Getting A Little Insurance

As you all know, I’ve kept my short positions through this run up adding to them as the rally went on but holding off lately on adding to them.  I’m holding TWM & SDS as a hedge and to keep my overall exposure fairly low.  But, with the recent gains in the markets and the fact that these Proshares paid really large distributions, both TWM & SDS have become a smaller part of the overall portfolio.  With the rally not showing the type of intensity I’d prefer, I added to those shorts this morning looking for a pullback.  I suspect it’ll be weak and perhaps just profit taking.  But, with the bad jobs report this morning and the government’s numbers coming out Friday, the near term could see lower prices.  So, this will probably be a quicker trade but I think it’s appropriate since we’re overbought to have a little insurance.  The pullback today wasn’t awful and it didn’t close on its low, but 88% of the volume on the NYSE was downside volume which isn’t great.  We’ll see what tomorrow brings.  But, I’d much rather short a little bit at these levels and have to cover them if the rally continues than to see us drop 10% without being prepared.

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January 2009
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