Contrarian Ideas Updated

There have been significant changes in the status of the contrarian ideas for this summer that I've written about and of which I've updated.

The contrarian areas suggested were: (1) shorting gold; (2) buying corporate bonds; (3) shorting financials; (4) shorting municipal bonds; (5) selling oil; (6) buying health care stocks; (7) shorting real estate; (8) buying the dollar; (9) buying the Nasdaq 100 and selling the S&P 500 (a hedged position); and (10) buying Treasuries or selling Treasuries, a you pick 'em choice.

Short Gold

The three-month daily price chart is shown below for ProShares UltraShort Gold ( GLL).

ProShares UltraShort Gold (GLL)
Source: Stockcharts.com

This position has changed little since the June 20 update. GLL closed at $15.32 on Tuesday for a gain of 5.66% since opening the position at $14.50 on June 5. Stop loss is still maintained at $14.50 and will be raised to a trailing stop of $1 if GLL closes above $16.

Buy Corporate Bonds

I used the iShares iBoxx $ Investment Grade Corporate Bond ( LQD) exchange-traded fund for this investment. The entry point date was May 26. This position has continued to advance in a very well-defined channel. See the daily price chart below.

iShares iBoxx $ Investment Grade Corporate Bond (LQD)
Source: Stockcharts.com

The gain in this position, as of Tuesday, is 4.87%, including dividends. I am now placing a $2 trailing stop loss on LQD.

Short Financials

I bought Proshares UltraShort Financials ( SKF) on May 26. At the close on Tuesday, the position has a loss of 1.38%. We can see in the daily chart below that SKF has declined close to the previous dip at the end of June. I have raised the stop loss on this position to $40.50, just below the previous intraday minimum of $40.92 on June 30. If this dip goes to a lower low, I want out. The recent doji candlesticks (June 9, 10 and 14) indicate indecision in the market, although the June 14 has a long upper tail, like a hanging man, which can be bearish.

ProShares UltraShort Financials (SKF)
Source: Stockcharts.com

Sell Municipals

This could have been implemented selling short iShares S&P National Municipal Bond Fund ( MUB). The gain on this position as of Tuesday would have been 1.02%, including dividends paid. The recent trend on MUB has been up. I would put a buy stop on this position at $101.20, just above recent highs of around $101.

Sell Oil

This was entered with the purchase of ProShares UltraShort Oil & Gas ( DUG) for $17.14 on June 16. As of the market close on Tuesday, the gain is 18.49%. The current stop loss was set as a 20% trailing stop loss (intraday high of $22.44 on July 8) and is at $17.95. That is, coincidentally, exactly the intraday low for the most recent dip on July 1.

Buy Health Care Stocks

I am following this position with the Health Care SPDR ( XLV) exchange-traded fund. It has a gain of 3.17% since the May 26 entry.

Sell Real Estate

I am following this position with ProShares UltraShort Real Estate ( SRS). This has gained 1.34% since the May 26 entry. The current stop loss is $19.10, 20% below the intraday high of $23.88 on July 10. This stop is just above the most recent intraday low of $18.95 on July 1. The daily price chart is shown below.

ProShares UltraShort Real Estate (SRS)
Source: Stockcharts.com

Buy the Dollar

The dollar has been in a narrow trading range. I selected ProShares DB US Dollar Index Bullish ( UUP) for this position and it has traded between $23.55 and $24.43 since May 26. The current stop loss is $23.21, based on a 5% trailing stop. As of the market close on Tuesday, this position is down 0.46%.

Buy the Nasdaq 100 and Sell the S&P 500

I have used two times leveraged ETFs for this position: Ultra QQQ ProShares ( QLD) and UltraShort S&P 500 ProShares ( SDS). Since May 26, QLD has gained 4.80% and SDS has lost 1.53%; the combined return is 1.62%.

Buy Treasuries or Sell Treasuries -- You Pick 'em

The two positions here are iShares Barclays 20+ Year Treasury Bond ( TLT) (long) or UltraShort 20+ Year Treasury ProShares ( TBT) (two times short) tracking long-term Treasury bonds. The results since May 26 have favored going long. The gain for TLT has been 0.62%, including dividends, while the loss for TBT is 7.72% after being stopped out (15% trailing stop) on June 26. I have a stop-loss on TLT of $91.97, based on a trailing stop of 5%, tightened from the former 7.5% stop.

The summary of all contrarian positions as of Tuesday is shown in the table below. All positions, but one, are still open using the risk-control guidelines suggested. That doesn't often happen for my contrarian attempts over this long a period, which is seven and a half weeks to this point.

Contrarian Summary

Lounsbury, his family members or clients may invest in any of the securities mentioned from time to time. There are currently positions in GLL, SKF and DUG. Clients and family members also own Vanguard Health Care, a mutual fund invested in many of the same stocks as XLV.

John B. Lounsbury is a financial planner and investment adviser, providing comprehensive financial planning and investment advisory services to a select group of families on a fee-only basis. He worked for 34 years with IBM, and spent 25 years in R&D management and corporate staff positions. He also was a Series 6, 7, 63 licensed representative with a major insurance company brokerage for nine years.

Specific interests include political and economic history and investment strategy analysis. He holds degrees from the University of Vermont, Columbia University and the Illinois Institute of Technology, where he studied chemistry, physics and mathematics. He is a contributor to Seeking Alpha and his own blog, PiedmontHudson.

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