Weekly Wrap-Up

It's my birthday weekend so I'm going to keep this short and sweet:

I was too bullish this week, I underestimated the resiliency of oil and the lingering panic that is gripping the markets, especially in the financial sector.  As a fundamental analyst, one of my weaknesses is getting ahead of the curve so I tend to see bottoms and tops early, which is salvagable with our stop, drop and roll strategy on longer options but not at all helpful on our short-term bullish positions so next week is either going to be great for us or a disappointment we have to roll into May to salvage what we can.

We made great progress from last week in our flexible virtual portfolios:  The Short-Term Virtual Portfolio gained 9%, the Long-Term is up 8% as another round of our callers bit the dust, our Day Trading Virtual Portfolio was a home run with a 34% gain on the week, benefitting from the risks we took on AAPL and GOOG, which also rocketed the Complex Spreads Virtual Portfolio up 24%.  Other than Google and Apple, what these virtual portfolios all had in common was the flexibility to flip negative, something we lacked in our smaller virtual portfolios.

Our Stocks Virtual Portfolio dropped 2% but the $10,000 Virtual Portfolio fell back to $10,543, down 6% for the week and the $25,000 Virtual Portfolio fell back to $25,227, a nasty 18% drop on the week as we put more cash to work while getting murdered on our positions in BA, CROX, MDT and NDAQ, all of which I still have hope for.  We still have $6,000 in cash but we will need that to adjust ourselves if the sell-off continues next week.

Last week we were optimistic DESPITE the fact that I used this picture of the Titanic to summarize our position.  I've given up on this administration doing the right thing but my optimism stems from the fact that the balance of power has shifted to the G7, who will now be able to force Bush to do something about the dollar and take some action to actually fix the housing crisis that doesn't involve just throwing more money at rich people.

I had not counted on how stubborn the White House could be as the dollar dropped 2% on another demonstration of fiscal ineptitude which sent oil soaring back from $100 on Monday to $108 on Thursday as the Vice President of the United States backed the Saudis, saying they were doing all they can for us.  Fortunately Congress comes back on Monday and we can go back to getting some checks and balances in the system (as the judiciary has already failed to balance a thing in the past 4 years).

Although we had a good day on Monday, which was incredibly fortunate as we took a bullish stance into the weekend, I said on Monday night 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."  The Dow finished the week down exactly 1.6% (down 200 from Monday's 12.400 open).  On Tuesday I warned the war costs were crippling us and my concerns did take over as we worried about the upcoming Treasury auctions despite the strong open in the morning.

Optrader opened his Swing Trading Virtual Portfolio on Tuesday and it's off to a very nice start, which says a lot in such a rough week.  Tuesday night, with the Dow at  12,532 I said "I still think we are due for a 150-200 point pullback before we can attempt 12,750."  Of course we ended the week at 12,216 – it's really only Friday's strange action on fairly low volume that has me concerned.  ORCL missed on Wednesday night and the 5-year auction did not go well.  Thursday we got the wildness I predicted in the morning post, and we blamed it all on Meredith Whitney on Thursday night.

That's what led to my bullish call.  I felt the markets were dragged down by a sell-off in the financials that was overdone as well as a continued rotation out of commodities, despite the decline in the dollar.  Friday morning I said it would take a "Duex Ex Machina" to save the markets and nothing happened so we dropped another 150 points.  We did keep our bullish stance and we have a lot riding on Monday or we face the danger of giving back 2 weeks of gains.

We closed just 71 positions this week with an average gain of 31% with Google short calls and DIA puts dominating our winners.  I say "just" 71 postions because the DTP causes us to have a lot more weekly activity than usual so 71 is a very low number, this is owing in great part to the fact that we only 1/2 covered earlier in the week and so, had less callers to take out.  Will we be rewarded for hanging tough or spanked for not dumping our positions and riding the wave in the opposite direction? – tune in next week to find out!