Well that was just fantastic!
I said to members at the day’s end that we should probably just cash out and call it a week and the Fast Money crew agreed with me with Dylan saying "Basically it was a great year today, so we’re going to take the show off the air and we’ll see you in ’09." I felt like chicken little telling people to take the money and run on our April calls but this was indeed all of the gains we hoped to get by expiration day and we do not look gift horses in the mouth.
Our Day Trade Virtual Portfolio, for example, gained $50,000 yesterday just 2 days before its 1-month anniversary. As we started with just $100,000 on March 3rd, despite the fact that we had a 118% gain on the weekend, adding another $50K in 2 days NEEDS to be enough to satisfy you. When you have a good month’s worth of gains in a single day, you can’t look to do it again the next day, more often than not, that is the road to ruin. We actually took a $12,000 paper loss by covering our Google longs too early but I will sleep a lot better knowing that a position that now makes up 75% of our remaining contracts is 40% covered.
Again, we made $22K on Google alone in the DTP and we covered it by selling $30,000 in pure premium by selling into the rally so Google has to go up ANOTHER $20 in two weeks before we even give our caller his money back – that’s another day like today LOCKED IN while protecting ourselves against a full retracement of today’s gains. You can’t afford to be greedy in this market, we worked too hard to get into a position to make money to simply gamble it away once we make it.
So I apologize in advance if it turns out I was too bearish into the close but, as I said at the close, even if we get another 400-point day and run to 13,000, that would only make me turn bearish as it’s too much, too fast and we’d end up shorting and, if we get a nice gentle move up from here, we have loads of time to manage our callers.
We accomplished our mission on the $10KP and have no April calls left, the $25KP just has HUM and that one we are just hoping to get out even on. The DTP still has a few but that’s why it’s called the Day Trading Virtual Portfolio but the STP is mainly purged and back to 80% cash, and that includes the $130,000 of protective index puts remaining. The LTP took the biggest risk by NOT fully covering but the logic we use there is that the drop in the VIX lowered the price of the front-month callers so we can assume we’ll get better premiums on the way down that will offset part of a dip and our length protects us from major damage other than a total disaster which our index puts protect us from.
Still, as pretty as that sounds, cash is king and there are still lots of things to buy once we feel more comfortable with the market’s direction. Today was a fantastic day that erased half of our January losses BUT we had a fantastic day on Tuesday, March 11th (up 415), which was followed by a less than fantastic week (down 180) and we had a fantastic day on Tuesday, March 18th (up 417), which was followed by a down 292 day. Last week was bad all week but the good news is, from a long-term perspective, we’ve been making progress all month – it’s just a very roller-coaster way of getting there…
From a longer-term perspective, we are still firmly in the channel between 12,000 and 12,600. We had a break below mid-March so a break to 13,000 for a few days would only serve to firm up the top if we are rejected there but let’s get to 12,800 first before we start spending our money at 13,000! We still need commodities to come down further in order to fuel a proper rally, otherwise we’ll be heading up again with $100+ oil continuing to choke the life out of the consumers, plunging them deeper into debt and eroding confidence, which will only come back to bite us again.
So I remain CAUTIOUSLY optimistic. We have Bernanke testifying tomorrow so anything can happen and we discussed our data-heavy week on Monday morning, which is only half over and, as I mentioned in that post, the market fell 700 points after Bernanke’s January testimony and today’s action brings us RIGHT BACK TO THE SAME SPOT!
As the old saying goes – It’s not paranoia when they really are all out to get you!
