That was truly easy!
4 out of 5 stocks advanced today and we were fortunate to have gone into the weekend bullish and even our covered calls, like AAPL and GOOG were slow movers in the morning and gave us time to stop out the callers we did have ahead of huge gains.
I mentioned several stocks from our Long-Term Virtual Portfolio in the morning post and they were typical in their great performance; AXP gained 3.1%, BA picked up 1.5%, C jumped 3.4%, TXN added 2.8% and DRYS went up a whopping 6.9%. I’d love to say it was brilliant picking but it was like shooting fish in a barrel yesterday. Of course we don’t own the stocks, we own the option contracts (which I also specified in the post) and the gains were spectacular! When we patiently stayed with our plays and rode them down level after level, this was the kind of turn we’ve been waiting for – NOW LET’S NOT BLOW IT!
The worst thing you can do when you make gains like this is to EXPECT more gains like this. We can hope for more gains, but expecting them leads you to trouble. That’s why I called a top for the day at 10:57, predicting 12,600 would not break, and we moved more towards cashing out our winners (and they were huge in the DTP) and covering our longer plays for the rest of the day. While I loved the market movement, we’re up 4 of the last 5 sessions and we’re up 800 points since last Monday, so positioning for a possible dip seemed prudent. Although our covers are still mainly 1/2 covers, we did add some QID $50s near the close to offset a morning dip in the Nasdaq.
My overriding concerns are that a 6.6% move in a week will cause 1.6% worth of profit taking and the performance of the financials made me wonder if we may not be completely out of the woods yet. Another possible market take-down is oil falling below $100, almost certain to happen tomorrow, which will take that major sector down with it. The XLE is back to where it was last Monday at 72 and is up 4% from last week’s low of 68.85 having been harshly rejected at 5% today.
More importantly on the XLE, the 50 dma is virtually certain to make a "death cross" below the 200 dma this week and we could be looking ahead to a 10% dip in the energy patch, which is 20% of the S&P so we’d be talking about a 2% dip in the markets looming ahead on any kind of energy sell-off. Like last week, we’ll be BUYBUYBUYing into that kind of dip – as it’s just what we want to see, but it’s good to be prepared isn’t it?
We got an unexpected boost today from a good housing report as well as the great news from BSC. Last week, it took Federal action in each of our 3 positive days to move the markets and that’s another reason to exercise a little caution as we are going to have to see how the market behaves on a week it leaves the government nest. Tomorrow we get Consumer Confidence followed by hard data on Durable Goods on Wednesday along with New Home Sales and Crude Inventories. Thursday it’s the Q4 Final GDP, which we know was lousy and Friday morning we get Personal Income and Spending along with Core PCE Inflation so I can say in advance COVER COVER COVER on that one!
If oil is down below $95, we may be able to shrug off the Feb inflation report but oil went from $86 the first week in February to $110 in mid-March so any part of the PCE attributed to energy costs will only be magnified in the next report as we have spent the entire month of March over $100 per barrel.
Hopefully we’re being overly cautious and we can remove our covers for another run with the bulls tomorrow but I’m sleeping better knowing that I won’t be giving back a fabulous week of gains on a possible overnight dip.
