Luck Smiles Down

Well if this mutual fund thing doesn't work out, perhaps a swing trading newsletter will be the future.

Yesterday's purchase of Ultrashort Real Estate (SRS) in the mid $53s [Bookkeeping: Wish Me Luck], is now up 25% in 24 hours. I think we actually got the exact bottom but man, it's a hard way to make a buck (ulcer city). I'm going to take a bit off this position which has grown from 3.5%ish to 4.3%ish of portfolio in a day. It is one crazy animal and unless the market is in free fall it is hard to feel any confidence. I still love it as a hedge but until the retail bankruptcies start hitting the headlines people will apparently whistle past the REIT graveyard.

I'd like to stress to newer readers, I normally employ a core and edge strategy - hold core positions for a long time and trade around the edge - usually those trades are weeks or months in the making; something goes up 20% - you take a partial position off. But this crazy market has smashed timelines down to hours or at most days. We have done a lot of selling this week on the long side as many of our stocks have made gains in a few days (+20-30%+) that normally take 4-6 weeks, and cash is now up to roughly 48%. One day I hope to return to actual "investing" but in the interim we're morphing into much shorter term trading philosophies, and we'll try to make some sheckles while we keep much of our capital protected to the side and out of what has turned into a full blown (government back stopped) casino of nonsense.

As always, S&P 870, 840, and 820 are our lines in the sand. The only reason to be long is "all the cool kids are doing it" and "the fat guy in a red suit with the sack is showing up soon" and "Obama shall save us"

Next week (Christmas) and the week after (New Years) will be full of retail trading nonsense so I don't plan to read too much into anything, as volume will be light as the professionals are busy refinancing their $5.4 million apartments at 4.8% rates. (they always win don't they?) We'll stick heavily to the sideline with cash horde.

Below S&P 820 we are back to carnivorous bears - frankly based on what I'm thinking for 2009 for S&P 500 earnings, 900 is going to be very expensive based on PE multiple. Again, it's all about sentiment; the economic news shall be dreadful for many days to come. Bulls want to see a clearance over the 50 day moving average (S&P 940 and falling fast) These bulls, once they put down their Kool Aid, should be asking Santa (and Obama) why copper and oil are in free fall - despite a falling dollar, despite all the world's governments stimulating with billions/trillions of infrastructure plans - if the economy shall be recovering "in 6 months". Food for thought - if you are not a PhD designed computer algorithm.

Long Ultrashort Real Estate in fund and personal account