OK, that one hurt!
I tried to stay bullish but we looked to stop out our callers at 9:42 and at the end of the day we had little reason to stop anyone out – that is a miserable day! Down and down and down and then down was the direction for the market today and every attempt to buy was met with rampant selling with all bullish behavior punished.
We either took advantage to Stop, Drop and Roll our positions to lower strikes or got taken advantage of at a time we should followed my original weekend advice, which was: "It was a fantastic week capping off a fantastic month and if we had any sense we’d spend February on vacation." Ah, if only I would have listened to me… Learning to quit while your ahead is one of the hardest things you can do as a trader and not doing so is the undoing of many virtual portfolios. We entered the weekend at around 70% cash but boy did our 30% get beaten up yesterday!
I don’t really mind a broad-based sell-off. As a fundamentalist, I firmly believe stocks have real values and there is a certain point at which a sale price is so low that I"m willing to turn into a boring old buy and hold investor. It’s times like these that I like to populated the Long-Term Virtual Portfolio and we are already over 70% invested there with so many of our favorite stocks at irresistible sale prices.
It is very hard to find a ray of sunshine in today’s trading. At 9:51 we set watch levels at 12,400, 1,350 and 2,325 and every one fell by the day’s end. At 10:03 I said: "Watch the BKX at the 2.5% line at 90!! Very critical level" and we quickly lost that too. Only Google gave us any hope all day, bravely swimming against the market tides and moving up close to $20 from its morning low.
At 12:45 I said: "Will 1,350 hold?" Nope, it didn’t. An hour later I said: "I’ll tell you guys this, if we don’t get a recovery starting around 2, this will be super ugly today from a trend perspective. Wow, there are just NO buyers right now. Selling not too heavy but virtually no buying interest. Only GOOG not giving up is giving me hope (slim though it may be)."
However at 1:43 I was still bullish enough to take some VIX puts (March 27.50 puts) and I was quickly punished for that as the VIX shot up from 28 to 28.50 but I stand by that decision as we should at least get a bounce into tomorrow’s open after such an awful day. We have oil inventories tomorrow coming off a very globally warmed week in the US and Europe and China was shut down by a snowstorm much of last week so look for builds across the globe putting additional pressure on prices.
I said at 2:04: "Hopefully this is the blow off down to 12,300, 12,339 was the close of Jan 23rd, the day after we touched 11,500 so another bottom test is not out of the question here if this is where we finish today" and we broke below it so what we’ll be looking for is a drop in oil tomorrow that BOOSTS the Transports (down 1.73% yesterday) and the Dow (down 3%), otherwise we’ll have to fasten our seatbelts for another big drop. I also said in that same comment: "Here’s 2,325 on the Nas, my last hope holdout. I’m encouraged that my QID puts are holding up well so far but we’re passing the point of no return on a reversal. FXI and other foreign exchanges are in the toilet, more things we WANT to see rotation out of but that means a 1,000 point drop in China tomorrow and who knows what for our open. Hopefully this is the blow off down to 12,300, 12,339 was the close of Jan 23rd, the day after we touched 11,500 so another bottom test is not out of the question here if this is where we finish today…"
That’s pretty much what happened at the open, we’ll get the bad news from Asia in the morning but we picked up the IGW July $45s for $8.60 as THE SOX MUST LEAD US OUT OF THIS MESS! If we survive the inevitable sell-off in Asia in the morning, we should get some kind of bounce but I’ll probably be warning you not to get too excited about that in the mornng – it’s just going to be one of those weeks!
