This note went out at 7:17am to subscribers of RR&A. This is not investment advice, and has been posted here in chronological order of when it was emailed as a courtesy to blog readers. For more information, see the disclaimers at RR&A.
"A quick note to those of you who are sitting on some gains, thanks to the recent snap back rally of last week following our "Tradeable Low" call of Tuesday June 13:
Anytime we have fast profits, our rule of thumb is to let them ride as long as we can, but at the same time protect our cash.
The way we do that is to move our stop losses up to our purchase price. If the markets head further south than we expect, you preserve your capital.
(We never let a profit turn into a loss)
If you missed last week’s trade, or only made partial purchases, traders can add long exposure on a pullback towards the Tuesday lows, as a "retest of the bottom" this week is possible; Traders means you can nibble on the Dow (DIA) from 108 down to 106.80; On the S&P500 (SPY) 124 to 121.80; On the Nasdaq 100 (QQQQs) 38 down to 37.14.
Note that buying on the retest is for traders, not investors.
Two additional notes:
We should have a major Macro-economic commentary out (late this week/early next week), followed in a week or so by a discussion of Asset Allocation for various types of investors.
Second, we are upgrading our email system; in the near future, we will give you a menu of choices as to what you want to receive. The idea is to make sure that you only get those investment calls which are relevant to you. Long term Macro-economic Commentary, Investing, Trading, Options, Short Term Trading. (We appreciate any feedback you have on this).
"AS WE WERE SAYING BEFORE WE WERE SO rudely interrupted by a man dressed in a white smock and wielding a scalpel (thank heavens he left his box-cutter at home), the stock market looks a bit worse for the wear."
So says Barron’s Alan Abelson, usually one of Wall Street’s most visible Bears. Just his luck — or was it the Trading Gods having some fun? — that he managed to be out of service for the most bearish period in 3 years. Traders, being a superstitious lot, will soon be begging Abelson to "let us know the next time you go in for a procedure" – so they can get short.
Regardless, whatever the man dressed in a white smock removed, it wasn’t his arch sense of humor or acid tinged tongue:
"The impact of the massive disturbance was global in every sense: Not only were its terrible tremors felt far beyond the narrow canyon of capitalism in lower Manhattan, but they commanded notice in quarters much loftier than trading floors or commodity pits. We’ve not the slightest doubt, for example, that what prompted the famed cosmologist Stephen Hawking early last week to urge earthlings to create settlements in space was, pure and simple, fear of the effect of crashing markets on the human race."
But the key to Abelson’s return is his clear eyed take on inflation, which comports squarely with our own views:
"FOR OPENERS, OUR HUNCH IS THAT MR. BERNANKE’S concerns about inflation, despite his mucking up the message with all that rubbish about inflationary expectations, have more than a modicum of merit. And our conviction on this score is only strengthened, of course, by the fact that so many pundits pooh-pooh inflation as a problem. Indeed, if anything, we fault the chairman for his evident sympathy with the argument that the fearsome upward spiral in the price of crude, so far, anyway, hasn’t been exerting all that much impact in the economy at large.
Apparently, Mr. Bernanke, like his critics, needs to get out more. Oil is a very sneaky commodity. Our old friend and revered Barron’s contributor, Abe Briloff, likes to describe certain stealth accounting practices as comparable to a bikini: what they reveal is interesting, what they conceal is vital. Oil is something like that: Its uses are readily manifest, but it plays a far bigger and more critical role in our lives than is easily perceived.