Trading Diary: Football season is over, but we still play DEfense

Oil continues its sickening plunge, influencing precious metals and resource stocks and causing us to make a few defensive portfolio moves we may live to regret.

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"Warning, Warning, Danger, Danger." Robot B-9 and the evil Dr. Smith (Jonathan Harris), 1967 promo photo for TV series "Lost in Space." (Public domain image via Wikipedia entry for the show)

WASHINGTON, March 8, 2017 – Trading Wednesday and today was flashing, “Warning, Warning! Danger, Will Robinson!” as oil and oil-related stocks continued their vicious waterfall decline, while Fed interest rate increase rumors has been causing our favorite financial stocks to hop around unreliably like a batch of Mexican Jumping Beans.

A batch of ready-to-jump Mexican Jumping Beans. (Image via Wikipedia entry on the topic, CC 2.0 license)

Technical indicators have been making us increasingly nervous, aided and abetted by the simple fact that, in our opinion at least, the wondrous and wonderful Trump Rally has gone on far too long now without a significant break or breather. And that it has been getting this week, big time.

Even today’s deceptively positive hairbreadth close in all three averages was cold comfort. Most fully invested portfolios, including ours, have taken a beating this week.

Trading diary


As we’ve noted in this column, we’ve been defensively picking off small profits in stocks we’ve viewed as marginal to try to stay ahead of the increasingly negative curve on Wall Street.


Read also: Wednesday’s oil smackdown continues in Thursday trading


Nonetheless, we’ve continued to get hammered in our virtual gold an silver bullion positions in miners Newmont (symbol: NEM) and Silver Wheaton (SLW). We’ve also been torpedoed in our fairly large position in Marathon Oil (MRO). Nasty things were also happening to our still very positive positions in JM Morgan (JPM) and Apple (AAPL).

So we attempted to finesse the issue today by selling both AAPL and JPM for a roughly 12 percent profit, the better to offset losses we incurred by selling our entire position in MRO as well as selling part of our positions in NEM and SLW. We also dumped our recent IPO position in Invitation Homes (INVH), which we’d vowed in our most recent column to hold.

The reason we dumped this one is that it’s new and without a track record, and we had (and have) no idea how this new stock will hold up when the market decides to get nasty, given that sellers are already attacking other longstanding respected REITs, fearing those pending Fed interest rate increases.

Markets are at an extremely oversold point as of Thursday’s close, and some kind of upside bounce is now virtually inevitable, and likely very soon—perhaps even Friday, as early Wall Street futures are telling us.

That said, this rally is still ahead of itself. Oil is in a huge surplus condition, and ADP’s conjectural employment numbers today, while likely over-positive as is usual with this measure, may not be matched by Friday’s more (but not entirely) realistic numbers from the Department of Labor (DOL). But if those Friday numbers are very positive—given that they measure the first month of the new Trump Presidency—that will almost inevitably prove to be the signal the Fed is looking for to pop interest rates up 0.25 percent next week, likely putting continued pressure on oil and precious metals by means of creating an even stronger dollar.

So we figure that the best strategy here is to take our profits now rather than watch Mr. Market take them away like he did in January-February 2016. In the market as well as in most surviving department stores, it’s always just a few days before the next markdown sale. That means that if this decline is not too severe, we may end up jumping back in to some of the investments we exited today.

Meanwhile, we’ve established small positions in our usual hedges, the S&P 500 short and double short ETFs, symbols SH and SDS respectively. If the decline continues and worsens, we’ll buy more of these shares as a hedge. But if we get a strong upside reversal, we’ll get rid of these ETFs pronto.

Don’t miss tomorrow’s thrilling episode.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17