Covering More

The more we fall, the more excited I am to cover more shorts.  When the market opened up this morning, it was a difficult decision to start covering more shorts but it didn’t take long for the gains to evaporate and the selling to pick up.  Within just a few minutes, all the green turned red and down we went.  At midday, I started covering more shorts and continued into the close.  You know it’s going to be a rough day when the financials are the leaders.

By the time it was all said and done, the Dow was down over 250 points, the S&P was down 27, and the Nasdaq was down almost 54.  All about 3.5%.  Where’s the bottom this go around?  I’m not sure but many of my oscillators are pretty close to where a rally should start.  The worse the news gets, the more doom & gloom there is, the closer we are to a rally point.  It’s very important you understand I’m not telling you to run out and buy stocks. Because I’m covering my shorts, I’m naturally get more long.  But, I still have a lot of cash and really don’t see a whole bunch of great looking charts.  There are some medical companies that look good (MYL, HMSY, GILD).  Outside of that area, not much happening.  Friday, I mentioned that FCX & RIG looked good for a trade IF they broke out.  They didn’t and that’s why sometimes it’s important in trading to buy at a higher price.  A breakout technically would have given me more confidence to buy those.  But, they failed just like everything else.  Back to the drawing board.

One thing to be careful about is when you’re looking for the next trade, don’t assume when the market turns around, the stocks that held up the most during the past couple of weeks will be the winners.  Often times the weakest stocks will have the biggest comeback.  Yes, that includes financial stocks.  

What is income?

After the bell tonight, JP Morgan cut their dividend.  As much as this gets bad press, I continue to believe they’ll be rewarded.  FCX cut it’s dividend a couple of months ago.  I think GE should do the same.  I know they want to seem loyal to shareholders, but cannibalizing the company by paying dividends doesn’t help anybody.  Save the money, reinvent the company, and consider a dividend at some point in the future.  

The JP Morgan dividend cut does show why income investing isn’t just about dividends.  You have to incorporate bonds.  If you’re not doing that, you run the risk of your income being cut by some management team.  Bonds don’t do that.  What’s stated doesn’t change in most cases.  It’s a pre-determined deal.  You know the deal when you buy the bond.  Not so with dividend paying stocks.  

Time for profits on gold

With fear picking up and inflation talk all around us, it’s no wonder why gold is trying to break to new highs.  But, if I’m long gold, I start taking some off the table.  Many technicians will look for technical patterns.  And, the chatter I’m hearing is double top.  I don’t need to explain that to you.  It’s just what is sounds like.  Gold made a high about a year ago and is now testing it once again.  There’s not a whole bunch to complain about in the picture.  But, there are some oscillators that aren’t as high now as they were when gold made its high almost a year ago.  So, that’s a negative divergence.  I’d like to see gold break through the old highs pull back and see if the old ceiling becomes the floor.  If that happens, then I’ll jump on board.  Another reason I’d like to take profits on gold with fear picking up, we could see a temporary jump in equities.  If that happens, you might see gold used as a source of funds by traders.  Be on the lookout for that over the next few trading days.  If it can’t go up on a day where the Dow falls 250, it may be losing some steam.  At least for now.

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