Friday, July 2, 2010

Bookkeeping: Sold Index Longs for Now

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I was hoping for a better session today (a more aggressive bounce closer to 1040) to sell these index longs I put on yesterday.   Perhaps the bounce will happen Tuesday... or not at all.  The action today is very sleepy (identical to last Friday in fact) and not very constructive as of 10:50 AM, it looks like one of those range bound sleepy summer Fridays.  Remember, Monday is a holiday so a lot of people are taking 4 day holidays so I'd expect it to be even more sleepy than usual.   Thankfully, silicon does not take vacations.

If the market just trades sideways for a few days below S&P 1040 that simply helps work off oversold conditions and sets up a new round of selling late next week or the week after.  But either way this long index play was more short term and thus far the bounce has been quite week.

I've sold the TNA ETF for about a 1.25% gain, and the SPY calls today for a small gain - however they are actually down today as the premium has been sucked out as volatility is down big time from yesterday.  Net net, a small gain between the two but lunch money.



If the S&P 500 breaks below 1120 I'd be interested in hedging short again.... conversely a move over the highs of the days (1033) might get me interested in an intraday play to the long side, otherwise I am going to be mostly sidelined.  All in all, a very good week on an absolute and relative basis.

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Overall, I have almost no short positioning on at this minute, and my main hedge is a huge wad of cash.  If I exclude gold and silver I entered yesterday with about 8% long exposure which I most likely doubled with yesterday's purchases.  I like the stocks I bought or added to but a general selloff will spare no one.  My goal is to get more long oriented down in the mid S&P 900s with sporadic purchases of individual long positions, while offsetting the losses that will come from that with short side hedges.  If we simply cannot bounce the short side hedges will be more index oriented (the usual SPY puts and "short TNA").  If the market can put in a nice 3-5% rally sometime next week, I'd like to add individual equities to the short side but almost all names I'd be interested in are nowhere near any resistance...  which is where I prefer to short things.  Hence if the market bounces I'd be taking a lot of losses on the short side so not interested in starting new individual shorts right here.  We're in a bit of no man's land for now.

Obviously the economic situation is poor, but I still think corporations (especially globally oriented multinationals) will have a good earnings season starting up in 2 weeks... the main issue again is going to be guidance.  Once people adjust to the fact the V shaped recovery is only a mirage and indeed malaise awaits us, a more intermediate term rally can occur.  Bigger picture, being aggressively long other than for a bounce does not work until we get back over the 200 day moving average(s).

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