Sell ACTIX Capital Value Fund

An ugly market day with a modest opening pop followed by heavy selling pressure during the last half hour. I will get tomorrow's price on ACTIV. It has been almost a straight ride down since I bought a scant few weeks ago.

I plan to exit my short T puts tomorrow and hold my short MRK puts.

It is no time to look to be a hero, especially for the small fish such as myself (and likely most of the readers). Yes, of course, the market could bottom right here, however, cutting losses is my style. When I think it is time to stop doing it, that is often the time the water flows off the cliff. This is a seasonally strong period for the stock market, but bulls can not gain any traction. Rallies are sharp and short and extremely difficult for position traders to get decent fills or find entry points.

Flying turkeys and waterfall declines

Some might remember an old sitcom episode where a TV station drops live turkeys from a helicopter, mistakenly believing that turkeys can fly. The metaphoric turkeys plummet down to the concrete and plop dead. Some how this seems like a good metaphor for the many stocks that have completely broken down on this Thanksgiving eve. The list of turkeys could stretch for pages and pages. Retail, banking, mortage companies are on the list with big names such as CFC, FRE, FNM, JWN, HD. So many stocks have broken under technical support, that traditional support levels look more like double edged swords rather than low risk points of entry.

As I have always written during my time blogging, buying the bottom (or selling the top) is a difficult game and rarely profitable because of the long odds. Few traders have the mindset and the execution, to do trade the turns. A high percentage that try, get in too early and then bury their heads in the sand instead of cutting their losses. The real stubborn ones sometimes lose everything instead of admitting they are wrong.

The big dollar fish continues to drive other markets and eat the other fish (gold, oil, stocks, bonds). The Fed is painted into a corner with the recession scare, combined with an anemic dollar. Further rate cuts drive the dollar ever lower, holding rates steady, means a higher chance of recession. At some point higher commodity prices from a lower dollar can also cause recession.

Be thankful and bless what you have, how ever much, or how ever little it may seem.

Happy Thanksgiving everyone.

Positions: MRK, T hedged longs

Sell GM, WFR options expire

I bought back my short GM puts early on expiration Friday. In this case, it turned out running for the exit was a good move as the persistent selling continued all day and GM closed well below my strike price of 30. Had I held on my tiny profit would be a loss, plus another commission. The puts I sold on WFR expire worthless, so I bank two small profits today.

The broad market continues to be weak, so any profits for longs are welcome. Gold had a tough week, as did oil. It doesn't look like a low risk play in either of those areas. Those that like to roll the dice can go ahead, I'll wait for a clearer opportunity.

KMX CarMax in the news, with Warren Buffett announcing a large position. A retest of the recent lows would be a good entry point. Put sellers can simulate that by selling the puts at that strike. Round number support at 20 might be another place for longs to look. As always there is a rarely an exact science or magical formula.

Positions: MRK, T hedged longs

Buy MRK, and a down week

I was fortunate enough to buy MRK before their Vioxx settlement announcment. I sold the MRK Dec 50 puts. Overall it was a dismal week for most longs.

A sharp down tick during the last half hour on Friday looks to me like some big players were exiting or going short. Constructive news for would be bulls was that the financial stocks found buyers on Friday, and US bonds went up in price. Bonds often telegraph a big tumble in the stock market, though of course this time history may unfold differently.

GDX (gold stocks) is diverging from GLD (gold bullion), with GDX ticking down even as GLD ticks up. This kind of divergence is a warning sign that the gold rally is getting long in the tooth. Just as TLT may lead SPY, GDX confirming new highs in GLD would be much more comforting for gold bulls.

Positions: WFR, GM, MRK, T all hedged longs

Buy T, Buy WFR

Buy T, Buy WFR, sold puts on these two on Monday, the T Dec 37.5 put , and the WFR Nov 65 put. Timing intraday was poor, as I bought much closer to the highs for the day, than the lows.

Lots has happened since I last wrote. A new Chinese IPO is now the most valuable publicly traded stock in the world. This makes the Chinese stock market officially a bubble. Sure the economy over there is booming, however, China's GDP is still a small fraction of the US GDP. Even though the bubble is now official, it doesn't mean it is time to short FXI. Bubbles have a way of draining most of the cash from fundamental type shorters before the bubble pops. The last stages of a bubble market often see huge percentage gains in a short period of time.

Bigger news perhaps is the super acceleration in the bull phase of gold and silver. Readers know I was clever enough to buy the breakout on gold at $700, and foolish enough to cash in those chips for meager profits very early in the move. I still have my core holdings, but the trading positions would have been nice to have at this stage. I do wish I knew what was going to happen next

Positions: GM, T, WFR all hedged longs. GM due out with earnings, also already announced a big write down and stock is down after hours. I am short the GM Nov 30 puts, so unless the sky caves in, there is enough cushion before expiration.

Bonds, gold, and the dollar

Strength in TLT a bond ETF (chart) makes me lean towards a higher stock market. The bond market often leads the stock market. The trading calendar also favors higher prices into January.

Gold makes big news closing above $800. Most of the rally has been dollar driven (chart). Oil has performed better since the Fed went to rate cutting than gold has (USO vs GLD one year chart). Those looking for a top in gold would do well to keep a close eye on the dollar. I am of the opinion that the gold bull can not over come US dollar strength. Again, for the average person, 2% to 3% in physical gold or similar hard assets is what I suggest as insurance against certain financial scenarios. Folks that want a higher percentage best know what they are doing and do their own due diligence [research].

As always, calling tops and bottoms can be entertaining, but rarely profitable. V-shaped reversals do occur, however, they are not common and when they do occur, they can be difficult to trade. Not many people can get in or out at the point of a V.

MRK, HD or LOW are more stocks that look like interesting longs (WAG, SBUX, NYT, T are some others).

Positions: GM hedged long (short puts expire in November)

Sell WFR, Sell BNI

Sell WFR, Sell BNI
As the market tumbles, my gut instinct is to buy the dip. I think about past times I have wanted to do that and how that often turned out badly. So instead of buying, I sell and take my tiny profits, buying back the short puts on these two stocks.

My puts were still well out of the money, and there is a strong logical argument to stand in there, even if the stocks continue to decline. As bad a streak as I have been on, seems much wiser to follow the rule: never let a profit turn into a loss.

I continue to watch that list of tax loss stocks that I mentioned earlier. It includes names such as WAG, NYT, CC, KMX, WMT, LEN. A successful retest of the lows on some of these stocks might make a decent entry point. Other stocks that I might buy include MCD and T.