Mousetrap 10/23/2011

[Timothy Clontz]

Thanks for the word of caution, Billy!

Unless NLY gaps significantly higher than CFI in the morning, I’ll sell CFI and replace it with NLY.

[Timothy Clontz]

I was able to enter the NLY trade, but not exit the CFI trade, so I’m long in both.

Because my margin is tight, I’m not hedged on the NLY trade.

This is a bit too tight for my comfort, but I’ll let it sit for now.

[Timothy Clontz]

Just sold DISH at 25.99 for a 17.87% gain.

Sorry for no advance warning. Decided to take some profit after today's move in the market.

[Timothy Clontz]

Just sold BKI at 29.39 for a 17.05% profit.

[Timothy Clontz]

Added two more...

BKI for 17.05% gain
DISH for 17.87% gain.
AGO for 14.41% gain.
CFI for 4.10% gain.

Wasn't planning these, but we hit the 200 day moving average on the S&P, and paused. Seemed a good time to take two trades off the table.

That leaves me 60% long and 90% short at the moment. Will probably add some long positions, but not any today.

[Timothy Clontz]

The market completed a bear rally to the 200 day moving average…

…and kept going.

I don’t have time for a full update, but the 200 day moving average is a good time to rebalance. I took profits on BKI, CFI, AGO, and DISH.

That leaves a 90% short position on XLF, and 10% each on six long positions:

SE
GTAT
NLY
CSGS
CLH
GCI

I plan to buy the following 4 stocks at today’s closing prices:

AMGN
KBR
VG
DD

Apologies for the sudden change, but I was not expecting the 200 day average to be breached today.

As for market timing – it’s a coin toss. Even above the 200 day moving average we have a bearish sector configuration, and in fact the sector rotation model now shows that we have progressed from Bear 2 to Bear 3:

XLY Cyclicals Bottom
XLK Technology Bull 1
XLI Industrial Bull 2
XLB Basic Industry Bull 3
XLE Energy Top
XLP Staples Bear 1
XLV Services Bear 2
XLU Utilities Bear 3 (here)
XLF Finance Bear 4

Services (XLV) is still the best long position on the model, and Finance (XLF) is still the short position (though it’s been punished severely these past couple of weeks).