Stop banging your head against a wall…
…And buy ’til it hurts. That was my motto the last two weeks even as I watched unprecedented buying and technical levels screamed overbought . I outspokenly got short this rocket ship around 925 in the S&P, and I made one of the toughest decisions you have to make in this business once we surpassed 960. I took my losses and I flipped my view and got long. One of the tough psychological factors when you’re in this business is that sometimes after being so wrong and watching your trades go against you for days, weeks, even months, it can feel worse to get out of your positions and then watch them work, versus sticking around and losing more money. It sounds like twisted logic but take my word for it. Although I was right, I still didn’t really believe in it, and I still don’t.
It seems the past month has been another step in the market correcting itself after such a long ride down. There was panic last fall, more panic in the late winter, and now we are correcting towards recovery in the next 12 plus months. But where’s the hiring and revenue growth and…you get the picture. Funds are climbing back in, and despite what the latest publication of Barron’s says, I still believe funds are chasing this thing to ensure they don’t underperform the S&P for the year. We climbed above 1,000 and that means we are exactly 50% higher than we were just 5 months ago. The technology sector is always seen as a leader, and as it’s failing to show strength for a week I’m slowly beginning to sell again, cautiously, nervously. The bottom line is that in the longer run I am not a believer in the market much further than 1,050-1,100 until two things happen: Hiring and stabilization in home prices.
What do you get when it’s August, the bulls are getting tired of buying, and the bears are afraid to short? A dead market and a lot of golf for me until September.
To give a general idea of what I do, I’ll lay out some of the trades I put on today. In the energy/oil space I’m selling ConocoPhillips (COP), Energy exchange traded fund (XLE), but am long the oil ETF (USO) that mirrors the actual price of the oil commodity as a small hedge and because I am adamant about a weakening dollar helping commodities. In the technology sector I’m selling IBM (IBM), and on the consumer staples level I am selling Wal-Mart (WMT), Procter & Gamble (PG) and am long McDonalds (MCD).
