Oops!
Things went way better than I thought and, frankly, I got caught with my pants down because I was nowhere near bullish enough for this rally. The downside of a balanced virtual portfolio is you miss a fun rally sometimes which is funny because, if the market goes down 300 points, we’re proud we didn’t lose anything but, when it goes up 177, we are mad that we missed something. It’s just human nature but it also shows that, deep in our hearts, we’re still bullish.
I didn’t like the rally yesterday as we poked out of my trading range of 13,300 because we weren’t making new 52-week highs and even when we finished above my breakout mark of 13,450 on Wednesday, I was still nervously neutral. At 12:09 today I said: "BTU making ATH – that’s interesting. ISRG new ATH, CMG new ATH… Now this is a rally!" Sometimes, when something looks like a rally and moves like a rally – it’s a rally! As I said the other day, it’s very hard to get into a rebound relationship when we’ve been hurt so many times before but, when the right rally comes along, we have to be ready to commit or we may miss an opportunity.
What’s a nervous investor to do?
In retrospect, I should have done more bargain hunting yesterday. There were plenty of slow movers I liked like HOV, BSC, GS, RIMM (well I don’t LIKE them but for $100 I’ll let them take me to dinner), DELL, HPQ, GE (who was selling GE for $36?), BA… There were plenty of wallflowers at the dance as we went from 13,300 to 13,450 and while we did pick up a few here and there, we didn’t take any real chances. Yes, we were perfectly balanced and yes we didn’t lose – but we didn’t win either, and winning is fun!
If you have $100K in a virtual portfolio that is well balanced in either direction then there is nothing wrong with taking a stab at something for $5K with a 20% stop. We did grab BSC yesterday when I first became concerned we needed more upside and I said: "So huge rally day for the Dow but if you press a spring down far enough it’s going to bounce back. I would have loved this if we took a week to grind these levels out but this is nonsense. That nonsense may continue through the Fed (and maybe after) so BSC is a good upside play with the Jan $100s at $4 and, $RUT Jan/Dec $760s at $13 for the spread since the Decembers are $22 and the Dec $780s are $12 it’s a pretty good risk reward. XXX" Those Russells need to be rolled up as the darn thing jumped 25 points today!
You might think that BSC was a brilliant idea as they finished the day up 6% but I got nervous at 1:30 when they turned down and dumped them even, perhaps 5 minutes before they jumped 40%! Ah well, they say you can’t win them all but I like to win as many as possible… I was nervous and took a lot of profits and now, hours after the close, I still can’t put my finger on my fear but it’s absolutely still there. I said earlier in the week this bail-out plan is exactly what we need to rally the markets and we got the plan and the markets are rallying – why can’t I be happy?
I’m going to ponder this over the weekend. There are numbers swimming around in the back of my head regarding housing values, financing, bank margins (that one I’m sure about, this plan will severely impact bank margins), currency valuations, global overheating and consumer spending that just don’t add up bullish for me and I will try really hard to move them to the front of my head so I can be less vague. Suffice to say, something is bugging me and I just feel the need to be covered on the way up, which leaves me effectively neutral and missing most of a lovely 300-point move.
Perhaps I’m overthinking it. That’s the beauty of the Long-Term Virtual Portfolio – it doesn’t require thinking and it had a great day yesterday because it’s bullish (as I said, deep down, we are still bullish) and the strategy doesn’t require us to fiddle with it whether we go up or down 300 points to make money. The $25KP actually lost $1K today and the $10KP made only minor progress. Hopefully tomorrow will be a nice quiet day where I can just sit back and reflect on the market movements, they’re making a big deal about the jobs report that ADP has already telegraphed would be strong but is that a good thing or will strong jobs take a Fed cut off the table and tank the market?
We often discuss whether good news is bad news or bad news is good news but lately no news, just rumors, has been great news as we might get a Fed cut, we might get a mortgage deal, RTP might get bought for some ridiculous amount of money… There’s one of my problems, rumors are not a very good foundation to build a rally on – maybe I was right when I said it was bad not to grind up to new levels so I guess its:
"Easy come,easy go,
A little high,little low,
Anyway the wind blows,doesnt really matter to me"
