In no way do I mean to perpetuate the comparison of the stock market with gambling, but it would be fair to say that I've taken an "All In" mentality in July, entering a number of positions as the markets tests critical support levels at the 200 day moving average and 880 on the S&P.
I closed most positions in April/May as I saw a classic bear market rally hitting a top and running out of steam. Well aware that I might miss an extended rally, I still decided to take these impressive gains and review my watch list for fundamental strength as we head into earnings season.
The S&P looked toppy as it pierced the 200MA and neared 950, so I waited...waited......waited. Trying not to overtrade and hoping that I would get a minor pullback if not a greater correction, my instincts were rewarded as the market declined and provided a couple tests of support at the 200 day moving average. As often happens with traders, my prudence was quickly cast aside on July 6th when the market opened above the 200 day, bounced right off it and closed at the high for the day well above the open.
With this conviction I entered positions in PETROLEO BRASILEIRO SA(PBR), NOBLE CORP(NE), GILEAD SCIENCES INC(GILD), and EBAY INC(EBAY) but sold OTM calls to hedge my position against a failure of this support. July 13th provided further confirmation when the S&P opened right AT the 200 day MA and the 880 support level, dropped briefly below and then traded higher finishing with a huge move on strong volume. Sure, some say it's short covering or bargain hunting, but I have a watchlist of premium, fundamentally sound companies with great businesses and I believe smart buyers simply see value and are scaling in slowly. So in the next 2 days, I bought BHP BILLITON LIMITED(BHP), MYLAN INC(MYL), DIANA SHIPPING INC (DSX) and DIRECTV GROUP INC(DTV) and did not hedge these positions. Today's move was even further conviction with a gap up huge day on big volume and I closed out a couple of the existing hedges.
Now, I don't want to get carried away here. I still see the potential for a long sideways trading channel as the US economy deals with a prolonged recession with a great deal of uncertainty regarding government regulation and intervention. I will carefully watch the movement of the S&P at 950 and will likely consider hedging with short term calls and puts if we pierce this resistance level, but at some point, I have to put the trader mentality in check and remind myself that I've INVESTED in solid, financially stable companies with great business models and attractive long term prospects. I've scrutinized these companies, their industries, their competition, their growth prospects, cash flow, balance sheets and more. Taking a long-term perspective, I'm thrilled to have established such a portfolio at these valuations and any correction would be an opportunity to further diversify the portfolio or double up positions.
Stay Tuned! [more]
So…my last market prediction was a bit too cautious. We’ve had quite a rally since I expressed some remaining bear sentiment in mid April…can’t always be right! I’ve been slowly conceding the bear mentality, but remaining cautious with covered calls as a hedge just in case! However, last week, I took some gains and the stocks I held are no longer covered. Today was a further confirmation of optimism as markets surged on strong volume and the S&P pierced the 200 day moving avrage for the first time in over a year. [more]
Pontificating on the market’s current impressive rally, some experts are calling it the start of a new bull market while others maintain it’s just a bear market rally. Bull, bear…I don’t care, I just won’t be a pig! Time to lock in some gains. [more]
"What you're now seeing is profit-and-earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it..." [more]