As you know the rally from the March lows has sent us into a selling frenzy and allowed us to take advantage of the cheap shares we bought as the markets fell apart.

This past decade has been the worst decade in history from a buy and hold perspective with all the major indices down for the ten year period starting in January 2000.

The model portfolio that we are working with right now was started in August 2008 and the markets are still down from the initial buy in for our holdings.

However, our portfolio is showing some decent profit considering that we had a great opportunity to buy into the market weakness and have since been able to unload those cheap shares as this market rally has continued to push higher.

Here are the most recent sell orders given by the software.

Sell 22 SPY at 112.66 for a total of 2,478.52

Initially we bought into SPY at 12.00 per share and have since had 26 buy orders and 8 sell orders. The net effect is our cost per share is now down to 106.50 and the holding is showing a profit. This is the value of the PCA system.

Sell 32 QQQQ at 46.05 for a total of 1,473.60

Our cost per share is now down to 38.85 and we are 67% in stock and 33% in cash on this holding.

Sell 13 IWM at 63.26 for a total of 822.38

Our IWM cost per share is down to 57.69 and we are holding 906 shares. We are currently 75% equity and 25% cash on this holding.

Sell 17  DIA at 105.47 for a total of 1,792.99

Our DIA holding is now 71% stock and 29% cash with a cost per share of 99.53. We are holding 804 shares.

In our sector portfolio we have GDX with a starting price of 34.95 and a current quote of 46.57. We are getting a hold signal right now with a buy price of 38.80 and a next sell price of 50.24. We have had 10 buys and 8 sells and our cost per share of 16.85. A few more round trips and these shares could be free! Once again, the power of PCA!

Sell 20 SMH at 27.62 for a total of 552.40

We started SMH at 30.41 and now our cost per share is 25.05 after 15 buys and 6 sells. We are 75% stock and 25% cash in this holding.

Our XLE holding started at 70.90 and now we are at 57.50. We have 370 shares after starting with 200 and our cost per share is 59.54. This position is 77% stock and 22% cash. 14 sells and 6 buy orders have been placed and we are holding for the next buy price of 48.12 or the next sell price of 60.62.

XLF is also in a hold pattern waiting on a buy price of 12.39 and a sell price of 16.20. This holding has had 11 buy orders and just one sell order and we are 85% stock and 15% cash.

Our GLD position is in a hold as well. With a next buy price of 85.08 and a next sell price of 111.75. This holding has issued 2 buys and 3 sells and we are 70% stock and 30% cash.

SLV is also a hold right now with a next buy price of 12.88 and a next sell price of 18.07. So far we are 3 buys and 3 sells and we have 478 of our initial 500 shares. Currently 51% stock and 49% cash.

In total our portfolio is showing a profit of 27,597 and all but one holding is still down from where we bought it.

The power of PCA is that it forces you to buy low and sell high and I have managed this portfolio in a very haphazard manner. Given more attention the results could have been even better!

The Indices portfolio is up 20,464 or 5.7%

The sectors portfolio is up 5,586 or 7.6%

The Gold & Silver Portfolio is up 5,657 or 24.3%

Finally our leveraged ETF portfolio is down 4,111 or 25.1% and was a bad idea to begin with.

I strongly recommend against using leveraged ETFs in the PCA system as the churn will kill your profit over time.

All in all I have to say… not bad! Total portfolio profit of 27,597 or 5.8% is a pretty good [performance given the fact that all holdings but one are lower than the entry price.

The PCA system of buying low and selling high automatically since August 2008 has been great. No one would have guessed back then how much damage could have been done to the stock market. Even more stunning has been the bounce of the March 2009 lows and now here we are.

From 2000 to now it has been the worst calendar decade in the history of the S&P500.

As we look forward to 2010 it was nice to get another chance to lighten up the holdings a bit more with these final sell orders. I look forward to another interesting year and we’ll be there to buy low and sell high every chance we get.

Happy New Year!

Sincerely,

Doug & Bill
Investing Systems Inc.

I had a good chuckle the other day when our beloved Jim Cramer came out with his new book “Getting back to even” which was written by “Jim” and his hair-brained nephew Cliff Mason.

If either one of them had a lick of sense they would be telling you what PCA software tells you… Buy Low & Sell High!

That is it.. the whole game. Diversify across industries, indices and commodities and let the market do what it wants. That is the ticket for long-term success.

