Thoughts on DXO and the market...

Here is the chart for DXO.... This trendline has been intact since the middle of February when I bought my large chunk… there have been at least 5-6 tests of it along the way. Currently we are sitting right on the trendline. I thought about selling it in the $3’s but because all those calls I sold against other positions and the FAZ I bought were offsetting my DXO losses I decided to give it the benefit of the doubt and see what it did when/if it got to the trendline. I grown attached to DXO. :)

We are at the trendline now and it is “do or die” time for Oil and the DXO. I think it continues higher but if the market shows me otherwise I will book my profits. I did not add more as I am not 100% sure which way this one will go.

As far as the overall market goes as you can see from my trades I have been getting smaller and smaller as time has gone on. I went from almost being 100% margined when I was mega-long the gold and silver miners AND a bunch of market longs (20+ positions) to having no margin and a big pile of cash currently (5 positions and 3 are covered). I was very bullish on the stock market but sold my 401K at 832 as posted here. I was bullish on the financials but they rallied from $5.8 to $9.5 in just a few weeks.

So keeping in mind that I am not invested heavily in this forecast, what I see is:

A pullback in the short run (day to few days) followed by a bit more of rally into the intermediate term. Today was the end of the quarter which is always positive because of window dressing and tape painting. The first of the month has been a negative market day for countless straight months so April 1st should be red, but calling what happens tomorrow is a fools game. Anyway this rally in the intermediate term could take us only to 850 but it is possible that it runs all the way to 900 and beyond.

Either way I do not see a new bull market at this point and I think the rally runs out of steam as soon as we get overbought and the confidence indicators are showing LOTS of bulls and we finish off the last of the stubborn bears out there. How high we go depends on a combination of how stubborn the bears are and how dumb the bulls are! I’m not riding the upside but I am not shorting here either….
When you don’t have a big opinion on the overall market direction it is a traders market and you need to stay small, try to pick short-term winners and take profits quickly. This is exactly what I am doing along with not being a very active trader in this whipsaw consolidation days.

Ugly Day

Today's closing price action didn't really excite me. We closed under 800, after being up another 1% earlier. The bulls clearly couldn't hold the momentum. We will probably sell off into the unemployment number on Friday.

However, I bought 200 OIH @ 76.09, and wrote an OIH 75 at $4.15 and an OIH 80 at $2.20 (Aprils!). My cost basis is 73. I am happy to get long OIH with a cost basis at 73, but I'd much rather sell OIH at 75 and 80 and make $1K.

Sold FAZ at $21.40

Bought at 18.66... sold at 21.40.

Would have been better if I had sold it at $24 yesterday but I want out while I am still up 15%.

Two Long Energy Ideas

RIG, stop 54.70

OIH, stop at 72.5

Pivot Day

The GM/Chrysler issue could really blow up this rally -- immediately. Futures are pointing to opening below 800, which is a substantial area of support. The other area of support is the 50 day moving average at 792. Closing below there would be a substantial blow to the bull case may warrant liquidating bullish trading positions and becoming short term bearish.

RVASpeculator is already short financials -- it may be time to short the market in my account, today's outcome dependent.

Half of DXO

Following the script I laid out earlier in the week, I sold 1000 DXO at 3.04. I have set a stop for the remaining lot just below where I bought it, at 2.69. The dollar seems to be rallying rather strongly here and it may be troublesome for DXO and other commodities.

Sold the 401K, bought some FAZ

I realize this rally is probably going to 900 on the S&P like everyone is saying but I am out of my 401K at 832. (today’s close)

The way I see it is even if we go all the way to 900 on the S&P that is only 8% higher from here. The downside risk is greater than 8%. Plus because I got 30% of my money in almost at the exact bottom in the 600’s I am up for the year now in my 401K and I want to keep it that way.

I will not be putting my 401K money back into the market until the 50 week moving average crosses the 200 week moving average to the upside which cannot happen for quite some time (probably 10 months at the minimum). No more gambling with the long term money.

I also bought two chunks of FAZ (triple short financials) near the close of the day on Thursday. Financials hit their peak last week and the market has continued higher NOT taking the financial sector along with it. To me this is telling that the financials will lead the way down again when the next downturn comes.

UYG (double long financials) has hit the 3.00 – 3.05 level three different times since March 18th…. On March 18th, March 23rd and again today on March 26th. If UYG can break out and go to 3.10 I am going to use that as my cue to get out of the FAZ and see how high this rally can go. I can see a possible scenario where the market goes higher and UYG does not break out and I also can see a scenario where all hell breaks loose and the momo buyers jump ship, so I will hold the FAZ until the market tells me not to.

With the way this rally has been going I may get taken out of that trade on Friday but I hope to hold on to it longer than that.