because one cannot short in an RSSP.
Now I don't know how much you have shorted in your trading life, but the profits are not of the same scale!
And even if it might seem easier to short in a bear market, there are ALWAYS stocks to short, whether in bear or bull market.
Since - as a wrote that in another post - for ethical reasons, I do not like to buy stocks of companies who pollute, I love days like today, when metals go down, and I can short those companies.
By the way, even if the MTI is not (yet?) "DOWN", [my own indicators are not either],I feel that the SDOW is already ripe to buy (it is not exactly cheap), but I'd be careful with the SQQQ!
And not everyone here has US portfolios! (I do, but it is relatively small compared to my RRSP.)

But ETFs have nothing to do with what one could call a "portfolio".

Heu that's none of my business, but since we are not allowed to speak french on an English forum, I have to ask you in English:
Why "debile" as a nick? Do you feel "debile"?

Louise

[debile]

Hi Louise,
You're right, I do speak French :-) Debile is a nickname I sometime use because my usual one contains my name and I'm not comfortable using it everywhere. As a teenager I was crazy (extreme sports) and just kept the name even though I'm more mature now.

RRSPs are unfortunately limited. It sucks but there is not much we can do about it. I like to put money in my RRSP at the end of the year and trade (i.e. short and use the margin) before doing so.

SQQQ dangerous? Yes but I think if the shit hits the fan, NASDAQ will go down much more that the DOW.

Now, is it a good time to short the market? hmmm. Actually I was expecting a big drop last Friday because of the GDP. According to consumerindexes.com, one of my favorite reference to predict it, we were doomed. I sold almost everything and was waiting.

I didn't short because of an old saying that goes like "The fed can continue acting crazy and pump the markets longer than you can stay solvent". For this reason, I hesitated and it was the right decision.

Turns out 0.07% of the GDP was composed of direct government spending and most of the rest is from inventory accumulation...

The market is not rational. Trend following works great under almost any type of market including this one but I got to be careful of my emotions. As a rational guy, I see great opportunities shorting. It's hard to resist but I have to.

I'll probably restart buying after the elections... there are rumours of another stimulus this Wednesday. Wait and see

[jpenns]

I think this is a great idea, and look forward to SSP implementing it.  Nudge nudge!

[Super Stock Picker]

Another option is to buy puts on optionable Canadian stocks.
They are not so many available in Canada though.