Thursday, February 22, 2007

Why I Sold Many Trading Longs

When one trades aggressively over an intermediate time frame using much margin, it's very important NOT to be 200% long at the start of a correction. Corrections in a bull market are scary & fast & one can lose a lot of the profits one made over a long period of grinding higher in just a few days.

So when that bearish CPI number came out, my assessment of the risk of a real correction went way up. Hence, I'm off margin (aka "butter" from the humorous brokerage commercial). I used the S&P futures short to offset the margin temporarily, while I sold individual stocks as the market rallied during the day. That worked well and I covered the short today for a small profit.


mern said...

the CPI scared u? imagine if the BLS actually gave us a realistic #. i still havent, since ive been checking, chatted with anyone from sea to shinning sea that has a personal CPI below 7%. anyone in florida is 20% just on property taxes and homeowners.

the large revivsions by the bls on jobs and inflation r just insane.

the govt paints a pic of the economy, which the bulls seems to be buying/bought. but the conference calls ive listened to, dont sound nearly that gud.

the truth is probably in the middle.

personally i still think stagflation is here and its real. but till the liquidity spicket is turned off, that seems to trump everything.

so i day trade until i see the market break, then i jump on the darkside with the butter


Bunkerman said...

It's not that the actual CPI number scared me, but that we know the Fed watches the core inflation number and we know their model expects it to decline slowly. So when it blips up, we know the Fed will start to get worried they didn't tighten enough. So any further blips up make it more likely the Fed will tighten again & take the market down hard, like last May. I'm basing this on what Bernanke has actually said in testimony, not my ideas of reality or what they "should" do. This thinking got me long last summer and it's making me cut back now.