Friday, July 30, 2010

Coward Ace (and picking vacations wisely)

In war and in the markets, get away from fights you are not winning.

I wouldn't mind day-trading the action here, but otherwise things are becoming too choppy to pretend you can hold a large line and beat it. Worse (from a bullish perspective), more than a small spat of leadership stocks have been woodsheded now after reporting earnings. Tech groups, and semi's especially, have begun under-performing; a material concern should that trend continue.

Yes, I did say bullish perspective, since unless you have been trading extremely short-term and picking your spots with perfection, you have been knocked being short this market - even as THE ECONOMY IS GOING NOWHERE!!!

What's an economy? I thought we lost that a couple years ago.

Fine. I'm looking forward to taking a breather now in August while all of this works itself out (or doesn't). If the market goes bad, I'll reduce further (and/or hedge, depending) but I'd prefer to wait for the calendar to catch-up some before shorting. This July has been the best monthly gain for the market over-all in a year. Why would I want to short that? Why do so many insist still on fighting?

Given the collective genius remains skeptical of a market that is posting it's best month in a year (even if some cracks may be starting to surface), I won't be surprised if August only further frustrates bears. However, a weak market heading into September, should we see it, is one of the easier ways to make money being short. That would be a set-up to get net-short about. The September month is a net-loser historically, especially for growth, and the September/October combination is rarely a bull's best friend (except for sick buy-entries which commonly come out of that period's lows; pivoting upward then for a strong Q4).

Don't fight losing battles. A mantra which makes your winning fights significantly more profitable.

I scaled into a much smaller line here lately and dodged some bullets as a result. Some of those problems avoided were because I moved away from anything about to report. I had seen enough blow-ups to get religion (after taking a body-shot from NFLX earnings and eying enough after-market debacles where I held no position, I was sure to steer clear of earnings from names I'd been long recently like AKAM, APKT, CAVM, LOGM and NETL (to name a few skewers).

The fact that so many strong growth charts drew swords on themselves, especially in tech, is a wake-up call if not something more serious. Again, I'll hang-out lightly invested, with smaller numbers and smaller position sizes, while August takes shape.

Next week I will be remote, but generally tuned-in, while the following week I'll be basically out of commission altogether (and likely hedged that week if only for that reason).

If you're making money in this market, then by all means have at it. But if it is becoming more and more challenging, then August is not a bad month for the sidelines. Accounts here remain fat on the year and came through the recent mulch undamaged, but I attribute a lot of that to getting religion; since some of the leadership names I have been pushing on would have hit back significantly had I been more brave.

Fortunately, I'm more of a coward...swimmingly fat for vacation.

Follow Centrifugal to fade trades in real time.

Total Position: Currently 100% net-long, 33% invested

Currently Long (according to size): EWS-Singapore (7.3%); CRM (7.2%); CXO (5%); OVTI (4.9%); CYT (4.6%); VMW (4%)

Currently Short: no current position

Futures: no current position

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