Uh oh! We've seen this movie before…
Just when we thought things were going so nicely, all of a sudden there's a terrible sound and we bump into something.
Let's not worry until we contact the captain and see what's going on… Captain, Captain Buffett, hello? Uh folks – remember when I told you to keep an eye on Berkshire Hathaway? Well, they… uh… jumped! While we are flying around way up at Dow 12,400, BRK.A dropped 4% since Monday's open! It is never a good thing when the captain is 4,000 feet below the plane!
That's OK folks, he's an old man, perhaps he just went out for some fresh air – let's just take a look at our canary and —- uh oh! That is one sick looking canary!
We did A LOT of selling today as we didn't like the looks of this market from the open and, now that I've had a chance to step back, I'm still not so excited about it. But I'm not really worried yet either, despite losing our captain and maybe an engine or two…
Sure, you may say, it's easy not to worry when you just cashed out but why should we, who still have open position not be worried? Oh I'm sorry, when I said I'm not really worried I meant me – not you. If you are still in the market you should be very worried, but not panicked. It isn't time to panic yet. Maybe soon but not yet.
The last time I wrote an article about a thump was also a Thursday, December 7th (Pearl Harbor Day). We had pulled off a nice run at 12,400 but we failed it 3 days in a row and dropped all the way down to 12,233 before closing at 12,278. The next day we opened even lower (but still above 12,250) but broke 12,300 at the day's end, on the way to a pretty good week (last week).
On that day we got off to a pretty good start but (and I am now reprinting that day):
By 11:45, we had pretty much crossed to the opposite side of the open on most indices and it got worse, and worse, and worse and worse until they rang the closing bell!
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The Dow finished the day at 12,278, 82 points off the high but 83 points over Monday’s open!
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S&P 1,407, 9 points off highs, 9 points over Monday!
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NYSE 9,041, 51 points highs, 52 points over Monday!
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Nasdaq 2,427, 27 points off the high, 7 points over Monday.
So today (2 weeks later) I will say:
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The Dow finished the day at 12,421, 25 points below Monday’s open and just 50 points below the all-time high!
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S&P 1,418, 9 points off highs, 9 points below Monday!
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NYSE 9,103, 29 points off highs, 22 points below Monday!
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Nasdaq 2,415, 50 points off the high, 20 points below Monday.
Oh wah wah, we are slightly below our all-time highs, boo-hoo! Come on guys – it's the stock market – it goes up AND down!
But, just because we found a little gold doesn't mean we should ignore our canaries. As we know, greed kills and there is nothing worse than leaving our profits on the table until they turn into losses or leaving our small losses on the table as they turn into bigger losses. The plan for the week was to lighten up and this morning we decided to cash it in, despite the all-time high, despite the fact that oil was going our way.
Wise choice or lost opportunity? Well we left a few plays open but I think we'll have a very nice relaxing holiday not having to worry about the markets. There are 254 trading days ahead of us in 2007, I'm sure we'll be able to find something worth trading before March!
It is very, very possible that we are simply consolidating for a move up and, if we begin to break our topside levels, I will be thrilled to jump back on board this rocket for the long haul – meanwhile, we can step outside and stretch our legs.
Oil fell hard today, dropping .10 below our resistance level of $62.30 before bouncing back to a very unimpressive $62.66, down $1.06 for the day. Of course Nigerian rebels did something or other (who even bothers to check on this farce anymore?).
Gold was flat against a flat dollar – if you went shopping you really didn't miss too much.
What you may have missed though is that they suddenly revised consumer holiday spending up $230 (32%), higher than the highest estimates for the season as of just a week ago. Will that be a game changer? We should watch retail closely tomorrow but so far, nothing much.
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We started the day hopefully but, nonetheless, I said this morning: "I still don’t want to hold much over the holidays unless it is well covered so I will be reducing naked positions across the board and knocking out the underperformers unless we have a level-breaking rally today:"
It was a good game plan as the GDP made people nervous and the Philly Fed put the nail in the coffin on markets that were already heading down by noon. At 10:13 I had already said: "SOX died, transports dying – not looking good so far for any calls!" Despite the relentless selling, we still picked up a few new positions:
We took a few AMZN $40 puts for $1.50 in anticipation of a drop-off.
BP $65 puts were taken off for a .47 average (up 88%).
CHK Jan $32.50s were let go at .25 (down 64%), that was an expensive cover!
We added the COP Feb $65 puts for .95 as a pre-roll.
DD $50 puts were picked up for $1.10 and sold half for $1.40 as slowing economy trumped lower oil prices.
Sold the DIA Jan $125s for $1.05 against the June $124s.
ESV Mar $55s were another cover play that was let go at $3 (down 21%).
We jumped on the drop in copper this morning and grabbed JOYG $45 puts for .60, now .65.
MRO $90 puts were exited at $1.90 (up 58%) – thank you Zman!
MU was a tricky play, we took the $14s for .50 and 2x the $12.50 puts for .20, selling 1/2 back at .25 to leave the basis on the puts at .15 (we wanted .10 but couldn't get it). Earnings were good and I'm looking to take some off the table if they pay for the puts.
OIH $135 puts stopped out at $1.75 (up 25%) a nice save on a DD!
The RTP $200 puts were more successful than JOYG, finishing at $3.40 (up 79%).
We finally entered SNDK from my call on October 20th with the Jan '08 $40s at $10.50, selling the $42.50s for $1.80 to start working down the premium.
VLO Jan $55 calls came off at $1.10 (down 15%).
.80 was the best we could manage on the VOD Apr $30s, which finished at .85.
X Feb $75s came in for $3.80 and the $75s were sold at 2:30, a little lower than expected but the same spread we planned on.
XLE $61 puts stopped out at $2.15 (up 30%). I never got my price on the $58s so I held those.
XOM Apr $80s came off the table at $2.30 (up .05) after buying out the $75s for $2.10 (up .75) for an .80 gain on $0 invested – not bad for a cover play!
The XOM $72.50 puts came in at .45 and went out at .70 (up 56%) as we hit the HOD at 1:08.
