Friday, March 07, 2008

Positions and market strategy

It's been a very difficult market to trade specially for traders like me how does not have a good educational background about macro-economics.

With limited formal economics studies, I tend to plan my strategy based on my market observations after I looked at the charts and of course with some added common sense. So in the last few days, my strategy has been to focus on the inverse ETF to position my self for further downside and by using an ETF, I limit my exposure to extreme movements in the individual stocks.

My strategy is based on the following themes/observations
  • There could be extreme pressure for institutional funds to liquidate assets so equity positions can be sold in bundles anytime which could pressure the strong stocks
  • Quick money has been made shorting financials but a long bottoming process could be in place and a final push down could happen to flush out all other weak hands before the value investors starts looking at what's left of the sector.
  • More downside for the REIT holders
  • China stocks could see more downside as China is being looked at as a coupled-economy to US
  • Mid and small caps are vulnerable to liquidation
  • Metals/Gas/Oil are still hot as booming economic expansion in other areas keeps demand high
  • Agricultural and Chemical manufacturing (fert) are still strong
Based on the above observations, my positions are FXP SKF TWM SDS SRS inverse ETFs which I purchased this Wednesday this week (Holy Grail set-up 60-min chart) and long on certain oil/fert stocks.

Update 9:00am : I will be selling into the spike up for the inverse ETFs

4 comments:

John Forman said...

I wouldn't be too worried about not understanding economic theory. A lot of that stuff has been complete overwhelmed my mechanical considerations in the market (credit crunch).

Anonymous said...

Economic theories are just that, theories. Unless you're holding 6-9 months, macroeconomics are worthless in these volatile market conditions. I'll take your trading skills over an economic education anyday! Keep up the great work. -TVH

Market Monk said...

Agree with everyone, macro economic figures are not known till long after all of the revisions are done. The stock market is the best judge, juror, and executioner on what the economy is about to do.

A good mechanical system or discretionary trader will do well in these markets.

I am not so sure the rest of the world will continue their expansion if the US catches a severe cold (or worse) so the run on commodities could slow down or pull back.

When it comes to the commodities, I wonder how much of the run is due to the falling dollar.

Anyway, keep us posted on your thoughts and trades.

Look forward to seeing you in WallStreak.

MM

MC said...

John,

Thanks for you advise. I was just always wondering if advance education in economics will be helpfull or an added advantage.

TVH,

As always, you're very kind. Hope the market keeps rewarding you.

MarketMonk,

Thanks. I have and always will trade base on my observations about sectors and price movements. I will visit wallstreak more frequently.