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Random Thoughts: Is it Real?


One rally doesn't mean the worst is behind us.

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Salvation Lies Within, Unleash the Hounds and Character Witness.

Does a Bear Sit in the Woods? - 11:38 am

It's easy to get caught up with the intense emotions that are running rampant. That, more than anything, was the catalyst behind my afternoon Truman Show segment on Friday. When the market tanks, most mainstream media screams "guns and buttah!" When it rips, they cheer, high five each other and proclaim that the worst is behind us.

For those of us in the game every day, we understand that "selling hope and buying despair" is rewarded more often than not, particularly when we operate through the lens of discipline over conviction. I was most certainly early in my constructive stylistic posture but that happens to the best of us. Like dieting, we can trip but mustn't fall.

My response--as shared in real-time on last week's Buzz--has been to aggressively trade around my bets and play the hand I was dealt. That included a few "all in's" (for the quick Snappers) and adding core exposure, which I continue to trade around. A few notes of interest as we perception plays ketchup with reality:

  • While I'm using a trailing 1% stop (on the S&P) for one leg of my metaphorical bull costume, I have indeed made some sales of my overage. File that under "pure discipline" and know that each time I hit the button, I whisper "let your first sale be your worst sale."

  • Look at Toll Brothers (TOL), Centex (CTX), Ryland (RYL), Lennar (LEN) and KB Homes (KBH). It sure feels like there's a whiff of nationalization waffling towards the homebuilders.

  • As per my opening missive, I'm taking a hard look at starter positions in GLD and FXY.

  • You'll never make as much as you should and you'll always lose more than you want. As soon as you accept that, the swings and things will be a lot easier to digest.

  • While expiration looms large--and volatility will exacerbate--I can't shake Bonnie Tyler from my crowded keppe. If and when Turnaround Tuesday manifests, I wanna be Graig Nettles (pounding my glove and ready for anything).

  • Away from the Red Beans, I would note that Schlumberger (SLB) doesn't act like a stock that wants to trade higher

  • At a point--and I'm not sure today is it--fund managers that purged stocks will have the "holy cow, I'm under-invested" moment. In the industry formerly known as Wall Street, under-performance is the only thing worse than absolute losses.

  • Finally--so it's said--I don't believe we're out of the woods. We've still got that wishbone world thing to digest, as well as the potential for a final "5th" wave lower that takes us closer to a "natural" level. As a trader, however, I'm less concerned with the destination than the path that we take to get there.

  • And no, it's not easy. I mean, seriously, Phoebe (my cat) looked at me this morning at 5:00 AM and said "asdhelv pehes shdfwe werels!" which, in catspeak, means, "Hey freakbag, feed me, clean my litter, brush my back and get some sleep."

  • As always, I hope this finds you well.


No positions in stocks mentioned.
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