Stock Talk

Since launching this blog a week ago, I have not really spoke much about my trading of individual names in my portfolio. Just for your information, I tend to carry 7 to 10 stocks at a time and trade differently given a bull or bear market. For example, in a bull market, I am willing to let a long trade run longer because there stands to be a better chance of it lasting. Conversely, I am looking for targets when shorting into a bull market. And for a bear market, it is the opposite: hold shorts longer, cover longs faster. So with that said, lets move on.

This past few weeks have seen furious moves up and down. As I have maintained, we remain in a bear market so my long positions, as a result, are mainly rentals (as Doug Kass would say over at realmoney.com) and I tend to cover when the target is hit. The short term trend, IMHO, turned up around the 24th of July and thus I am trading from the long side at the moment only. I purchased my portfolio worth of stocks around that date and have been unloading ever since with only once name left: Level 3 Communications (LLL). I unloaded the other names which included ESS, VNO and SYMC last week with a decent return overall.

So where are things going from here? Well, for my trading models, the most bought stocks (those with the highest ratings) are now dropping like flies. ISRG, one that I liked before the big bounce higher, was upgraded to a most bought and has promptly corrected about 25 points. SOHU, another name which I sort of liked, another "most bought" stock, has been dropped kicked 13 straight points lower. I currently have four agriculture stocks rates most bought and they each fell 4 to 14% in one week. Conversely, on the most sold list, the returns have been flat to down 1%. This tells me two things. First, this market is very willing to take profits which takes me to my second point: This is inherently a problem given the continued supply though some contrarians would take this as a buy signal or capitulative.

To that I just point to the stats. First, there are 40% of the stocks currently rated in my system as a buy. On the sell side, that number is more towards the 50% level. Now, at market bottoms, we are all tough that everyone is shot and capitulation and panic run rampant. If 40% of the stocks I follow are still in uptrends, what does that say about the overall market going forward? It could mean that we are in for a world of hurt coming soon or this underlying strength is a good omen for things to come as it shows buyers are in the markets. Well, from my technicals, I would argue that things are short term strong. Longer term is where the problem comes in and that is where I think that the 40% of long positions drops down to 30 or 20% before we find real bottom.

Bear careful out there. It is indeed treacherous.