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Wednesday, August 5, 2009

Shorting stocks in parabolic stock market rally

It's no secret to those reading this blog that I have been bearish (negative) on the stock market since SPX hit 930. Here we are with SPX at 1,005 and climbing. Further, the market has rallied over 50% since SPX low of 666 only 5 months ago, one of the hugest rallies in years.

Only an idiot would short the stock market in this environment, right? Well yes and no. Only an idiot (me) would short High Risk and Lottery ticket plays in such a market. The losses from these are mind numbing.

But shorting lower risk stocks have actually done quite well considering. Almost all of the stocks I quoted to short back on APRIL 29th are doing relatively well, considering such a huge rally. Lets take a look:

From WebSurfinMurf's Financial Blog


Now consider this, since 4/16/09, the S&P rose 16%! Once this market tanks ... and it will tank tomorrow, next week, next month, certainly in 2 more months... what will happen to these short plays?
Will these stocks rally to new highs as the market falls? Possibly, but odds are against it. And these stocks could gap down in a big way.

So even though my stock plays in high risk/lottery tickets are utter debacles, lower risk shorts are doing pretty good considering. Now, if I could only control my own greed and short only the lower risk stocks to reap gains when the market turns around, I would be a a great investor. As it stands, I need a little work.

For the "Record", these are the losses as of Tuesday, 8/4/09 in high risk/lottery tickets.
From WebSurfinMurf's Financial Blog


I'll be sure to refer back to this article when these numbers are all green +33% or much higher. I may no longer hold them, since I may not be able to withstand the pressure. The long haul is what counts, not guessing the exact turn point.

What is needed is the US to defend the dollar. If this doesn't occur real soon, I may retreat from these debacles in short order, even though over the long term I believe I am right. There is a point where you just can't take the risk anymore. If the US chooses hyperinflation, best to stand aside, retake big positions in resources, and ride this to its utter disastrous conclusion.

From WebSurfinMurf's Financial Blog

1 comment:

  1. Stock market rally is very interesting for financial persons. Thanks

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