We strictly trade covered calls during favorable (flat-to-up) market periods. Seems routine for the better part of the last decade, but has only allowed for us to truly engage for a few months (Q2 '08) in 2008 and (Q2 '09) in 2009.
These periods allowed for my system to easily jump 20-25% - but soon went to cash with the ensuing tenuous market action (see Performance Charts at www.KingdomCapital.
The current correction will ultimately wring out most of the market excess that may allow for a nice multi-month rally to unfold and a subsequent large return using my high-yielding covered calls picks.
But first, selling has to "capitulate" - with investors finally throwing in the towel at any cost, and strong technical action from leading stocks must take form. Yesterday's 3% vault was a "follow-through" that has indicated every market bottom, since the 1880's - but not every confirmation signal is successful.
Time will tell as we now look for buyers and breakouts amongst leading stocks. An early distribution day - soon after a follow through - most always leads to failure. We've seen two previous follow-through days during the current correction fail. Tape action is key.
I will keep you posted. Be patient.
Most don't understand that this system is designed to eventually manage to overtake the bulk of your investments - starting with 1/10th your net worth and to vault past your full net worth in less than a decade. To do this simply and easily, a large average annual return is a goal - BUT MUST be coupled with strict loss management rules to minimize drawdown periods. KEY: learn to manage during up, sideways and down periods as you'll see on this site - then the multi-year effect will take hold.
This is a long-term system and not a get-rich-quick scheme (too much risk) that of course would only command a small amount of your investments. Eventually and soon the whole ball of wax will display, but for now (see KCM Pro 2010.xlsin file section). . .
G
From: Gilbert <gilbert_arevalo@
To: CoveredCallFund-
Sent: Tue, June 29, 2010 12:09:59 PM
Subject: [CoveredCallFund-
Now a full 8 weeks, our "correction" is at a critical juncture. Take note of some excerpts from the following article:
"Notably, the current test of S&P 1,040 marks the fourth approach, and major technical levels are normally breached on the third of fourth independent test."
"This area matches the 2010 lows, and the neckline of a head-and-shoulders top, a high-reliability bearish formation."
"Moving to the Dow, its wider view is equally challenged."
"As illustrated, the blue-chip benchmark stalled last week at its 50-day moving average, and a bearish head-and-shoulders top continues to take shape."
"Against this backdrop, both small- and mid-caps -- former market leaders -- have already violated their 200-day moving averages, marking the latest in a series of yellow and red flags."
"And to add insult to injury, the Volatility Index currently holds about 46% under the May peak improving the chances of an eventual breakdown. If this week's downdraft marked a bottom, the VIX would typically be challenging new highs."
http://www.marketwa
G
--- In CoveredCallFund-
>
>
>
> Still patiently waiting for a more cooperative Stock Market. Our timely "correction" call is now a full 6 weeks long. After exiting stocks before the '08 crash - with most prior year gains in tact - we found the '09 bottom in a timely enough manner. . .
>
> Well I'll leave you with a copy & paste of my recent online post -
>
> Gilbert Arevalo
> 13:52 ET
> For the few with longer term perspectives w/trading systems. . .my take on the "flash crash" fits fine with "normal" market behavior. Remember that Fed-induced levels of prolonged '07-'08 period suddenly lopped off 50% of index market cap in a few months.
> Gilbert Arevalo
> 13:57 ET
> Then we "bottomed" in '09 and rallied for 1/2 year with rel. "normal" price and volume (institutional participation) action as beaten down financials, etc. were scooped up - with "doomsday" apparently delayed - at least until mid-year. Then price diverged w/volume as indexes innocuously levitated in scant or no trade for an incessantly long time period - into '10.
> Gilbert Arevalo
> 13:59 ET
> The Jan-Feb period wasn't sufficient to "correct" the market as it again jumped to even loftier levels on even lesser trade and no new leadership with the "new bull market". Every day up volume down with an innocuously large (however real) price move. THEN THE DRAIN. Makes total sense. It did bounce, but quickly moved back to said area. The area still wants to hold with just a rel. small market pullback. Time will tell.gA
>
> If this is finally a "healthy" market yesterday's >2% gains in low, low NYSE trade will waffle. For now. . .this may not be the case. (Arghh!) Meanwhile, the Nasdaq "follow-through" is in higher trade, but is still below average.
>
> IBD criteria works. . .but is tenuous in indecisive periods. For now we will look for further confirmation in the form of (currently non-existent) leadership.
>
> G
>
> --- In CoveredCallFund-
> >
> >
> >
> > The market still groping for direction - as we moved into "correction" mode...nearly 5 weeks ago.
> >
> > Thus far we've had some seriously volatile index jumps off lows on the way down. Is this enough to "wash out" the market? It doesn't appear so. According to IBD we went back into a "confirmed uptrend" after Wednesday's price and volume action.
> >
> > According to my measures, however - with volume mixed and really with no conviction on the Nasdaq a sell-off with the disappointing jobs report is not surprising.
> >
> > We've kept our Market Direction bias in "Stop Losses" mode - at least until the SPX can convincingly overtake resistance at its 200 dma or around 1105.
> >
> > Distribution today effectively nixes the IBD call. In the last 4 years (imo) the publication has only once seriously missed a call. I kindof knew this one need not be heeded for a plethora of reasons I won't go into now.
