Sunday, June 24, 2007

Potential Buys

As of now I am short this market. I am not short SPY or QQQQ but I am short reits, utilities and homebuilders. I'm short these groups because they've been the weakest stocks in the market and they are interest rate sensitive which is where I want to be right now.

If you've been reading my blog for any length of time, you would know I am usually on both sides of the market although at the moment I am predominately short. The only thing I have long is GLD, SLV and two metal stocks.
Even though I am looking for the stock market to dip some more, I still need to have a list ready of potential longs which I will buy when I feel the time is right.

Above is a chart of the S&P, FXI and CRX. Since the low of this last rally which was made on March 5th, the S&P is up about 8% while FXI and CRX are up 23%. These two groups (Asia and commodity related stocks) clearly outperformed the S&P. This is where I want to be on the next dip in the market.

What I would like to see is the S&P make new lows for the month and then I will take a look at some of the Asian and commodity related stocks. A few days ago I posted 5 Asian ETFs which are exploding higher and will be on my list as potential buys. Some of the commodity related stocks I will watch are oil and metal stocks but like I said, I'm not looking to buy right now... I'll be patient, I'll wait for a dip, and if they still look good I will will be a buyer.


throwaway said...

Hi Kevin,

You say that you are normally on both sides of the market. I am curious as to whether this is purely a "co-incidental" result from the individual positions that you open based on their individual merits - or is it due to a policy - either a policy that you have arrived at through trial and error and that you have seen working well for you, or a policy based more on theory such as the benefits of hedging in mitigating risk?

Kevin said...

Excellent question..

I would say I tend to be somewhat hedged because my setups usually find trades on both sides of the market. Keep in mind I am not evenly hedged. I'm usually 80% long and 20% short, or 80% short and 20% long...something like that.

I beleive many times you can make money by being on both sides of the market. The important thing is to know which groups to be in.

Another reason I like to be on both sides of the market is because it helps cut down my risk to a small degree but I don't put a trade on just for the sake of a hedge, I put a trade on because it actually looks good to me. If I don't see anything at all to do, then I won't do it and I will be 100% long or 100% short.

Mike said...

First off I want to thank you for setting up such a great site !, much appreciated .

What would you need to make a buy on energy currently if not a dip ??


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