As far as my other ultrashorts (Nasdaq and Oil/Gas), they were purchased to take advantage of a trend reversal and not a long-term statement about the Nasdaq or Oil/Gas. I plan to remain patient, stay the course, and follow my plan with those investments as well. I might add to my ultrashort Oil/Gas soon if I get a better price entry point. I am not giving up and expect Oil to correct as the dollar strengthens and demand weakens in the short-term. Once that happens, I will sell my ultrashort. I will not add to the Nasdaq ultrashort unless the price improves considerably. It might be a month or so before I sell those positions as the correction in Oil has certainly not occurred.

Until next time.

Doc

I realize that I continue to ride against the rising tide of oil prices and my ultrashort is getting killed at present. As such, I have been slowly adding to my position as it drops and lowering my basis. This will make a profit from this position much more likely if there is any pullback in oil prices. This is a bit different than "catching a falling knife" which is not a good investment concept. Oil has strong fundamentals for price rise and will, I believe, reach $150 per barrel even if the dollar strengthens.

However, I strongly feel that this rise is too far too fast. I am not alone in this belief. Many analysts are agreeing that a short-term strong correction in oil prices is likely soon. Most now believe that oil will not drop below $100 per barrel though. Some are calling for a fall down to $80 per barrel. I am not one of those. I believe that $100 per barrel of oil is now, unfortunately, almost a certainty. The primary reason is rising demand in the emerging markets (eg China) and very little increase in the supply of oil. The Petrobras find is a great one, but it will take mucho bucks to find a way to extract that oil. This will tend to support prices instead of lowering them as more supply normally would.

This ultrashort on oil and gas is not intended to last for the remainder of the game. I will look for a profit and then close out the short ETF and flip to going long on oil services. This will primarily be deep water drillers and NOV (National Oilwell Varco). NOV, subsequent to the purchase of GRP(Grant Prideco), is a very strong provider of oil well manufacturing and replaceable parts for deep water and offshore drillers. Only time will tell if this gamble on an oil pullback will pay off.

Thanks for listening.

Doc

Therefore, I think building cash and planning for a short-term pullback is definitely appropriate. Although I know the market has kept going up since I started this call, I look at this very similarly to the way I called the ag. pullback. I think the market will go higher than these levels by the end of the year. In the meantime, I look for a sharp and painful pullback.

I might be wrong, but I will be adding to the ultrashort positions tomorrow.

We will see how all of this goes. So far, my long positions have done well and that has proped up the total account. Now I need to balance my upside further with the ultrashorts.

I guess I have em just where I want em.

:)

So, if you were to considering timing the market, it depends largely on what you really believe. If you believe that this is a bear market and we have been experiencing a bear market rally, then you will be inclined to think that a large correction is coming soon. If you believe we are still in the middle of a long bull market and have simply corrected, then you will be inclined to think this market could continue to rally into the summer.

Now, being a bull, I would like to believe the latter. Unfortunately, I do not. I think that we are in the middle of a bear market and this is a bear market rally. As such, we are likely to tumble pretty fast from here and might retest the March lows.

With the lower interest rates, stimulus package, and company year over year comparisons becoming easier, I think we can rally effectively near the end of 2008 or early 2009 (given that the market looks 6-9 months ahead.) I even believe that we will be able to climb out of this bear market in 2009.

Short term, I believe we are in for a significant drop back toward the March lows. When that will happen, I cannot really tell. I tend to believe that May is giving us a "fake out" like some early October up moves. When the sentiment turns, I want to be positioned to profit. Thus, my persistence with using ultrashorts along with selective long positions.

We will see fairly soon if I am right. If I am, I might be able to move up the ladder a bit in this round.

Oil prices moderated slightly last week and the ultrashort oil and gas ETF rose to over $33 per share. I sold some of my DUG position with a gain and held onto the rest. Since then, Oil and Gas have gone back up and I have moved into a losing position. My resolve has not changed with respect to Oil and Gas prices. I expect a significant correction of something in the range of 14 - 20%. When that occurs, I will sell my position and probably not restart it again unless there is another meteor rise in Oil. However, what if Oil continues to rise and reaches rediculous levels before it decides to correct? I will likely "stay the course" and withstand the hit. If oil continues to go up in a rediculous way, I may sell out but that is very unlikely.

