Lightening up on Some positions-Think there is increased possibility of Downside

Firstly apologies that I have not been able to post for a week or so I had some computer problems and I was travelling so was not able to get any posts out.Well yesterday was a real shake out.Today there seems to be some buying on weakness, I am glad I bought some SPY Puts a little while back as they softened some of the downside-I still was down around 3.5 % yesterday though.

I am not convinced we have seen the last of the selling and yesterday was a timely reminder of what can happen when everyone rushes for the exits at once.I am waiting to see where the Market closes and also what the voulume is like today, if we are up but volume is weak then I think we are in for some more selling sooner rather than later.

Some selling was long overdue, it would have been nice if it had not all happened at once though !! I took the opportunity to lighten up on some positions today so that I have some cash to take advantage of any opportunties but also to take profits or to reduce my exposure to some of the more High Beta stocks which will move a lot if the market sells off again.

I sold the following from my Pension Portfolio and My ISA

Linear Technology- LLTC sold for an annualised 6.38% Loss

Realty Ome Exchange -O sold for an annualised 24% Gain

Level 3 Comms LVLT-Sold for an annualised 26.5% Gain.

I would be extremely cautious about adding any positions at the moment I think we need to take some time to see what transpires in the next couple of weeks before we decide our next moves.

Sometimes the smart trade is to do nothing !!

For those of you old enough to remember the TV series Hill Street Blues -

" Lets be careful out there "

Best Wishes

Alan

Tags: LLTC, LVLT, O, Level Three, Realty, Stock Market Decline, SPY, PUTS

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Buying SPY Puts for Some Insurance

The stock Market dropped sharply today as Bonds sold off and the existing Home Sales Numbers came out weaker than expected.At the close the Dow Jones Industrial Average (DJIA – 12,502.6) had lost 119 points, or 0.94 percent, and is now resting on its 20-day moving average. The S&P 500 Index (SPX – 1,423.9) is also on its 20-day trendline after losing more than 1.1 percent. The Nasdaq Composite (COMP – 2,434.2) dropped 1.3 percent, falling back below its 10-day and 20-day trendlines.

The Market is making me nervous at the moment, I have learned over the years that when I feel like this I should be proactive in protecting my capital and gains and taking out some insurance to protect the downside.

Now let me be clear I am not calling a top or saying that the market is going to decline from here-I think it is extremely brave (or stupid) to try to call market tops and bottoms,but I do feel that the market is behaving as if it is running a bit out of steam and it would not take much for it to roll over from here.

I cashed in a few postions today that have done well for me over the last little while, I closed out positions in the following :

Telecom Holders (NYSE TTH) 33% Gain

Madison Claymore(NYSE: MCN) 3% Gain

Vietnam Opportunities Fund ( LSE: VOF) 86% Gain

Drax Group (LSE : DRAX) 16.5% Gain

So I have lightened up on a few positions and realised some cash so I can take advantage of any opportunities that may present themselves in the next little while.

The Feb 43 QQQQ Puts that I bought a week or so ago came rocketing back today up around 80% to be back at break even. Depending on what happens tomorrrow I may roll these puts to the March contract as time decay will start to be a factor here.

I am also going to look at some "at the money" or "in the money" SPY Puts as I feel that the S&P 500 may be vulnerable to a further breakdown here as well.

It is important where we are trading for the mid to long term that we look at smoothing out the ups and downs and volatility as much as possible, if only for sanities sake.

If you cannot trade Options in your account or are not comfortable doing so, have a look at your portfolio and look for any opportunites to prune back your exposure.

You can do this by taking profits in stocks that may have run up but have been trading sideways for a while or ridding yourself of positions that have not really performed as per expectations.

There is always a danger that you may miss some further upside but my experience has taught me that missing out occasionally on some of the upside does not make up for the angst and "If only I had" regrets that taking big and swift losses brings.

As ever best wishes and Good trading

Alan

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