We're heading out to dinner with friends in a few minutes, so I'm going to make this quick.
I can sum up the past fourteen months by saying this: although I did a lousy job taking advantage of it, the rise that took place from March through December 2009 made sense to me from a charting perspective. What did not make sense – – and what simply drove me up a tree these past few months – – was everything that took place in the first four months of 2010. I've highlighted this chunk in the graph below.
So if you showed me this graph on the last day of 2009, I would have said it represented a once-in-a-lifetime shorting opportunity. Regrettably, the market was just about to kick into overdrive, which made February and March especially unbearable for me. The past four days have had tremendous healing force on my portfolio.
I've pretty much laid out all my thoughts on Friday night's video, but I will say this – – the oft-cited level of 1150 on the S&P does have import, but for the wrong reasons. Many held that up as the support level for this market; a buying zone, if you will, for those who had enjoyed great success buying dips for the prior fourteen months. I believe, however, that 1150 could instead mark an important new resistance level, given the drama on Thursday and Friday. The stuffing has been beaten out of the bulls, and I think they're going to be eager to sell based on any push higher.
I currently have 55 short positions and a list of 106 – count 'em, 106 – other stocks I would love, love, love to short given the right price. The "right" price is anywhere between 5% and 10% north of where we are at right now. If we can get some kind of "phew, that was just another nice dip" rally going, I am going to ratchet up my short positions all the way up to 200% of my cash. Right now, I've got a nice, lean 35% allocation, and I've got a list of 21 longs that I may enter to bide my time.
It is my belief that, before May is over, the bears are going to have a shorting opportunity delicious beyond compare. As for the powers-that-be doing things like banning shorting later this year during the chaos? Let 'em. I'll already be in position.
