Well that was another fun day!
We picked up a lot of new calls early in the day, made some great day trades and cashed in our first round of oil puts – pretty much a perfect day. We'll see if we get some follow-through tomorrow but the markets held up well against a significant commodity sell-off that knocked 3.8% off the price of oil, 1.6% off gold with the entire precious metals index falling 1.8% and even agriculture took a 3.3% hit as the crops report pointed to a well-supplied market.
We were right on top of this at 11 am as we were already short on oil and MRB and NAK gave us a strong exit signal on gold that we took at 10:12. By 11 am we were quoting "Trading Places" as we watched all the commodity traders suddenly scrambling to escape the $6 Trillion roach motel they checked into.
We discussed speculation in the agriculture markets in this weekend's reading section so this is coming as no surprise to us however we jumped on POT as it bottomed out at 2:30, picking up a quick 20% into the close on the $150 calls. There will be tons of opportunities for quick trades like this so I cannot emphasize enough how good it is to have cash in this environment as we don't expect commodities to give up without a hell of a fight but, just like homebuilder stocks and housing prices and mortgage companies and financial institutions, down and down and down they will go.
Still, we are not ready to celebrate yet as this marks the 5th consecutive negative monthly close for the S&P, the longest losing streak since Bush the First was in charge (1990) and little George has been shattering his Dad's records right and left. Hank Paulson discussed sweeping reforms for the financial system – everybody hates it so it's probably fair and the idea for merging the SEC, who actually does something once in a while with the Commodity Futures Trading Commission (who, since this is the first time many of you have even heard them mentioned, obviously do nothing ever) sent shivers up the spines of commodity manipulators everywhere as they will have to pay off a whole new group of guys.
We picked up QID puts into the close, looking for a nice Nasdaq breakout tomorrow as the Nasdaq looked kind of pokey and we were well rewarded so far sticking to our guns on C but we are overweighted in our $25KP and need to lighten up that position tomorrow, fun though it may be.
I'm still waiting for something to be done about the dollar and something to be done about the 7,000 families a day (21,000 consumers) who are losing their homes to foreclosure before I'm ready to go all gung-ho bullish but this was a great start to the week and a huge relief as I was very worried over the weekend. Perhaps that relief is something that is being shared by other fund managers and we will see a little money coming off the sides tomorrow.