> >
> > Meanwhile, perhaps the benchmark indexes can take this correction another leg lower. New buys are currently off the table, in this tough environment, but I will keep you posted.
> >
> > G
> >
> > --- In CoveredCallFund-
> > >
> > > Thanks for this clear explanation, Gilbert!
> > >
> > >
> > >
> > >
> > >
> > > ____________
> > > From: Gilbert <gilbert_arevalo@>
> > > To: CoveredCallFund-
> > > Sent: Wed, May 12, 2010 8:40:24 PM
> > > Subject: [CoveredCallFund-
> > >
> > >
> > >
> > >
> > > Thanks for your input Mike and I admit the market has been very trying these last 2.75 years.
> > >
> > > The IBD mantra: "Price rarely goes far without volume." - seems to have gone right out the window! But for the long-term investor gauging price and volume is still tops.
> > >
> > > Bill O'Neil's research dictates that every market bottom has been "confirmed" by a significant (>1.5%) index rise in higher volume then the previous day. CAVEAT: not every confirmation results in *the* bottom.
> > >
> > > You are right that price has already risen considerably, but in looking back through 12 years, patience almost always proved prudent. Did we not all see 2010 gains evaporate in an instant?
> > >
> > > Just goes to show, it may take time, but price does eventually jibe with volume. Most of this divergent behavior can be attributed to the Bear Market period. But, it appears it has been exacerbated by incessant government intervention (stimulus).
> > >
> > > The most recent, of which was an $1T injection into European countries. Just another monkey wrench, but wrenching nevertheless. This is all temporary, but seems unending. I know I am exasperated!
> > >
> > > I still believe it is the best choice, since in the last 2.75 years some gains were made amidst a still down market. Bill O'Neil research also reports that healthy price & volume action accounts for 80% of all market periods. W'eve probably seen the majority of the 20% (or more) during this last few year period.
> > >
> > > When gains do come, they do stack up quick and nicely - especially in the early bull market years. The important thing is that once an account compounds a few years of high annual gains - do stick with my stop loss methods - since we won't want to drawdown more than 20%.
> > >
> > > The real question is: Are we finally close to a "solid" bottom - yet?!? With this strategy a nice 50% 5-month run should bring things back into perspective. I'm sorry IBD timing has (only) been your experience during these tumultuous times. We'll experience the good times together - soon.
> > >
> > > Now an example. Let's say you started an account in 01-JAN-2006 with $25,000. Based on my historical returns you'd be sitting on a [(25k*1.34*1.
> > >
> > > Compare that to an S&P 500 index [(1,248.29-1,
> > >
> > > Nothing worth having is ever easy. You don't want that hard-fought 4+ yr return to drop by 1/3 or 1/2 - with loose management rules. You want to keep pushing in the right direction, letting the gains come to you - not starting over, or worse. . .pushing too hard and in the end having to quit trading altogether:-
> > >
> > > I hope this helps bring things into perspective.
> > >
> > > G
> > >
> > > --- In CoveredCallFund-
> > > >
> > > > Again, my only trouble is trying to pick tops and bottoms like this. For instance, take the current situation we are in. It seems that you are trying to look for a "solid bottom." But the market is nearly back up to the high it had before the downturn, or glitch, it had last week. So you're looking for a solid bottom after the market has done a huge amount of recovering (over 500 points at the time of this writing)? That is the problem I have with trying to pick tops and bottoms...you think you're waiting for a "sure bottom" when you've missed it by 4 days and now we're approaching a top.
> > > >
> > > > This is just my opinion, of having tried this myself for 2 years and discovering I'm simply unable to do it. I'm not sure Investors Business Daily can either, but possibly you'll prove me wrong.
> > > >
> > > >
> > > >
> > > >
> > > >
> > > > ____________
> > > > From: Gilbert <gilbert_arevalo@>
> > > > To: CoveredCallFund-
> > > > Sent: Wed, May 12, 2010 12:02:49 PM
> > > > Subject: [CoveredCallFund-
> > > >
> > > >
> > > > Hello All Members,
> > > >
> > > > At some point the correction will capitulate - wringing out the market's excess froth and put in a solid bottom.
> > > >
> > > > I would like to grant members FREE Access for 1 week to KingdomCapital. com, to get a better insight into my trades off market bottoms.
> > > >
> > > > Username: compound
> > > >
> > > > Password: returns
> > > >
> > > > Simply go to the login area at the left of the homepage, using the above.
> > > >
> > > > I mentioned in my previous post 2006, 2008 and to a lesser extent 2009 got us into high-yielding covered call trades (see Trading History) - very near the exact market's lows - to put on some decent gains.
> > > >
> > > > 2007 is also a good example to see out capabilities to enter and exit with market shifts, as there were many. All of these trades were compiled into performance charts for a good visual (see Performance Charts).
> > > >
> > > > Thus far in 2010, you've already twice seen a critical aspect to the success of a long-term trader. My stop loss methods, if anything, salvage capital by kicking us into cash in advance of each major market downturn.
> > > >
> > > > You never know how deep or long a correction may last, but limiting losses is great for keeping your trading confidence for when things do eventually turn around. I hope to soon demonstrate compounding further returns in 2010.
> > > >
> > > > G
> > > >
> > >
> >
>
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