October 9th, 2014

10-09-14 – Morningstar Report 10-09-14 – Transaction Record

10-09-14 – Transaction Record

The stock market is going nuts! Huge rises then huge declines… with Ebola, ISIL, and Russia vs. Germany in Europe. There is a global slowdown if we look to commodity prices and the weak demand for oil, copper, etc… I feel the the U.S. is still fine, but there is way too much selling pressure and fear about. The psychology of the markets is negative. There is a decided shift in sentiment of the overall conditions for a bull market. Quite frankly, I’m kicking myself right now! The global macro signs were there. But I return to the thought, what does any of that have to do with earnings of companies in the U.S.? ¬†Besides companies with a European presence and the oil & gas industry… I’m not sure. I’m inclined to say not much.

October has not been kind. My core energy positions have been killing the portfolio returns. Net of cash, the portfolio is now just barely beating the S&P 500, although still well ahead of the U.S. total market returns (i.e. large & small caps). I’ve tried to rotate out of energy and into U.S. based companies, Chipotle, Kroger, Molsten Coors, Cedar Fair, etc… After today, I will reassess and move into U.S. consumer driven stocks that benefit from low commodity prices even more.

I continue to hold my core positions and am adding to another, Macy’s, which I believe will do very well in the 4th quarter. The valuation is good and the U.S. consumer seems stronger. I trimmed the EPD & AMLP positions on October 3rd. I hope to add back to them gradually as the market falls. I will also add to Kroger as the market falls.

The S&P 500 is near the bottom end of it’s yearly channel. This sell-off is similar to February 3rd of this year, from which it bounced. That may happen here. If this support level does not hold, the next support level I’m watching is around 1900, the 200 day moving average.¬†

I am about 17% cash, which is OK. Doh! Wish I hadn’t bought those stocks on October 3rd… zigged when I should have zagged! Tomorrow will be revealing, but a march back to ~2010 for the S&P is just as likely as a “correction” in my opinion. Such a big swing down usually follows the laws of physics in that there is an opposite reaction (not always equal though).

Ignoring psychology here, I am playing for a bounce in the near term (like a week), but feeling a gradual change in general conditions to bearishness along with the psychology that goes with it.

I am playing this like the time period between March of 2009 and October of 2009 or July of 2010 to January of 2011. I sense a period of “digestion”, “uncertainty”, “consolidation”… whatever you want to call it. Basically, volatility that ends up sideways where we were in about 4-6 months time. I’ll probably sell some calls along the way here.

Follow me on Twitter, I put all the trades in real time on there. And note to self, more blog posts as they make me analyze much more than the day to day!