Wednesday, December 2, 2009

Bookkeeping: Adding to Index Longs on S&P Break of 1114; Closing iShares MSCI Japan Short (EWJ)

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The long awaited move over S&P 1112 is finally upon us.  Due to a lower than normal long exposure I've made my "swing trade" positions that we normally take on these breakouts much larger than normal ... I am using TNA as usual, as well as SPY Dec 112 calls (SPYLH).  I don't even see a point owning individual equities at this point as every move is monolithic so we'll just use these index positions rather than bothering to go add exposure in 15 stocks.




Overall strategy is to stay in this trade unless S&P falls back below 1110.  Eventually this simplistic trade will blow up spectacularly in our (and everyone else's) face but it repeatedly works, much to my surprise.  For about 7 months, each time I write about this exact same trade I say this can't continue to work... but it almost always does, and even when it does not work it retreats only for a day or two before we try again.  I expect to take a massive bath on "buy the breakout" at some point... maybe on this trade, maybe some trade in 2011 - or some point in between... who knows when it finally stops working, but until then all the computers and their human owners will pile in.  Pavlov dogs.

We're going to exit our Japanese index short as it has broken $9.90 which was our self imposed stop loss; so a 3% loss as the Bank of Japan caught us with its surprise move Monday night.  Sort of like an earnings pre-warning for an individual stock - can't account for such a thing. I didn't want to sell yesterday in case it was a 1 day wonder... just impossible to short anything as central banks sacrifice their currency to inflate the world.  Gold makes another new high.





Long SPYLH, TNA in fund; long SPYLH in personal account


EDIT 11:10 AM - with the S&P 500 reversing back down to 1110.40 that is close enough for me, and I've exited the index long positions from an hour ago.  I refuse to take any more risk than that, in a market that makes no sense to me.  Aggressive investors can short the index now, with stop loss over S&P 1112.  I won't bother messing with a market that is so full of lemmings.  Back to sitting on our hands until / unless the next breakout attempt happens.


No positions

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