The NASDAQ has done very well as I have built my ultrashort position. As with oil and gas, I will exert substantial patience because I believe that there will be a turn in sentiment relatively soon. When that happens, the NASDAQ will likely drop for days or weeks before beginning to recover. Further, the summer is not a good time to be in the NASDAQ historically. I will count on that and that this rally is likely a bear market rally. If I am right, the market will correct and we might retest our March lows. I will profit from my patience. If this does not happen, then I am hoping my long positions will "cover" for a losing ultrashort.

Financials are doing much better recently, but I am confident that more bad news is on the way and financials will correct downward as well.

These ultrashort positions can be very frustrating and require courage and patience. I will report back in a week or so with my progress.

If anyone looked at my account they might have noticed that I now own POT, the very stock I said to "sell" and get out of the way of a correction. I expected a sharp selloff in agricultural commodities (especially fertilizer) and was even quoted on MSN in the strategy lab open report as being bearish at that time. However, I pointed out that it would be a good time to reenter these stocks if they corrected. At the time I posted my decision to sell all POT and MOS, POT was selling at around $215 per share. When POT corrected rapidly down back to $177, I decided to "FLIP" the trade and go back long with POT. Since that time, POT has returned to about $200 per share. When I went long I did not buy a full position but a half position. This was in case POT had further to drop. I waited for a 15 - 20% correction and jumped back in. This move has proven a very positive one and I expect similar success with my ultrashorts.

Time will tell. I will report back soon.

1) I believe agricultural chemicals have had a great run and are due for a strong pullback.

Action: I will be finalizing my sellout of these from my original SLO1 account by selling all of POT at the market tomorrow. I have also sold all of these from my personal accounts.

2) Regardless of the strong upward fundamentals in the long term for Oil and Gas, there is only so far Oil will pull away from $100. Much of the upward trend is depending on the drop in the value of the dollar and short term disruptions in supply. These are almost certain to correct slightly and oil will respond with a downward bias for awhile before restarting it's upward flight. History has strongly supported this type of price action for oil and the "fast buck" speculators will pull their funds quickly when they see the trend going against them. Similar to the pullback I expect for agricultural chemicals, this does not change the overwealming fundamentals in favor of upward price movement over time. It does give me an opportunity for profiting from these courntertrends. Remember, with contrarian investing it is especially hard to maintain the courage of your convictions but it is essential to do so to profit from the trade.

ACTION: I plan to enhance my ultrashort position on oil and gas by increasing DUG with even a slight further pullback. I am convinced, if I am patient, I will profit.

3) As much as I hope the market turns around by the end of the year, I think the evidence suggests that we are in a recession and a bear market. The recent rally, in my view, was a bear market rally. With that in mind, I think we will be in a downward trend again soon and I want to capitalize on that before rebuilding my long positions.

ACTION: I plan to add to my ultrashort NASDAQ (QID) with any slight further pullback. The NASDAQ is poised to underperform the other indexes even though some of the earnings have been good this quarter. These months are very poor for technology in general and the NAS is tech heavy.

4) Financials are not out of the woods yet. Despite some of the calls to wade into financials at this time, I still feel that bad news is coming beyond what is expected. The credit crisis is not nearly completed.

ACTION: I plan to add to my ultrashort financials (SKF) with any slight pullback.

5) There is no positive short term catalyst for NVidia (NVDA) despite the fact that I am convinced that NVDA will be a strong tech stock going forward.

ACTION: I will trim my NVDA position and look to rebuy below 18.

6) Apple has had a great run. There are multiple upward catalysts but expectations might be too high.

ACTION: I will trim my APPL position by another 1/3 with any upward price movement. I will then hold the rest long term and may add if the stock pulls back after earnings.

7) Verizon has a great dividend and is surprisingly underappreciated. I know that they have a high debt level, but they have multiple positive catalysts including strong wireless and fiberoptic networks.

ACTION: I plan to add to my Verizon position with any pullback.

That is my summary of trends and actions for now. I will update once these changes have a chance to be successful.

Doc

This is the case with my investment in GOOG that I added to SLO2 with good research to support that the street had unfairly punished this company and it was poised to rebound. When the short-term price action didn't go my way, I simply sold out and lost a golden opportunity for a nice portfolio boost. It will move decidedly higher tomorrrow because of beating street estimates. (up over 75 points). Yet another example of the importance of doing your research and sticking to it.

This advice occurs on the upside as much as the downside. With this in mind and staring in the face astronomical fertilizer prices recently announced, I plan to sell all of MOS if/when it hits $136 per share. All the momentum is up with this stock, but I plan to sell out and take my 16.5% gain and move on. I will follow this for a pullback, and if one occurs, I will consider a rebuy. It is simply too hot for me right now.

