Monday, February 23, 2009

Another new low, going 25% to cash

November 1996 was the first time that the S&P 500 index reached today's closing value of 743, which is the lowest closing price of the current bear market. The S&P 500 was as low as 740 in the middle of the day on November 21st last year, and we're now only three points away from there.

Surprisingly, today's market drop was accompanied by a slight increase in investor optimism, which is a bearish indicator for the market. I suspect that some investors are counting on a hard price floor near 740 to cause a bounce and launch the next bull market, and I think that they will be proven wrong in the not-so-distant future. There will probably be some positive days coming up, but I think they will only be wiggles on a downward trend that has further to go. Some of the positive days may be very big ones, as has happened before in this bear market.

My GRZZX position is up 14% from my average purchase price. In the interest of sleeping better tonight, I'm going to enter an order to cash out 25% of my holdings, which won't be processed until the market closes tomorrow (Tuesday PM). Sentiment is only slightly to the optimistic side of neutral, and one minor indicator might be signaling a short-term bottom. This is my least favorite time in a bear market, because a steep sucker rally can start with little warning after a long drop.


Anonymous said...

Please tell us you didn't sell. This is exactly why I don't do mutual funds. You're trapped all day long. Even if SDS blows up, a trailing stop will get you out intraday.

I am curious of why you didn't sell yesterday w/ 7 down days and near the lows. It doesn't seem like you have any analysis of price only sentiment?

Jody said...

The sale of 25% of GRZZX was completed at a price of $9.71 for a cash gain of 7.5%, and I remain 75% in the fund anyways, so I'm still positioned well for future drops. I'm simply happy to make real gains in my account when 99% of investors are flying blind and watching their retirement funds melt away.

It's possible my timing is not at its peak right now since I've been on a nocturnal schedule for the past 7 days, and was literally on the road today, (and will be in the air tomorrow) but it's quite premature to pass judgment on my GRZZX strategy until I've completely cashed out and we can see the final numbers.

If you think that price doesn't fit into my analysis, then either this is your first visit to my blog, or you've ignored about half of my previous posts.