The VIX touching its lower Bollinger band (VIX
chart) and the market coming within a few tenths of 1170 (SPX
chart) triggered my sell criteria today. 
SPXA50R
has jumped above 88, which were cycle highs several times in the recent past.

I sold VWO, FXI, and EWZ, my emerging markets laggards,
and kept VWO and VB.  I bought, with some
remaining cash, a small position in SDS, the 2x inverse S&P 500
ETF.  I'm moving into a hedged position with SDS
and JNK, 80% JNK and 20% SDS, but since this is an IRA, it takes a few
days for
the cash to become available, so I didn't sell all my long positions.  I
do not want to be net short, even for a few
days, but at this point I want a hedge.

I estimate the market has between 0 and 30 more points of
juice left, so keeping some longs is a good idea.  VB and VNQ are strong
performers.  Let your winners run, is the idea here.

I am not really making a bet on the short side, although,
I suspect, the short side is the higher probability trade, given the
market
extension and extreme overbought state. 
Shorts are guilty until proven innocent at this point, in my
opinion.  You need to get below the 200
day moving average (1045) before the short sale becomes the default
trade.  That is a possibility, but not a high
probability, at this point.

I'm moving out of risky assets though, and I need to sell
either all or part of VB and VNQ to fund a big JNK position, with SDS
hedge.  The market has shown great
resilience and strength, but those characteristics have limits.  Trees
don't grow to the sky.  This tree may hit 1200 though, so striking
the right balance between long and short is the challenge at the moment.

I exited VWO at a small profit, 0 to +4% on all blocks.  I exited FXI
and EWZ at a small loss, a 0 to
-3% loss on all blocks.  With VB and VNQ I
have more appreciation, 9-12%, currently.

I lost a great deal of money trading last year.  By this time last
year I had completed 29 transactions
and lost -$595.  The market's steep
decline in early 2009 had something to do with that of course.  I have
made +$498 so far this year, with
another couple thousand in unrealized appreciation in VB and VNQ.  I
have completed 14 transactions so far this
year.

What do you call a trader who trades half as much and earns
twice as much?  A maturing trader.  Since the bear market started I've
become
much more proficient using indicators, something I will be eternally
grateful
to Horse Trader for setting me on the right path with, and would like to
work
toward a simple trading system, using SPY or perhaps QLD, buying the
dips and
selling the peaks.  There are several
systems I've examined (black box systems) on Collective2.com and
glinser.com, using
QLD, but I think, ultimately, what I need to do is do the trading myself
rather
than rely on a black box.

On Fast Money tonight Kominsky (sp? He's the new guy)
pointed out managers need to get allocated for end of quarter, so this
market
of ridiculous extension may just go on extending through March 31.  That
makes sense, but the market was really
oversold a month ago, so the length and strength of this rally, to me,
is really
proportionate to that.  I believe any
market rise the results from a deeply oversold condition is strong in
proportion to the depth of the prior oversold condition, and by the same
token,
any market retracement that results from a prior overbought condition
(like we
currently have) is bearish in proportion to the strength of the prior
overbought condition.

Published By Bloominonion Thursday, March 18, 2010 Read More


Source: Zecco.com

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