First whiffs of panic in the air. Ironically the stuff that was pole axed yesterday is holding up well today (financials and commercial real estate). So I am not deriving much benefit from my Ultrashorts there. These sectors just might be "sold out" - i.e. anyone who is going to sell is pretty much out at this point. We saw the same pattern in mid January when everything was selling off yet financials, homebuilders, and retailers were showing relative strength. This development makes things tricky because unlike yesterday my Ultrashort exposure is not providing very much value, in those 2 names at least (Real Estate, Financial). So it's a much rougher day than yesterday when those instruments were up 8-9%. We went through the exact same conundrum in mid January when I could find nothing in the Ultrashorts to offset the damage in the long side.... this is the problem with only being able to buy ETFs on the short side. Sometimes you need a hammer and all you have is a screwdriver. Similar situation forming it appears.
Seeing the strength we have today in those 2 groups (relatively) and assuming they are close to washed out, I will be cutting them back this afternoon with a pretty serious haircut, especially as we break below S&P 1280, on our way to S&P 1270. I do expect the Plunge Protection team to be hitting the "buy" button hard and fast and defend that level at all costs.... so we could get a vicious bounce once we get there. Either way I will be curious what they have up their sleeve Monday in premarket with futures.
By end of the session I'll probably be selling half or more of my exposure to both these positions ...
Long Ultrashort Financial, Real Estate in fund and personal account
Friday, March 7, 2008
Might See that 1270 Today, After All
Posted by
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2:38 PM
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2 comments:
If you think those sectors are done going down but the market as a whole is not, why not buy SDS and QID? I know you are familiar with them.
I am not saying they are dont going down - they just had some relative strength Friday. Amazing to watch Fannie Mae losing 10% a day.
As for SDS and QID I've been in TWM the whole time since august since I believe smaller cap, which are more tied to the US economy will be hurt more... SDS is more large cap so on a relative basis I expect large caps to outperform
As for QID I have REW which is similar. But for now I think technology is also looking washed out. Close to it. Not saying it wont go down in panic selling because nothing is spared but past few days technology is actually doing ok.
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