So we had a good day in the market. Yay, we should all run out and buy our favorite stock, right? Not so fast. Let's take a look at why the market went up.
There were three reasons why we had a 90 point up day on the DOW. Can you name them? The first two are easy. AA Alcoa beat earnings estimates. (Let's forget the fact that analysts have been lowering their expectations since the last announcement. Oh yeah let's forget the fact that aluminum is up about 18% in price over the last six months. And it is not important that the demand from the aerospace industry was unusually large. Let's just celebrate the fact they beat dismally low analysts expectation and the CEO said we could see more of the same.
Second reason? The European Central Bank became suddenly aware of the effect their comments about no more bailouts had on the market over the last five days and said, "Well, maybe, we could float a little more bad debt to any idiot that wants to buy it." (Note it was maybe. That is why Spanish and Italian bond yields came down a bit) Those were the two easy ones. Anyone want to guess what the third one was? Hey we had been in a down market for 5 days. It was time for an up day.
So for those reasons the market ignored an unexpected jump in import prices and a lackluster mortgage applications report. Money flowed into treasuries keeping the 10 year at or below 2.00%.
We are not out of the woods yet. The Red Flag is still flying and we need to see a follow through day before we even think about a positive upward trend.
In the portfolios today.
MSFT hit our 30.25 stops and it got almost everyone out of their positions. MSFT will stay on our watch list and we will wait for a better market and a new entry point. Our gain on MSFT was 8.2%. It was a sizeable position. Most of the other portfolios (except for the newest) saw 4-11% profit.
That only leaves us with a few CORE positions left. CELG, XOM (Yes we cash out everyone else, but we are having fun selling calls against out position and will do so until we get called away), AAPL (DOJ is picking on our favorite stock for price fixing e-books with a slate of publishers.) BRK/A, and ACET.
We are 31% bonds right now and we are 30% cash. CORE equities account for 36% of our balances. The balance are some speculative stocks like ASXSF, GNTX, and LQMT. We will be scaling back more equities soon and looking once again at GLD and GLD options. As import prices escalate, we should see some goosing in gold.