Apple, however, with a 30% gain is still not too hot for me. I did take some profits recently, but I think there are upside catalysts remaining and the stock is still down substantially for the year. It can certainly move higher.

Boone Pickens is decidedly against my "ultrashort" move on gas and oil. I myself have questioned this move because of strong oil demand and no increase in supply. As I said, I think the trend is decidedly "up". However, I still feel that a pullback will occur soon. If so, I will likely get a nice gain and will sell the ETF. If not, I will sell the ultrashort within a 10% loss window.

Interesting stuff.

Later.

Doc

With that in mind, I am going to move to the short side further than normal tomorrow by purchasing DUG at a full position for my portfolio. My reasoning for this is similar to the reasoning for selling some of MOS before a strong turn in sentiment. Oil is at an all-time high. Now I happen to be of the belief that this high will be taken out easily over time. Oil might even ride further in the coming days. (AGAIN, YOU CANNOT PREDICT THESE TURNS EXACTLY.) However, the short-term movement is being caused by factors that will be corrected in a reasonable timeframe (disruptions in pipelines and such.) Once those are corrected and before the summer driving season hits full-swing, Oil will almost certainly drop back some after this rapid run over $113. The trends seem to indicate that it will drop back to $100 or lower for a time. The chart pattern (bearish) might indicate a return to just below $40 for DUG before it starts back down again. That would be a cool 21% gain that is very likely to occur. I am willing to take the chance that oil will pull-back some before returning to it's upward trend.

For those who are not familiar, DUG is an ETF which is an "ultrashort" of the oil and gas index. It is provided by Proshares, who have some of the best sector ultrashort ETFs available.

I will also purchase a 60% position in Sirius Satellite Radio (SIRI) at a limit price of 2.39. This is another speculative move that speaks to my belief that the merger between Sirius and XM will be approved to take place and that this will drive the shares upward (at least for the short-term.) I happen to think that SIRI is caught in a trading "window" between about 2.30 and 3.20. Good news is likely to drive the stock to the upper side of that window. If this occurs, SIRI should track to the upper end of that range. If it hits my target of 3.10, I will sell most or all of the position for a 29% gain. Again, I will not get greedy and if it slows down as it hits $3, I will consider selling slightly sooner some or all of my position.

These are contrarian moves against the trend of the oil market (DUG) and against the trend of the stock (SIRI). I will hold my other positions for now and reassess soon.

Doc

My experience with that type of stock is mainly when I have not invested a penny in it. In other words, I kick myself everyday when I look at the quotes and see the stock "up again" and I did not know when to take a position. I wish I had more of these experiences when I actually invested, but that is not nearly as common as the "kick me" stock described above.

One of the reasons that I do not have such a great experience for stocks I am invested in is that I believe in taking profits before you get squashed. Jim Cramer has such an expression when he says "Pigs get slaughtered." While I do not have such an aversion to being a pig as Mr. Cramer, I do recognize that the only stock you make money on is one you actually sell at a higher price than you bought. (Please forgive me all you dividend buffs out there, I do know that dividends can alter that simple equation.)

It is with this in mind that I plan to sell parts of several positions where I either have a nice gain already, or I anticipate a larger loss if I wait. I will be selling about 1/3 of my position in AAPL and 1/2 of my position in MOS. In those stocks I have a decent gain and want to take some profits. In addition, I will sell part of my positions in NVDA and all of my position in BBY. There was a nice gain in BBY recently and I would love to "escape" without further losses. I still believe in the retail sector long-term. but the short-term picture is simply too dark for this time shortened game. I may return later or I might not even get out because my "limit order" is too high. My hope is to take advantage of another decent stock day and "escape" at a slightly higher level for BBY and NVDA.

One thought on MOS and POT and others in the "AG" sector: THESE STOCKS ARE OVERBOUGHT IN MY VIEW !!!!! My advice is to save yourself and take some profits. This is a real life example where some "Pigs" are going to get slaughtered. I recommend taking profits and waiting for a pullback before considering buying more. Based on the worldwide shortage of food, I think these stocks will do well over time even from these high levels. However, there is likely going to be a sector correction soon and I suggest getting out of the way! I feel so strongly about this that I almost decided to sell my entire MOS position. Experience has taught me that even a savy investor cannot predict accurately the turns in a sector or when a hot sector will cool off. Therefore, this is only an educated "guess".

