Down We Go

One good tell of a market’s condition is how does it react to news.  When it came across the AP wires that Obama had effectively clinched the nomination, the market immediately dropped about 130 points.  Hasn’t this race basically been over for some time now?  See, it’s not about the news.  The news is an excuse to buy or sell.  In a really strong market, this would be a non-event.  We didn’t really learn anything today.  Yet, the market sold off rather quickly.

Conversely, sometimes we’ll see something that shouldn’t impact the market make it shoot higher.  “Breaking News” comes across the television and up we go.  Right now, I believe the path of least resistance is still down and any little bit of news pushes stocks lower.  Everything’s perceived negatively. 

I mentioned yesterday I’m short oil and gas companies.  Oil is down almost $2.50 per barrel today.  I’ve been short the S&P 500 and the Russell 2000.  Now, I’m also short financials for a trade and hedge.  I still have my core positions there that I like for the long run.  But, financials have been leading the way down lately and that is likely to continue for the short run. 

I think it’s important to spread out your shorts to diversify basically.  Our goal is always to short the bad and weak areas and stay long the strong areas. 

I do not believe it’s too late to add shorts if you’re new to the blog.  It’s also not too late to sell positions that are weakening and vulnerable.  If you have investments that are long term and want to keep, you can short other ones (ETFs are good for this) to hedge.

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June 2008
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