Wednesday, September 30, 2009

RINO is a Beast (and I am a madman)

I got caught with pants down early today, but here is what I can (briefly) inform, regarding the present action.

-Lower-lows on the major indices (posted Friday last wk) remain the pivot point for taking considerable action. So far today the Dow has penetrated this level, but that is the only significant index to do so; thus far this is bullish.

-GS was not invited to the selling party. On the other side, AAPL is holding its own. Semi's and various Tech are also firm; thus far bullish.

-Oil is rallying now, following earlier weakness and the Dollar has been down throughout the session (at the same time the market has weakened); probably bullish (I say probably because we may be further de-coupling with the Dollar/Equities inverse-correlation, more than indicating clear bullish prospects for equities; keeping an eye on this - even though you don't know what I just said).

-Breadth is clearly negative early, though not severe, and volume is rising; bearish, unless we can recover most of today's losses, reverse higher, shoot the moon, etc.

Heavy amount of Put-buying today; bullish.

-Trish came on and she was not very excited in reporting the Dow down more than 100 points; this is a clear negative for this session and was the tipping-point-catalyst for me taking on the partial hedge via TWM (originally I was looking to add double the amount of TWM, but not until the Russsell 2k traded below Friday's low; which has yet to occur...Trish means that much in my decision process).

-Action is not so grizzly thus far, but more big data hits this week (both tomorrow and Friday). If not for Trish, I would be simply taking lumps, pants down and hopefully wearing boxers down there. As it is I am still long, but a little less so; call this bullish or bearish - I refuse to use myself as a contrary indicator, at least publicly.

Since I have a bit of hedge now, I am free to add to longs (as long as we haven't broken any uptrend in the overall market). I'm taking an usual line on accumulating RINO. I'm paying up, as this thing is just a beast (higher again all day today, which is saying something), but I am only into a small, partial position thus far. I will intentionally add to this at a lower level (or else higher if it consolidates northward and creates a new entry). I also added back to JDAS, and I am eying BCSI.

The point regarding RINO is that I intend to break my rule of averaging-down. I don't like averaging-down, but this thing is a bit of a runaway and that strategy is my only chance now to have any piece of it; we'll see what happens. I'm probably doomed.

And if I end up with too many names as the market breaks my benchmark for needing to neutralize I will be adding to my hedge and simultaneously culling out weaker names long at that point.

Finally, if the market drives lower and the Dollar does not rally (further decoupling), then you can be rat's ass sure I am letting go of this UUP hedge.

When a hedge is not a hedge and it starts losing money, there is only one thing left to do.

Chuck it up!

-Total Position: Aprox. 2.5-to-1 net-long, considering levered TWM and low-beta UUP hedges.
-71% invested
-Pure-longs = 52%

Currently Long (according to size): CTSH (7.9%), RKT (7.5%), SWM (5.3%), SXCI (5.2%), CFSG (3.4%), JDAS (5%), CLW (4.9%), TSRA (4.9%), ULTA (3.6%), RINO (2.6%)

Currently Short (according to size):
-TWM-long (Russell 2k Dbl-short; 7.3%)
-UUP-long (12.2%); current inverse correlation with equity markets defines this as an equity hedge
(Note: inverse-ETF TWM represents being dbl-short the respective R2k-index).

Futures Accounts: no position

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