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Dow Watch: Swimming With Sharks


Just when you thought it was safe to go back into the market...


Greetings from New York, where I'm taking a long-planned staycation, which morphed into a trip to Charlotte to address a ministry group on how to best help congregations deal with the financial crisis.

My underlying message was, is, and will likely remain:

1. Don't invest in hope, because that rules out anything financial (save, possibly, Goldman Sachs (GS));

2. Don't "buy and hold" and get uninvested to the point where you rediscover your sense of peace regarding their financial positioning. At that point, let's begin the rebellion against the pure lunacy and flat-out illegal manner in which this administration takes control of companies who long-ago earned the right to be euthanized.

All apologies to those offended by the absurd (and endless) bailout of General Motors (GM). If you're delighted to pay for the better part of Detroit, I really can't speak for or to you. You likely think I'm crazy, and I doubt you understand what's unfolding before your very eyes. If you're actually in favor of leapfrogging socialism straight into totalitarianism, let's just agree not to talk to one another at all.

Regardless, I haven't been "kicked off" or "put on probation" from Fast Money. I plan on being there next Monday. That's simply all I have to say on the matter.

Here's what I have to say about the markets since last I was in the public eye:

  • Two examples of why I'm concerned about casual traders in times such as these: On May 19, somebody went in and bought Saks (SKS) at $5.28, a full 28% higher than the closing price on May 18. If it was a pro buying Saks on that spike, I'll eat one of Saks' deeply discounted hats. It was the sharks, devouring raw-meat bidders.

  • From May 15 to May 27, GM went from a close of 1.09 to a May 22 high of $2.24. The stock is worth nothing. Do I envy the guy who caught the 122% move? Yes. Do I think the buyer at $2.24 was an experienced trader? Absolutely not. On TV or in the 'Ville, my goal is to help "the little guy" avoid the countless traps the Street uses to capture
    newbies. From where I'm sitting, Wall Street hasn't been this much of an insider's game since the 20s.

  • Does that mean I'm suggesting I'm omniscient? No more than it means I'm on drugs. (I'm neither of those things). A few weeks back, I sold Goldman Sachs at 136.5, because I saw resistance there. When the stock went back to that level, I ignored a sacred rule of trading: "Past resistance is future support."

  • While we're ruing, I sold Apple (AAPL) around $127 after buying it off support around $120. Just to prove my mistake on Goldman wasn't a fluke, I ignored the exact same rule. A guy could go loonier than a rat in a coffee can dwelling on such mistakes. It's more lucrative to learn from them. Beyond that, sins of commission in trading (e.g. buying Saks, pretty much ever) cost you money. I'd rather grouse about missing a move than throw away money chasing one.

Obviously I haven't gotten all the pulpit-pounding out of my system. The bottom line: Professional traders are confused and afraid of this market. Even the guys making money this year are grousing and moping. What you have left are sharks fighting each other and going into collective feeding frenzies selling moves like the in-one-week GM double. The unknowing in the pits are chum for the sharks. (As in bait, not pals.)

If you stare at the ticker all day and have been doing this for a decade or so, be careful - but then, you don't need my help. It's the folks who simply don't understand that are getting annihilated. This isn't a stock market to be dabbled in or trifled with; casual trading as a hobby is akin to dabbling in heroin. Just say "no."

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Position in AAPL

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