Month End Shenanigans

So we had the quarter and month come to a close today. March was a record rally for stocks since the bottom of 666 on March 9th. I was in all cash until during the day yesterday I started to take some positions again. I still have my 77% gain for the year, gave back a few percent today(I had gotten to 79%). I am upset and cautious at the same time because none of my positions performed today even when the market was at it's peak up 2.5%. I suspected a sell off into the close but only took one put position to protect myself and should have gotten into another as planned as it would have limited my loss quite a bit more.

We are at an interesting point right now, we rallied to 810 but failed to hold 800 on the way back down so it appears to be a rejection of that level. I am always trying to think about what big money is going to do, was the sell off a locking in of profits that will set us up for buying tomorrow for a good first day of the month? Will they buy going into the mark to market meeting or sell and buy on the result? I have to weigh all these things.

The concern about my positions is warranted because they previously were relative strength candidates and are now weak, but how much of that was positioning for the end of the quarter? If we don't get any kind of positive results or signs of stabilization from earnings I think we will see a retracement to 750 for sure if not more. Buying the dip worked again in a few names I ended up passing on. I guess it worked out the last time I passed, and with the uncertainty it's likely better to take less risk than more to any one direction.

On a side but related note, I read the book Ugly Americans, which was very interesting about an ivy league guy who goes over to Asia to trade futures and the type of world it is. Anyways, he basically makes his entire fortune in a single trading day arbitraging stocks that are being added and removed from the Hang Seng.

This is essentially what good hedge funds do on a regular basis, buy good company stocks and short bad ones so they are always "hedged" hence the term. This is also what I generally will try to do buying relative strength and shorting relative weakness. I am trying to determine what some good pairs trades will be, one I have thought of could be long AAPL and short AMZN, the thinking being that apple will come out with a kindle competitor and steal market share and any amount built into the stock for strong kindle sales could come out while apple could go up. On the flip side though is that Amazon sells apple products so it would benefit from the revenue making it less appealing as a pairs trade, but this is just how I'm trying to think.

If natural gas can get any type of bid at all I think CHK will finally confirm a triple bottom and be a very good trade but it is still at the bottom range of its downtrend.

Overall, I am very happy although it was annoying to lose money today it is part of the process. I'm cautious going forward trying to preserve my gains but still take on new risk when it is good.