Classically Trained, for the Revolution

Tuesday, September 16, 2008

Stop Worrying and Love the Bomb

OK, the Fed held steady today on the Fed Funds rate, but they dumped an additional $50B into the banking system reserves (which follows the historically significant $70B they already shot into the system Monday). Then after the close announced they will indeed bridge AIG an emergency loan to the tune of $85B.

I covered anything left short at today's open, picked-up my rubber band woot suit from the cleaners and started buying long ~90 minutes into the session. By the time the market started driving higher with about 90 minutes left I was fatter than Brando and running like God. I sold my larger index trades into the rip higher, but I held several names long going into tomorrow; un-hedged.

I would expect a bit of follow-through tomorrow, and perhaps a sharp advance, but if it is dramatic I'm just selling into strength. If the advance is more casual (which will tend to have a bit more staying power), we might get a few days to a couple weeks of a firm market, but a re-test of sorts should eventually be expected.

So a strategy of selling emotional spikes higher and buying emotional dips lower is the gameplan here for the time being.

If we manage a successful re-test, or mark a bottom in another fashion (to be defined later), then I would actually move back to managing portfolios for a living; instead of reverting to this late-90's style daytrading (it was fun while it lasted at least).

If we don't manage a successful retest, but drive to lower-lows instead - I will get aggressively short and forget about getting flat by the close any longer. They'll be no way to be short enough should that develop.

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