Weekly Wrap-Up

That was a rough week.

I said in last week’s wrap up: "Hopefully we won’t regret not selling in May and getting out of here" as we expected a consolidation back to 12,750 and, with oil topping $125, we are so far lucky that’s all we have.  It shouldn’t come as a surprise that there is an inverse relationship between Dow performance and energy prices – what’s surprising is how the MSM seems to be surprised to see it in action.

Thank goodness we called the top last Friday when the Dow topped out at 13,150 or things could have been pretty ugly, even as it was we pretty much treaded water for the week riding as many callers as we can into expiration but by Friday we were getting a little worried that our current covers would not be enough and we went into this weekend with a fairly bearish plaza.  Although we closed just 49 positions this week, very few of the ones we have left are the most covered we have been all year to the point where a rally next week will be somewhat annoying.

Our smaller virtual portfolios suffered most this week as they are, by nature, bullish since it’s hard to make progress when you don’t commit to a direction with limited capital:

• Our $10,000 Virtual Portfolio fell 8% to $16,199 as we head into our final week.  We are right on target for our Applefly and that will give us a great finish if Apple holds close to $180 and the rest of our positions are, if anything, over-covered.  All of our $10KP positions are in the $25KP so we will start with a fresh $10,000 after this week’s expirations.
• The $25,000 Virtual Portfolio has no luck and fell 8% for the week as well.  We also have a nice pickup ahead if Apple holds $180 this week and there’s nothing to do here but roll our callers and grind this one out next month as most of our positions have moved to longer spreads.
• The Short-Term Virtual Portfolio is very flexible and gained 11%, much of it thanks to although, out of 35 positions there are just 6 naked calls remaining which are dwarfed by the value of our 5 naked puts  – by far our most bearish posture of the year!
• We made a lot of good calls this week but our Day Trading Virtual Portfolio still took a 4% hit as our oil puts don’t look like they’ll be paying off any time soon.  The DTP is sitting at $368,142 despite carrying over $100K in unrealized losses on energy puts, which is not bad  for a virtual portfolio that began on March 3rd with $100,000.   I will not be abandoning the positions but I will be moving them into the STP so we can start a fresh DTP after Friday’s expiration.
• The Long-Term Virtual Portfolio treaded water, gaining 1% for the week although we do still have a few open positions there, taking a chance with AXP, C, FDX, ISRG, MDT, NEM, TXN and WM.  These are, of course, well-covered by index puts in the STP and, overall, we needed SOMETHING that would benefit from a pop – just in case…
• Our Stocks Virtual Portfolio will also be shutting down as it’s up a nice 62% for the year and we have a lot of new members who are interested in stock trading techniques so we’ll have some fun with that as well as tracking some plays as we start making picks for the CNBC challenge..  There are only 4 positions left and DAL and MU should get called away on Friday anyway.
• Complex Spreads was the star of our show with a 9% gain on the week as our BIDUfly comes in for a landing right  on target and both AAPL and GOOG worked hard to knock down our poor callers. 

Overall we closed 49 positions with a 58% average gain.  Our gains have been pretty much in range all month because most of our closed positions have been rule-based, taking our callers out with greater than 60% gains and closing out winners at 50%.  In our smaller virtual portfolios, this has led us to roll losers into calender spreads and, if those don’t work out, we will realize losses eventually but, for now, we get some very pretty weekly results!

While last week we had fun, cherry picking winners out of the earnings reports, this week we went very defensive as it was day after day of worsening news.    The week’s economic data is well summarized in this article, which is very much in-line with my take on the reports as they came out this week.  You know we’re in trouble when the picture on the left is my Monday morning headline as a combination of dollar troubles and calls for investigation into lenders and regulations on future practices dominated Monday Morning’s report.  If you want to know what happened last week, you can simply re-read that Monday morning post as that’s pretty much how it played out and my call to get the heck out of our May calls that morning was a real money saver as I said: "don’t hold any May contracts you don’t really, really, REALLY love and even then you should sell them…"

Monday evening we posted Trader Mike’s chart of the Dow, which clearly showed the resistance we ran into as well as picking the trend (the BIG BLUE line) that we ran back down to this week.  Obviously next week is critical as we need to hold that line if we want to remain bullish.  We also did a Big Chart that night, which will come back into play next week if we head lower.  Tuesday morning we were enthusiastic about the pullback as it gave us a lot of nice bullish day-trades but, by the end of the day, we took advantage of the high of the week to cover up. As I said at the close of that post: "The one thing I am sure about is Dow 13,000 and oil $130 DO NOT MIX! "

I can sum up my very bearish rant on the economy Wednesday morning by just repeating the last sentence: "Rough sledding ahead, be careful!" and that’s exactly what happened as we dropped a quick 220 points on the day.  The evening post was titled "Wednesday Wipe-Out" as crude went up despite a huge build in inventories.  At least we got our CROX run but CROX quickly became the poster child for "Always sell into the initial excitement" as they never came close to that Thursday morning open again.

We called Thursday morning a toss-up, hoping Wednesday’s drop was going to be enough to appease the Bear Gods and we did make a mild recovery on the day but WMT’s comments were very scary and by the end of the day we covered everything as my closing comment was: "Today’s "rally" was stupid" as there was no way I was going to be bullish with oil topping $125.  At 2:52, with the Dow still holding 12,850, my comment to members was: "Wow they jacked oil up to just under $124!  Bye bye markets…"

So we covered, and covered, and covered some more.  Hopefully it will be enough and hopefully it will not be too much but Friday’s nonsense with Chavez et al was nothing to change our mings over and the market plunged 100 points right out of the gate.  This is why we cover when we get nervous, if you wait for confirmation, it’s often way too late!