The old adage, ‘You snooze, You lose’, definitely pertains to being a trade/ investor these days. How else can you describe a missed ‘90 handle’ run on the SPX within days to anyone sidelined asking..” what’s the market run all about the past 5-6 trading days??". Not only sidelined money, but shorts are asking the same question, except for the past week all they do is make predictions about where “R” might be higher and saying this will be a great place to short more!. The question to this methodology is why in the world are they making these predictions while letting their positions from 1020?- 1040 to 1075 disintegrate if they know “R” say at 1100 is the real formidable level?. Basically, what they are doing is giving in to the thought the market is running higher, yet they don’t cover their existing shorts and their losses add up. We see this in our perusing of other blogs during lulls in trading. Basically, sidelined investors and many shorts are one of the same these days. In the long run, okay in this case its only 5-6 trading days both loose in different ways. Yes, a sidelined, unprepared investor does lose too even if they didn’t lose any money because 10% runs don’t come around that often and/ or in such a short period of time.
As we’ve always discussed trading is about preparation and a game plan. You always you have to ask yourself the questions about what might be relevant to the market at a certain moment in time and dissect ‘news flow’ as it happens afterwards. So, if anyone asks you the question of what this run has been about it’s pretty simple in these eyes as they’ve been all pointed out to watch as part of being ‘prepared’ and in the game.
It’s almost like a 9th inning rally in baseball. You come in with a game plan and it probably starts in the other half of the inning. You might be losing, but still you bring in a pitcher who can curb the other team. (we had that in the market settling/bottoming). Than the manager brings in a pinch hitter to lead off the inning. (we had fresh catalysts in the market) and than you have the next hitter, bunt him over to 2nd. Afterwards, you have a couple of more chances in getting him home for the win. (we’ve had that in the earning reports yesterday from AA, CSX NVLS). That’s the rally and that's the ball game as they say. So, right now it’s irrelevant to us what INTC or JPM does in the short term. These are the on deck hitters left that are not needed at this point. So, what we’re saying is it's time to regroup and anticipate ‘individual EPS linked plays'. As you can see this Q, we may have some decent surprises (EXPD types would be great!). You throw out what got you here and patiently wait for reports (fresh meat). In the meantime, we’ll let the market figure out what it wants to do, either break this April to June trendline for good with conviction or go do some backfilling to 20ma or just below.
Why leave good holds and look forward to new fresh plays?. Well, we imagine most do not have hedge fund size accounts and if you’re in profitable holds, you’ll need money/margin for new plays and not have money that is tied up in stocks that already bloomed the past week or that will backfill with market if that happens. You might want something premarket/ AMC in size and unable to dump a hold into an illiquid market to free up some cash. Of course, if you have sizable accounts or time on your hands (timeframe), you can do both. All of us are different in our decisions to take profits.