Left: S&P 500 Ultra Shares. Found support on the 50% retracement line again. The market is volatile but looking strong despite the fiscal cliff woes; Right: 20 Year Treasury Bonds. Just wanted to give you an idea of how both stocks and bonds are acting.
S&P 500 is approaching the middle bollinger band– a welcoming sign. As the Fibonacci’s support above, this market is possibly at the bottom end of its range (bullish).
Went ahead and pulled the trigger on selling EMC calls. The stock is approaching its upper bollinger band and I would like to reduce the size of this position anyway. So, if the shares get called away great. I might use the added cash to buyback EMC if it surpasses resistance.
Makeover: The portfolio has undergone reconstructive surgery to deal with the FCX blunder. I sold all of the names I was up in to take profits and to raise cash for my other positions. Why didn’t I go long term on them you ask? Because, I have seen this movie before. I pick a great group of stocks that are considered bullet proof by the street. Then, a freak event happens that kills my beloved stock; not going down that road again. You never go broke taking a profit.
Old Favorite: I am reverting back to an old favorite- The S&P 500 triple leveraged etf (above). I get the security of the highest quality group of stocks in the world but won’t sacrifice performance to own it. I still get the action of a growth stock due to its 3x leverage. I am willing to allocate 25% of the portfolio to the S&P 500, 50% to the other 5 core holdings, and still be in 25% cash going forward. This is the strategy that got me here in the first place.
Two of a Kind: So, I feel there is still opportunity in the mining complex for various reasons (China bottoming being one) and I cannot have FCX distorting the performance of the portfolio. I switched to VALE (above), an iron ore giant in Brazil, to make up for that. Well, this gives us “two of kind” so to speak in the mining space and, unlike in poker, that is a no-no. However, the move made sense for two reasons: 1- Vale looks cheap and the downside seems to be out of the stock. 2-FCX will probably be in consolidation mode for a while as the market wraps its mind around the deal.
Upgrading: We also switched out of Terex for a gain and switched to the higher quality- Caterpillar (also above). Unlike in FCX- Caterpillar, as well as my other 5 core holdings, is a best of breed company that has a proven record in dealing with shareholders and exercising fiduciary responsibility.
Conclusion: What FCX did was an outrage to investors (including me) and was highly unexpected. But, it could turn out to be a blessing in disguise. I am thrilled about the new possibilites for the portfolio. I will not make an update for a while as there should be no moves to make for the next few days. Sometimes, the best move to make in the market is to make none. I need to let the dust settle and take a break. Any questions? Just comment below.