So far it is working out pretty well for the ETF portfolio and the market is still way down from when we started.

Here is the selling I got today as the Dow hit 10,000.

Indices…

Sell 20 SPY at 109.31 for a total of 2,186.20

Sell 23 QQQQ at 43.16 for a total of 992.68

Sell 18 IWM at 62.34 for a total of 1,122.12

Sell 17 DIA at 100.023 for a total of 1,703.91

Sectors…

Holding on GDX 

Sell 15 SMH at 26.57 for a total of 398.55

Sell 12 XLE at 57.96 for a total of 695.52

Sell 21 XLF at 15.73 for a total of 330.00

Commodities…

Holding on GLD and SLV

The total portfolio is now up 3.9% and the  market is still down about 20% or so from our entry point. We keep taking these sell orders in case the market cannot sustain these levels, which I suspect it cannot.

I wanted to load up the cash side so that if we get another strong pull-back we will have some cash to take advantage of the bargains.

The portfolio is now up over 18,000 dollars and that is a good feeling after what we’ve been through.

Now that the market has “recovered” our boy Cramer wants to tell you how to get back to even… I want to tell you how to get ahead.

I updated the model portfolio recently and got a barrage of selling. As I expect the market to roll over a bit here and possibly for a while, I am updating the portfolio more often these days.

Today I opened it up and ran the quotes to discover another round of selling.

I will take this round of sell orders as well because I will want the cash on hand to buy back in at lower prices.

Here are the orders for the model portfolio.

In the Indices portfolio I am getting sell orders on SPY, 14 shares for 1,456.28

The QQQQ holding is saying hold and I will.

The IWM says sell 17 shares for 1,003.68.

The DIA is selling 10 shares for a total of 959.70

The Sector Portfolio is selling off a bit as well… here are the orders.

GDX is selling 15 shares for a total of 668.40.

SMH is selling 14 shares for a total of 345.66.

XLE is selling 9 shares for 478.08.

The commodities are all holding and we sold the entire QLD position as it was a bad idea to begin with.

Total portfolio picture is this…

We started with a portfolio value of 472,613 and now we have a portfolio value of 471,728 so we are down a mere 885 bucks or 0.2%.

That is not bad at all when you consider the prices of our initial purchases way back in August of 2008. The market had not really fallen apart yet and the collapse provided the buying opportunities to load up the portfolio.

We’ll see what happens going forward and since we have about a 25% cash reserve available we may get a chance to deploy more cash should we get considerable weakness from here.

With 75% of the portfolio invested, we could also get a chance to lock in more gains if the market pushes higher.

The beauty of the PCA strategy is having a plan in place no matter what.

Until next time…

Buy from the scared… sell to the greedy with PCA.

We started the model portfolio back in August and the markets have completely fallen apart since then.

Overall the model portfolio is only down about 24.9% because we had the cash cushion to help absorb the losses.

We have had a bunch of buy orders as the markets collapsed and I am very glad we are using ETFs instead of stocks.

3 of our positions are "out of cash" and I may decide to add some more if I could be convinced that we have actually seen the bottom.

We still have some buying power, and It may be a while before I deploy any more cash into the positions.

Only time will tell.

We would love to scoop up some real bargains and so I will try and keep some powder dry.

To get our weekly commentary for all things market related… tune into www.MarketToolbox.TV every Sunday Night!

AIM High!

I am sure there is no surprise that we are getting more buying as the markets continue to fall.

It makes me wonder if we should skip the buying and wait for an even lower markets with bigger better bargains.

It is not a good sign that I contemplate disregarding the systems advice although with the Big 3 on the hill looking for a handout and big insurance companies buying up very small banks to get in on the bailout I am not sure we are anywhere near a bottom.

The sentiment is just too negative and I am not sure what it will take to turn it all around.

I still think, that even in the face of all of this doom, the Newberry Doctrine would be a great place to start.

We need to see investor, consumer, entrepreneurial and loan officer confidence return before we have seen the bottom.

I am planning on a whole mess of new broadcasts to look hard at the market from all angles and see what we should be doing now.

I will be updating the model portfolio after the close today (Friday November 21st) and loading up on the new buy orders just in case things find a short-term bottom here.

I will also be looking at how the cash has been deployed so far and determining the buying to go forward.

