Don't Take Losses'  Instablog

Today the SPX traded within the highs and lows of Friday. That is what technicians will tell you. However, it's notable that we closed above Friday's open. To me, that means the rally was real and will continue until we face resistance @ SPX 1100 or 1107.

As we discussed on Friday, we felt some capitulation and bought the close...with 32%. We added during the day on dips and ended with 86% long: in materials, tech and industrials.

Here are our holdings: CMI, FLS, BUCY, POT, STX, SNDK, MRVL, ANR, CLF, CIEN, CREE, CRM, NOV, XME, NOV, MA, and a bit of a few like HIG, LVS.

The market gapped at the open as it has a tendency to do after 3 down days...that's why we bought when it felt so bad. Also, we were facing Mutual Fund Monday and the first day of the month...keys to be buying despite the horrible action last week. If we had not, the gap would have been a complete screw job...as the stocks largely traded sideways after the opening gap. That is why we balance the risk of being in the market against the risk of being out of the market...at all times.

We ended the day up about 1.4%...pretty nifty on a day all the indexes are up less than that and we started behind with only  32% longs. It was good trading, decisive moves into the right stocks. As we mentioned on Friday, we started a number of stocks believing they would be the winners. We were right an jettisoned early the laggards.

Tomorrow's plan: sell the rips. We'll raise a little cash if we rally hard. If we're sideways, we hold, if we plunge we'll let out stops hit...

Because the uptrend channel was broken in the indexes and most stocks, pundits say we're going to hit resistance @ 1107, and retest the low @ 1071, heading down to 1020, a 12% correction. My guess is we go sideways for awhile; I just don't expect the big down move unless N'Obama does something else really stupid which is a real risk. We'll keep you posted.