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^ start selling. This rally will run out of steam soon. The big money is still on the sidelines. The shorts will be back with a vengeance soon.
Technically we've got one shoulder and a head. We need to see a retreat to 800ish level on the S&P500 in the next 3 months before it really runs and the next bull cycle begins (the second shoulder). Technicians call it a reverse head and shoulders.
Some time in the next 2-3 weeks this rally is going to stall. It will meet resistance at or near 950 and go sideways for a while until people lose faith and pull out. It will fall back to around 800 and off we go.
Right now is a great time to consolidate your profits and get ready for another round of sweet deals later in the month or early next. Don't be a pig. We've had a record rally and that only spells one thing: it's over (for now).
I'm totally on board with your thesis that we are probably due for a near-term significant pullback in the indices. And I also believe that we are likely to have another nice run off of that pullback. But if you really believe that we are due for a massive runup after that pullback, similar to the one you illustrated, why would one risk selling anything now, and then trying to time the bounce to buy back in again? When you try to time the market like that, you would be risking 1) sellling too soon now, 2) buying in too late for a future bounce, and 3) buying in too early for a future bounce - not to mention the additional trading fees from selling and buying back again and short term capital gains tax rates...
That's cool, be bored. I'm just telling you how I see it and what I'm doing about it.
I sold 1/3rd of my AAPL common today and bought Jun 09 $120 Puts. My basis is $89.07 so I took my profits off the table. When times are tough I stick to what I know which is AAPL. Once I see the pull-back I expect then I'll start spreading the money around a little.
I'm not telling you what to do. Ignore it if you choose and do what you think is right for your money.
You aren't the only person here who might be interested in my opinion. I get PMs all the time asking for it and I only offer it in this forum, publicly, and only when I'm making trades. Having executed over $5M in trades in 2007 before exiting the market in the spring of 2008 I do have some experience that some might find insightful. Granted not you but that's not my problem.
For those who aren't bored I see strong resistance between 910 and 935 on the S&P500 where I feel this rally will lose steam (between the double white lines I've drawn):
I don't feel there is enough conviction in this rally to break out or to sustain it at the current level. I think it will falter, go sideways for a week or so and then people will get cautious and pull money out seeking lower risk.
I do think that when the valuations come down and become attractive in the low 800's people will re-enter with more conviction that the bottom is really in. That is my view. We'll see what happens.
Those of you that are shorting in anticipation of a pull back, what are you in/ looking to get into? I am holding FAZ, SKF, and QID at the moment, but am possibly looking to diversify.
The next move down doesn't start today. The banks arn't even pulling back after their huge upward move yesterday. I had CNBC on for about 15 minutes this morning and they are still pushing anything and everything that is slightly positive. Their selective reporting will have to stop at some point. Today's move down doesn't even cover the final move in the last 5 minutes yesterday.
I expect the unemployment numbers will also surprise to the upside and continue the market euphoria. The bottom line is the government needs this rally. If the market continued down in March they would have been in some major trouble. I also believe that some of these good economic reports are due to cyclical activity. There is no way that the declines in Q4 reports were going to continue at exorbitant rates. If you pay attention to the reports that arn't being pushed as "green shoots" the economy is still weakening.
Originally Posted by MADANT15,May 5 2009, 09:13 AM
Those of you that are shorting in anticipation of a pull back, what are you in/ looking to get into? I am holding FAZ, SKF, and QID at the moment, but am possibly looking to diversify.
only thing ur missing is something to short the dow.
can i get some opinions on rearraning my portfolio for the next year? im not looking for extreme risk and not really expecting extreme gains. i just want something better than my money sitting in a money market getting 1%.
That's cool, be bored. I'm just telling you how I see it and what I'm doing about it.
I can't tell if you are responding to my last post or not. But if you are, you misread my post. I said "I'm totally on board with your thesis..." - as in, I was agreeing with you on both an upcoming pullback and then a nice run upwards.
I just question the merit of someone who is currently invested in this market trying to successfully time the market twice to take advantage of those upcoming moves. Seems to me that the safer, and possibly more profitable bet, is to keep current holdings intact, add on if you have cash and see a good oportunity on the dip, and wait for the extended bounce that you illustrated with the red line.
05-05-2009, 08:27 AM
