Tuesday, March 17, 2009

What a bunch of BS

Well, that went well. I had to travel today and in meetings and no chance to watch the market. I got somewhat lucky as I sold my March calls on VIX and my March puts on GS right after the open before I jumped on the plane. A nice two day profit (on those at least) Right after I sold, I saw both move up and figured I was going to miss a killer day. But, it ended up being a good move. Unfortunately my GOOG and RIMM puts didn't fair too well but those are April and June puts. I got lots of time. And SRS.... well, again, its my core position and not going anywhere.

As I said yesterday and the day before, until there are clear signals, don't invest too much into this market. I stayed with options keeping me mostly in cash. The VIX slid to the 200dma. Very interesting here as indications say the market is short-term overbought. Yet TA says we broke a key resistance and we should fill the gap to 800 or so.

The media hope-hype will go away as soon as some bad news hits. For whatever reason, the media is jumping all over the housing starts data as though that signifies the end of the recession. Give me a break. The housing numbers were so low in Jan, they had no place to go but up. As someone on Bloomberg said this afternoon, "all it takes is 3 apartment buildings to go up and it will cause an increase in the numbers".

So, don't put too much into the housing numbers. Housing is not improving. It is all media hype and I am starting to believe it is a bigger scam than any of us could imagine. It doesn't take much imagination in believing the White House is calling for all financial media to spin news as upbeat. They are trying to prop up the market with optimism and hide the pesimism.

Notice that CNBC had Meridith Whitney on well before the opening bell. She had nothing good to say about financials or the economy. The market reflected her statements early but as the media disregarded this and instead focused on the housing hype, market rose. If Whitney had been on cnbc at 11am, imagine the damage.

We are still in a down trend, bear market, obviously. Is this a bear market rally? i think so. I am pretty damn sure of it. In fact, after hours I did short financials. This move is too big and prices in a lot of optimism. Just one piece of bad news in financials will have them all tumbling down. The VIX is getting stressed as it isnow 15% from its 20dma. It should recover soon.

Trying to time this market is very tough. If you really want to be in stocks and ETFs, and you are certain where the market is going to be in a month or two from now, play a core position toward that goal. And hold it. maybe 25% of your portfolio. Then use another 25% to do some swing trades on the other side if you feel certain short term moves are coming. As a simple example, lets say you have $100K in your portfolio and you are sure S&P is headed to 600 in 2 months. Put $25K into SDS and forget about it. If you feel the market is about to go up, perhaps play FAS or SPY calls as a daytrade. Keep your core position. If market goes up to a point you think it is overbought, perhaps buy more SDS or some other short position as a swing short term trade.

That way, you keep your core position and core investment toward your target without overextending, and also keeping cash on the side for those times when the market gets overbought or oversold. And don't be afraid to use covered calls if your core position grows so you can protect those profits.

I will not get overextended given what TA is showing us. The VIX says we are overbought, and I do believe within a week or two, we will have a significant downturn. So staying patient and avoiding getting all my cash get caught up in this. I am playing it so that if there is a big downturn, should have a nice windfall. But if not, I will stay patient with my holdings.

OH AND DON'T FORGET!!!! VIX options expire on Wednesday. Don't get caught holding the bag.

1 comment:

  1. reversal day is tommorow, right at FOCM

    buy the hype...short the news