Further, to mitigate my volitility in any down move, I plan to buy large positions in ultra-short ETFs for the Nasdaq and financials. Again, I might be wrong in my prediction for a downward move, but in a stockpicking game (or real life) you need to have the courage of your convictions and act on them. (As long as you utilize discipline and logic as you go.)

We will see how these moves work out over the next week or so. I will report back then.

Doc

Will blog again soon.

Doc

For my part, I had sold 20% of my positions just before the FED rate decision because I believed that there would be a "sell the news" reaction. That capital was now ready to look for an opportunity. When I take these opportunities it is not good to use a "value" stock because, as with my retail stocks, when they become bargains they may drop further and come back slowly. Excellent growth stocks such as RIMM will recover much faster if you are ready to buy at an opportune time. In this case, I saw the drop back to around 100 as being a chance to pick up a cool 20% or so. Since I am so far behind, I felt that this was a time to place my recently freed up capital to work. I purchased as much of RIMM as I could before the earnings announcement. I should have used all my cash but one of my limit orders did not "hit".

In response to this move, I was able to capture a nice gain and plan to sell part of my position if I see a better opportunity. If not, I will just "ride it out" and see how it stands at the end of the competition. I would be very surprised if it dropped back much considering the excellent earnings and guidance.

In my view, a good portfolio has a "core", an "edge", and an "opportunity stash". This is riskier than a perfectly balanced portfolio, but I think has better return potential in the long run. It also should be diversified in areas you feel comfortable investing. Although I have been thrased in this competition by some worthy opponents, I still want to pass on what Ideas I might have before the competition ends.

Back soon,

DocA

That is the prevailing logic in the investing and financial press and I certainly agree with that assessment. However, what they aren't telling you (in my humble opinion) is that the market would have sold off even if the market had gotten exactly what it wanted. There were four major factors in play creating the environment for this sell off. 1) The disappointment by the market in the actual cuts I have just outlined. 2) The market was severely "overbought" just prior to the fed action. 3) The VIX (volitility index) had dropped to a very low level just before the fed news (indicating complacency). and 4) The overall fear that remained in the market despite the recent nice runup in all indicies.

In my view, it was almost inevitable that there would be a "sell the news" approach by the market today. That being said, I have mentioned over and over that you can never "outguess" the market and should generally be fully invested at all times with a diversified portfolio. Even though I still believe that is the best long term approach, I realize that this approach will not win me a stockpicking game such as ours. At least not with such a widely swinging market and a fear predominated market. That is the market we have today.

In preparation for this market approach, I sold about 20% of my portfolio before the fed decision. I did hold onto about 80% and realized I might take a beating. That will, at the least, give me the flexibility to pick up some last minute bargins for an end of the game push. This was a good decision, but as with my other moves, was not aggressive enough. If I really wanted to gain some ground, I should have sold all of my portfolio and rebuy at a lower price.

My sincere congratulations to the savy investors who picked the right speculative and nonspeculative stocks that gained 30-40% in months. I still believe I will have a nice gain by the end of the competition, but I will be lucky to finish in the top 100. I just couldn't violate my investment principles for the game and I will pay the price for that.

I am sure my SRO competition realizes that there is a vast difference between winning in a stockpicking game and winning at investing. There are some pretty sharp investors in the top group (my fav is dishwasher) who, if they could invest their own money at the rate they went up in this contest, would be millionaires by now and would never have heard of the strategy lab open. Their annual rate of return would be about 120 - 160%. So, I leave it up to each and every one of you reading this to determine what you have read that makes the most sense for your own portfolio strategies.

This quote is directly from Bloomberg.com and please refer to that site for the complete text. I did not want to copy more than this because of copyright concerns:

"Rating cuts have a bigger impact during bear markets because investors are more easily spooked, according to professors Xia Chen and Qiang Cheng at the University of British Columbia in Vancouver, who are working on a paper on the subject. They have concluded that sell and hold recommendations have about twice the impact during periods when stocks are sinking.

``When markets decline, people are looking for where's the stock with the real problems, and research has more value at that time,'' Credit Suisse's Natella said.

Hedge funds that employ computer-driven trading strategies are known to exploit short-term movements in stock prices caused by analyst rating changes, said Ross Miller, a finance professor at State University of New York at Albany. Managers study the trading patterns after analysts change stock recommendations and program their computers to benefit from them, he said.

Trading the Blips

``Although there seems to be more attention paid to analyst reports these days, these tend to be temporary impacts on stock prices,'' Miller said. ``A lot of hedge funds will trade the blips triggered by such changes.''