Monday, June 22, 2009


Sell China! But what do you know when you sell China? Sell oil! But what do you do when you sell oil? You sell something else.

You had to.

Look at how far the steel and coal and gold stocks got clocked, and look at how the NASDAQ finally got hit today. I sold all my gold stocks at the end of May. In retrospect, I was lucky, but I sold it because the smartest guys on Wall Street were buying it. But look at that intuitively. Did they have an edge? Now we know Paulson & Co. had an edge in sub-prime, but we are all mere mortals, when we don't have asymmetrical information! Didn't gold prove that? Now look at the NASDAQ today. Who is always the last person to sell? The momentum buyers on the NASDAQ, and today they finally did some selling. And what's with the Russell? Who cares about rebalancing. The chart on that looks awful.

The averages mask the damage that has been done to the stocks. So either the averages come down some more, or the stocks rally. In any event, the correction is bigger than what I thought, so I'll let the market be the judge. Maybe I'll get whipsawed, but that's the game we play. I don't care what anyone says--play the short term swings right and protect yourself, and you'll do fine in your long-term positions. But who is to say that the correction just ends here?

Who wants to give up their profits? I shorted COF and AXP this morning to hedge my regional bank exposure, because both of these numbers already gave back the TARP money. Obviously, at these prices, they are still too high--and is credit card debt really worth owning? But can these companies really go back to the Government if the sh*t hits the fan again? I'm not saying that will happen; but Wall Street is ripe to believe it can happen, and that is what makes trading exciting. It's always the interpretation of the news, and that depends on if they are unloading merchandise, and it looks like they are doing some of that. So you had to do a lot of hedging, as anyone's tolerance for pain, can't be that high, when you are sitting on profits! I mean, isn't that what we learned form "we're not paying bonuses" Goldman Sachs?

I'm sure a lot of other people did the same thing, but I do think China gets hit next. We all know that their recovery has more than a bit of a desert mirage to it, so why not book some gains their? I'd sell anything China related, as their books are cooked worse than our banks!

Look at how AAPL acted on good news today. It reversed. Remember last week when BIDU was upgraded by Goldman Sachs to 350? Thank goodness for puts on that number! It was down 20 today. But here's why that call by Goldman irritated me so much.

Remember back on November 8, in 2007, when all the tech stocks just hit air pockets? Every high priced tech stock just collapsed. They rallied back three weeks later, but that was just a wonderful selling opportunity. What was the high flyer that stayed up? It was BIDU.

Did Goldman have inventory that they needed cleaned out? How about every other investment bank, that has been giving the market "liquidity?" How quick will they be to the exit?

Now remember what happened to RIMM that morning when BIDU was upgraded Wednesday? Didn't it hit an air pocket the first ten minutes of trading? On no news? And it fell down to just a bit above 76? But now the stock is 68!

I thought about that Wednesday, but I just was to busy getting some puts that morning on the Goldman upgrade on BIDU to give it much more than a passing thought.

But don't you think those buyers of the momentum names on the NASDAQ remembered what happened in 2007? Like I did? Maybe they'll think it will happen again now. So they sell. After all, did BIDU rally on the news today? They sold it!

But wasn't the rally that we had just ugly? I would of thought that we would of cleaned some stocks with all they selling we have had, but it wasn't to be. But don't think that the market doesn't force your hand. If something starts going against you, you have to hedge your position, and protect yourself.

No matter what you think might happen.

Until it's safe to get back in the waters!


Anonymous said...

so do you think we're rolling over a decked with FIG...still holding it along with HBAN, HL, & MGM (ouch).

in your own opinion you think these are still worth owning for the next few months or are we rolling over now?

i had sold SRS at the low (stupid!) b/c i had had enough of it...and now it's $5 higher!

Palmoni said...

I'm holding those..but I need to make some money if we sell off some more.

MGM I'm just sitting with. I don't know who is liquidating, but they do have the computer programs that sell those stocks that break their secondary prices.

X said...

So, looks like we will test SPX880 in or around the FOMC decision. Could offer a good setup for a long?

Palmoni said...

Yeh--it looks like your call will be right on!