This is either the greatest buying opportunity of your life, or the beginning of the end of capitalism as we have known it. I wish I knew which.

Well, I missed the bottom…

The market tanked into the abyss on Friday and I missed my chance to get the PCA software updated at those prices… and even after the Biggest One Day Gain in Wall Street History… The market is still low enough for the software to kick out a fresh round of buy orders.

Here they are…

3 straight trades in SPY…wow!

Then we get a double in IWM…

Another Double order on DIA…

Getting a double energy buy in XLE…

We get a single buy order in XLF…

Finally we got a single buy order in QLD.

We may have gotten another round with this but we ran this holding down to just $80.00 in cash! Because PCA is a "fixed cost" portfolio process, the system will not issue buy orders when the cash reserve is dry. This is one difference between PCA and Lichello’s AIM. Since no system is "all knowing" it’s time for a human to look and see if we might deploy more cash into this equity. I will wait and see. We got hold orders in many of of positions and we are awaiting further instructions from the software. It is important to note that I am purposefully managing this portfolio in a less than optimum way. I am doing this so that people do not think I am cherry picking.. or that I am a "power user" or anything. I want to show that anyone can do this style of investing and that even if you don’t catch the "tops" or "bottoms" and even if you paid too many commissions by not "bundling" the trades, this system will still be good for you. In fact, the PCA system is one of the most "forgiving" trading models that I know of.

When congress voted down the "bail out bill" we are now getting a fist full of buy orders.

We are getting buy orders on SPY and QQQQ and SMH and XLE and QLD all on the same day.

PCA is allowing us to strategically deploy this cash into a weak market and will also signal us to sell these shares when the markets come back in line.

This is not anything more than pure risk management.

By being most exposed to the market at the bottoms you stand to gain the most when a rebound occurs.

Conversely, by being fully exposed at the top of a market cycle you are assuming the most risk. Now we are going to put a little more capital on the table.

Here are the buy orders we got today…

Here is a good learning opportunity for those new to PCA…We got 3 buy orders on SPY today. The lesson here is that by using the occasional update method I am able to take better advantage of bigger moves in the stock in this case SPY.

Here are the 3 trades…

Notice how the size of the orders decreases

And decreases again.

Of course you would have "bundled" these orders into one transaction at your actual brokerage but for the purposes of running this model portfolio and blog I am including them separately and will account for them that way as well.

As a side note… I have NEVER seen three trades in a row before… and today it happened twice… Read on.

Here are the trades for the QQQQ and once again we are getting a multiple order. only two on the QQQQ so here they are.

Now we are moving on to the sector ETFs and we are getting one buy order on the SMH

We are also getting a buy order on XLE

And finally we are getting another triple buy order… this time on the QQQ.

WOW, I have never seen anything like it.

Thursday Night we are doing the third seminar with our special guest Jeff Webber on how to build a diversified portfolio and we’ll talk about using PCA and LEAPs for the most conservative use of leverage I have ever seen… DO NOT MISS IT!

Today I updated the model portfolio and found another buy order for SMH

I’ll take that trade with a 10 dollar commissions and now we have…

The next trade advice is…

Stay tuned

Yesterday we got a buy order on QLD, today we got another one. We will be buying 10 more shares at $65.44 for a total buy of $654.40.

This is a good example of why the "next available trade is not always the best idea…

If I had skipped the buy order yesterday, I would be getting a bigger buy order today, at the better price.

Not that "next available trade is a bad idea… just sometimes you’ll end up spending more in commissions this way.

Also important to note is that in an extended run in either direction you are often better off saving up a trade or two..or three to get the better deal.

Here is the trade advice…

Here is the current position…

Here is the next available trade.

Stay tuned..we may get another one soon!

Today we set up QLD in our model portfolio under the Leveraged ETF portfolio. The Starting price roughly 80 bucks and we are starting with 100  shares and an equal cash reserve.

We are using 300 dollars as the minimum market order to buy or sell, this represents about 2% of the overall portfolio value for the shares and the cash reserve.

Here is the trade advice that we get.

I expect this holding to generate more trades than the holdings in the indices portfolio.

Please understand that this is not investment advice. The Position Cost Averaging system will give custom advice for each user based on the AIM methodology.

This is what is going to happen to our model portfolio as we move forward we’ll update the holdings.

If you would like to watch the video… please do!

AIM High!