Going Cautiously Long

The headlines before the market were so negative that they were already talking about what it took for the market stops to be triggered, as if they knew that the markets were going to drop over 1000 points.

These headlines are designed to stir up fear among investors causing panic, and I have to say that it works quite well. I was barely in the markets before today’s open and it got me thinking crazy thoughts about what could happen and what I should do about my portfolio. Remember to focus on what is happening rather than how bad it could get and be aware of what media you are tuning into.

I believe the smart money is buying stocks right now as the risk/reward favors the long side. It’s not going to be easy buying  and holding over the weekend, but I think those who do will be rewarded next week.

I said if things get crazy the Vix may hit 100, and we got pretty close today. The $CPC (Put/Call Ratio) hit extremes as did the Equity Put/Call Ratio ($CPCE) indicating that the masses are buying puts like crazy. I don’t know if today will be any significant turning point, but the masses are never right and I think today is just as good as any day to draw a line in the sand and open some long positions in relatively safe names.

I opened small positions in General Electric (GE), Johnson & Johnson (JNJ), Costco (COST) and was looking at McDonald's (MCD), Colgate-Palmolive (CL), and General Mills (GIS) for a few other suggestions. CL has earnings at the end of the month or I may have jumped in that as well.

If things turn very nasty I may liquidate all depending on the market action, but being a trader means you have to take risks, but you have to be careful to limit as much downside as possible. Good luck all, everybody needs it right now.

Comments

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puts would be good on ge right now to make up for any short term loss in positions.

2008 Oct 25 10:24 PM