Great week but a terrible Friday with a big selloff led by the financials. I posted around 3pm that FAZ will predict the rally and it rallied, therefore, no rally. The reason for this was the news from Washington. Big bank executives met with Obama today and many said that March would NOT be as good as Jan/Feb. This generated alot of profit taking in financials. The one thing I don't like about the market is that it is still rather dependant on financials, particularly the FAS. I personally know 3 traders (that I would consider pros) that bought the FAZ this afternoon; however, I did not participate. One of them also bought SRS. I personally rather have a massive cash position, than be short and get caught.
As for the portfolio, I sold out of my URE and TSO today for a combined breakeven, give or take $10. I bought some MAC puts today as well because the price action in that stock is getting wild. I bought Aprils puts, 4 at the $5 strike and 4 at the $2.50 strike (note: the only volume today in the April $2.50 puts was me at 9:30a, kinda funny. I wonder if I bought 100 if it would've moved the stock down harder haha). One of the classic ways hedge funds move stock prices is through the options market, so often you need to determine if its "noise" or a "signal". For example, if a hedge fund is long $50 million worth of HUM at $24 and want to blow out of it, they can manipulated the options market (rather cheaply) to cause buzz, make the stock price, and dump the stock. Rumors is another way. If you remember the Bear Stearns story, two weeks before bankruptcy, there was a NY Times article on how Warren Buffett took at 10% stake in the firm. I don't know this for a fact but I would be willing to bet that a fund manager was long tons of Bear Stearns and leaked it, to get a rip, and sell his position.
As for longs, I really like NTGR and IBKR. Both held up very strong today, so I didn't build or up my stake. I bought a microcap, WetSeal (WTSLA). Frankly, I make fun of the stock but I read the guidance report and they beat by $.02. The firm has a good balance sheet and has about $1.30 in cash per share. In addition, it has about 8% short interest. Frankly, I am hoping for a surge, then I am pumping it. I also bought GNK. Shippers were ripping today, just look at DRYS. The Baltic Dry Index is better than it has been in the past and the firm has does alot to conserve cash flow, by suspending their dividend. We will see how it goes but I would suspect a $2 downside with a $6 upside.
I will talk more about the market over the weekend, take it easy, and another week in the books.
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I bought some FAZ yesterday ($19.50), mainly for a hedge. I bought some calls on the SPY as well. This is nothing more than profit taking. I think we will pullback hard but then takeoff again, it is just a question of when.
ReplyDeleteYeah, we are in a weird zone
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