Shorting More

There’s good news and bad news about today’s mild sell off.  The good news is that I was able to short more this morning when the market was up and benefit from the fall throughout the day.  After yesterday’s weak internals that I wrote about, I was compelled to short more today.  It’s always hard to short into rallies but that’s what you have to do in this environment.  The bad news about the sell off today is that the short I executed today could be a short-lived trade.  The bulls are hoping right now that we have a pullback that is weak.  What I mean by that is perhaps the indices  fall to the old lows or perhaps even lower but the internals are better than the would indicate.  That would be the complete opposite of what is going on right now.  Lately, we’ve had rallies that give me plenty to worry about.  Nothing underneath them.  Not enough volume, too many new lows, not enough stocks participating, etc.  But, what if the Dow, S&P 500, & Nasdaq all fall 5-10% from here but the number of new lows starts contracting and the breadth (the stocks participating in rallies) starts improving, and the volume is even weaker on pullbacks?  Then what?  That would be the recipe for a longer lasting recipe where we cover all of our shorts and get long more stocks.  If we get a quick hard sell off, look to cover shorts sooner than later.

Fidelity National Financial

Many of you have asked for an update on Fidelity National Financial (FNF) and my opinion on it.  I bought it last last year basically because of the activity we saw regarding refinancing.  However, as the new year approached, one of my concerns was the amount of refinancing that wasn’t going through for several reasons.  I thought this might hurt their earnings.  They reported today and did have a loss for the quarter and lay off 1500 employees.  However, they said that their business soared in December and grew even bigger in January.  Remember, this was around the time I was suggesting you look into refinancing and I personally knew several people refinancing.  Owning FNF made sense to me.  In addition, they acquired three competitors who were struggling.  The stock was up over 7% today and up as much as 11% at one point.  I didn’t sell the stock today but will still be watching for any weakness.  Almost everything is a trade in this market.

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