Surviving the Sell-Off

We had a pull back today in the broader market by about 2% on the S&P, the financials pulled back significantly, the XLF ended down 7%. Today was almost perfect in terms of my positions, the XLF was down a lot, 2 were down slightly and the remaining 4 were up significantly. I got a bit greedy and waited too long to take profits and gave up a few percent more on the day but I guess you can't get them all. I again struggled on whether I should just let my longer term options ride or roll into higher strikes as they went higher to lock in profit.

I decided to take profits on 2 long positions as we started to pull back, I dont want to get in the habit of taking profits too soon but they had a good run the past few days with no pullback so I figured they were due for a little correction and I can get back in then. Selling them did save me a few percent by the end of the day but you never know what will happen tomorrow, and I did let them slip too much before selling. I was then more evenly positioned as it appeared we were breaking down. I watched the XLF on the daily chart and held my puts until the downtrend that had been in tact all day was broken. This was good initially as we did rally but that was given up by the end of the day and it finished at the lows. It may have been smart to just stay balanced into tomorrow however I felt there was more upside risk with Intel's earnings release and the fact that I assumed we would have some selling for options expiration. The VIX was down even on this deeper pullback, which is either bullish divergence or market maker manipulation.

I am now positioned long in four positions but much less than before so if the pull back continues it should be a limited draw down for me and I can look to take advantage of pull backs in the stocks I like. I will be frustrated obviously if they gap up again tomorrow without me but again you can't get the entire move, and I'll wait for a better entry.

Intel reported better than expected results but issued weak guidance and the stock sold off about 6% after hours. This looks bearish for the market tomorrow and tech in general. Some bullish signs was the statement that they thought pc sale declines had bottomed already. At some point even though we have run up significantly so far I think people need to recognize we have had fairly decent earnings and this could in fact be a turn around.

I'll be watching the oil inventories tomorrow because oil has been selling off going into it so if it is bullish then materials could be the relative strength once again and it would convince me to be back into my aluminum and copper plays. My hope is we see a pull back in the morning, then a bullish inventory report and they rebound. With the significant pull back in the financials today it could be building in some more negative surprises since most will not be like WFC and GS, if they are then we will go higher in a hurry.

Options expiration week is always somewhat of a guessing game of where the stock will get pinned, it may be smart for me to just wait till monday of the new month when options are cheaper to get into some different names. We could see a deeper pullback in stocks as the retail sales number may have made people realize things aren't as good as they may seem and when people don't have jobs they don't spend. I was surprised by such a poor number which is why I was more pleasantly surprised to do as well as I did. Until individual trends start breaking I will continue to buy dips but may do so with reduced position sizes until we get out of the rest of earnings season and establish more direction.

Total Return for 2009: 128%