Don't yank all your money out

CNN does it again with this brilliant headline.
Of course they have been saying the same thing for the last year every time the market has a really bad day.
Yeah wouldn't have wanted to pull your money out a year ago and miss this great action.
( -20% on the blue chips!!)
They also say that it is these times when buying opportunities arise. They don't explain how to take advantage of these opportunities if you hadn't yanked your money out in the first place.

We saw it coming and went to cash long ago.
Anyway it was a very exciting day today. Once again you guys are getting the crash course these last few months. (Pun intended).
Puts are working out beautifully. Took some profits today but looks like there is still some room to go here.
Sure you buy when there is blood in the streets, but this is still a time where cash is king. Leave the falling knives alone, you will get cut. We will know when it is time to buy and your patience will be rewarded.
In the meantime stay short if at all. Limit exposure. Remember our motto "Want what the market wants"

Peter

The Great Debate

Anyone looking for answers as to how this bailout will work didn't get any during the debate.
There was some finger pointing though..
IBD this weekend also points some big fingers under Uncommon Knowledge title -
"Fannie and Freddie were created by Democrats, regulated by Democrats largely run by Democrats and protected by Democrats"
Anyway it was so much easier for the Presidential candidates to debate about Iraq, Iran and Pakistan then to offer any real solutions for what ails the good ole United States of America.
Of course part of the reason is that no one has a clue yet. My bet is they will throw money at the problem, inflation will raise values and other bubbles will be formed. (Alternative energy is my bet)
The goal is to still come up with something before the markets open on Monday. Lets see.
Again I have been recommending cash at this time, It is just to much of a gamble. (although I am still holding some short positions not confident that this is going to work out any time soon)
Suffice it to say whoever takes over the reins from dubya sure has their hands full.
Speaking of bubbles.
If you recall we were looking at shorting RIMM in July when the MACD divergence occurred. This is one stock we will be reviewing at the next Boot Camp. In the meantime spend some time thinking about this one knowing that there are more out there and we know how to find them…(and why day traders miss all the fun)


Stocks:
Here is a long candidate for Monday for those that want to play. A breakout above $60.


Some others:
Longs - SNE and UTX
Shorts - CEPH COCO GIS and WMT (Also ready now to short KFT after riding the 5th wave up)
ETF's
XLE - stopped out with profit. Still looking to go long again.
GSG - nice divergence waiting for daily fractal This is looking great and will rise with rescue..
GLD- quite after run up last week still looks like good long
SLV- quite after run up last week still looks like good long
USO- quite after run up last week still looks like good long
QQQQ- straddling can't wait for Monday

Peter

"STOCKS BUY INTO RESCUE PLAN"

This was the weekend's IBD headline. (and check out that font)
Then below that in smaller font the real issue - Questions abound over bailout.
What really caused the spike on Friday? With what appears to be an imminent economic meltdown are the pros really buying up stock or where the shorts scrambling to cover scared of what more craziness this government might do to calm the countries fears.
First they took away the up tick rule and then eliminated shorting in the financial sector. Talk about party poopers..

The shorts had quite a ride with Citicorp!!
Don't you just love dubya's quote "There will be plenty of time to debate the origins of this problem. Now is time to solve it."
The solution: buy up all the crap mortgages from the failing financial institutions. That’s hundreds of billions of $$$ by the way. Whoever said there is no such thing as a free lunch was obviously not a CEO. Of course one mans free lunch is another billions peoples burden.
As far as debate the origins of the problem - well that really won't be much of a debate the answers are obvious. The finger pointing and excuses however will offer some great reading. All the hearings will also give George something to do in his retirement.
And finally that issue of question abound over bailout. Like most great solution the devil is in the details.
As an example: I am a mortgage officer who needs to get his numbers up, you come to me wanting a mortgage, well I have a deal for you we are offering $0 down and 0% interest for 5 years. My appraiser also tends to be Liberal on his estimates and the fact that you work in the American auto industry doesn't really concern me. Outcome you have a mortgage of 110% of the value of your house and can just barely cover the monthly payments. The extra $ you got went to buy new car, big screen TV, iPods for the family, trip to Bahamas etc. No savings. Fast forward - real estate values have dropped, auto industry layoffs, and interest payments now due.
Ant they wonder why no one has been able to sell these mortgages. Talk about your hot potato!!!
Now if the banks had to value these mortgages correctly they would be bankrupt, so the government will pay face value save the banks and then have to come up with a way that people don't walk away from there homes and cause a continued downward spiral in the real estate markets. Sounds like its not only the CEO's that are going to get a free lunch….
Some possible solutions: discount the principal so people can stay and pay something or reduce interest rates or …..
In the meantime what do us traders do?
This last week has been a day traders dream. But not for the faint of heart. There is excitement and then there is craziness. I suggested small positions if at all and that Cash is King.
Still am not to anxious to trade until the dust settles a little more.
For the more conservative of us swing traders I suggested moving to ETF's where the dogs were not so crazy. We got nicked into the XLE on Thursday at $66.50 seeing it get as high as $78.10 on Friday and close at $71.25. Not a bad move for 2 days. But again insane action best left to the pros..
For ETF's:

XLE - still long. Unless you took advantage of Fridays craziness. Stop $69.
XLV - crazy open. This is why we wait to see open and/or use limit orders. wait
XLB - same as above
XLK - same as above
XLU - same as above
GSG - nice divergence waiting for daily fractal
GLD- still for day trading only
SLV- still for day trading only
USO- nice divergence waiting for daily fractal
QQQQ- flat waiting

As far as stocks:
As you would expect we had some nice breakouts, but pullbacks into the afternoon similar to the etf's.

Peter