I have to admit, it is pretty suspicious that just as the market was plummeting to test the low end of the range a rumor leaks out that “Obama really is going to pay your mortgage.” I preface that I have never actually done the research to see the number of times news has been released right at a key support level, but it seems that within the past year or two this has happened a number of times. I also find it interesting that there was absolutely no details about this “new plan.”
The good news is that if you stick to the trading plan instead of watching the stupid plans coming out of D.C., you don’t have to worry whether this is mere coincidence or market manipulation by the government.
I say this because if you were short the SPY, the trading plan was to close your short near 81 because our range is 805-880. I managed to close the rest of my SPY hedge out at $81.50. This was tough to cover at the time. The market was plunging and it appeared this might finally be the chance to break support. On the other hand, my trading plan was to cover as the market approached 805 and to short at 880 until such time as the market tells me that this is no longer the trading range.
I also felt comfortable sticking with the plan because the descending triangle on DIA and XLI are not quite at completion yet. I think that was a clue adding to the probability of a bounce from support.
I traded a moderate amount today. Sadly, JO hit my stop this morning and was terminated. When XL opened weak, I trimmed it back to its original position size. I also added a little more to my AZO long. Not because I am excited about AZO long, but my stop is in the low 135s. When AZO hit 136, adding to my position means I either will get a great buy on a dip or add just a little bit to my stop out. So far so good. AZO survived today.
I recharged my LVS long back up to its original position size. I also covered some of my QQQQ short and replaced it with XLI short. I then added to my long IBB position and added back an equal amount of QQQQ short. This is pairs trade of believing that IBB will out perform the QQQQs.
The trade that made today was profitable was no doubt covering SPY at support. That made today a fairly decent green day instead of a flat or small loss day.
Moving on to specific stocks, I mentioned CEPH over the weekend as a long trade. I have been waiting on earnings and for the break above $80. Earnings came out tonight and the stock didn’t move after hours. I’ll be watching tomorrow to see if this breaks up or down. I’ll be surprised if it doesn’t move. Also, gold and silver have just been on a tear. I’m still waiting for the pullback in SLV to $12.70.
For tomorrow, after closing out my SPY hedge, I would say that I am flat or maybe a little bit on the long side. I do not expect to change my portfolio position tomorrow. If I had to guess, there will be a little follow through tomorrow to the long side. Perhaps we move back up to 850 on SPY. This is my guess based on tomorrow being a long weekend. Shorts, especially with the news today about Obama paying your mortgage, likely won’t be in a position to get aggressive on the short side. The one caveat would be if news comes out tomorrow that there really is no plan and the news today was total BS. Then we go straight back down towards 805.
For now I’m just being patient, hitting some singles and doubles and waiting for the descending triangle pattern to either confirm or fail. If it confirms, I’ll go for my homerun at that time.