Tuesday, June 2, 2009

Keep Disciplined!!

"These are the times that try men's souls."  Well, okay, maybe quoting Thomas Paine is a little over-the-top for a hack stock trader, but you get the idea.  When the SPX hit 666 on March 9th, sure it was stomach churning to pull the buy trigger, but not really... As Teresa Lo has said, we had a lot of information risk but hardly any price risk with stock indices at their inflation-adjusted 30 year lows.  Was the world really gonna end?  And if it was, did I really care if my TDAmeritrade account went to zero?  Besides, Teresa made a special point to tell members to BUY on March 10th!  So Idid (with a vengence).

What a difference a couple months make.  My retirement account sure looks prettier, TDAmeritrade is still in business, and the CNBC hotties are downright giddy.  Now we have more price risk as indices have galluped along and the day-to-day decisions are tougher.  Makes we want to sell everything and wait out the summer in my Glenn Beck bomb shelter.

See, here's the deal. I understand all the angst over the recent run, but what do I do with all these longs I have that have done well?

What's the trigger to take profits?

XLE, GDX, FCX, EFA, SLV, GDX, GLD, tech names, emerging markets, small caps and some pharma ... all above the Invivo stops. The biggest mistakes I've made the past two months were taking profits too soon... If I'm going to pay for a service to give me stops, heck, I might as well use them.

I had some shorts, but most got stopped out for (small) losses.

The volatility is still somewhat high but it is dropping; the worst case scenario is that I get stopped out at some point... it'll still be for a profit.  But there is also a chance some of these names go crazy in a melt-up and I need some irons in the fire. I think the chance of a complete crash is low.

Would I sink a ton long into the market now? No, but 
I'm not selling until this market proves it's going to roll over.If I had one concern, it is the high proportion of long holdings in reflation plays, and I may have to re-jigger it a bit. 

Bottom line: not many sectors or stocks are setting up as shorts at the moment. Airlines were on my radar (no pun intended), but if they can post a 6% gain on a day that a plane falls into the ocean and oil hits $70, well, the market is telling me the sector is not rolling over (yet).

Regional banks look weak and retail may drop too, but no set up is screaming to short just yet. Eric made the point that commodities led the last the rally so they prolly won't lead this one, and that is a good piece of conventional wisdom. But for now, I can't sell into this thing even if it's just a bear market rally. My stops are all set, tho, and my finger is on the proverbial (sell) button.

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