Market Outlook - The Week of April 20th

My friends we have been doing extremely well. I sit back now when I started my blog on March 7th and my trading account was up 58% YTD, now it’s up to 198% YTD. We have had a blast and rode great winners, like TXCO, UA, FAS, TNA, AXP, LVLT, DRYS, LDK, FEED, TTWO, TIE, FDO, SSO, DELL, FXI, TXN… the list goes on.

This week coming up, I will be taking a little profit, for my own sanity (plus I will be out of town Friday). This is a monstrous earnings week, so if earnings are good, we might not get a pullback, instead we will go much, much higher. However, I don’t think that will be a case. We need a nice “pause” for the health of the market and for the sanity of mutual fund managers. The VIX continues to creep lower (by the way, I posted a live quote on the left side) and mutual fund money isn’t even back into the market, so I am betting they are talking down the market, so they can get in (but that is if we pull back). If we do pullback, we want high cash levels, so we can buy great stocks on the cheap and make some serious $$$.

I will sell off some stuff, might even buy more, who knows. I got some great derivative trades in mind, so hopefully the market will turn the number I want to see, so I can execute them. You know my holdings, so I will keep them in check and trade accordingly. In addition, I might add some short exposure but I might not. I might just sit in cash, eat jelly beans and play golf all day, haven’t really decided. My best advice is to stay in cash unless you know the story behind short. I made a killin’ shorting REITS in January/February but I also read over 980 pages of documents relating the financial stability of commercial real estate, in addition to sell-side research on individual firms. Point being is I did the homework because nothing is more risky than shorting, the most you can make is 100% and your losses are unlimited. If you HAD to short, the RF blessing would be to play put spreads on individual firms and maybe ETFs, but I am beginning to hate ETFs. Inverse ETF’s are ok but the ONLY WAY I would buy them is to buy calls against them. For example, I own FAZ but have sold calls on them already to help myself. So, if you are looking to short and had to use inverse ETF’s (say the FAZ), buy the FAZ and buy out of the money calls on the FAS to protect yourself or sell calls on the FAZ. Otherwise, you are gambling and playing with fire really.

Lastly, I appreciate the visits. We are at 3,700 views in a month and rolling good! Feel free to pass the blog on to friends, family, message boards, coworkers, etc. The comments have been very, very kind and mean a lot. I have been trading for 6 years and love this game! I hope you have enjoyed the blog, may the community expand and bring great trading strategy!