Testy Tuesday – 11,550 Or Bust On The NYSE

Treading water for two weeks.

On March 7th, I wrote: “Testy Tuesday – 11,550 or Bust on the NYSE” and yesterday the NYSE closed at 11,556.9 so no harm in waiting around for the Fed. At the time we pointed out that declining volume was greater than advancing volume and that was still the case yesterday with 1.86Bn shares in decline vs. 1.15M shares moving higher in light trading but yesterday’s action was tainted by a failure at the closing auction. After-hours trading was suspended at 4:13 and all open orders were cancelled.

It seems to be working again this morning but it’s very scary when a major market system – THE major market system, fails on you. If that had happened during a trading day – it would have been total chaos of the “flash-crash” variety. Have I mentioned how much I love CASH!!! lately? Hedges too!

Our well-hedged Long-Term Portfolio is up over $9,000 since our 3/10 review despite the market not making any progress. That’s because we SELL risk to stock market gamblers using our system which teaches our Members to Be the House – NOT the Gambler. Notice we are 75% CASH!!! (have I mentioned how much I love CASH!!!) but the positions we do have are on track to make $250,000 this year as they use options to both hedge and leverage the cash we do have in play. You don’t need to risk a lot to make a lot.

By selling risk premium, we don’t need an up market to make money – flat or even slightly down works for us and anything less than slightly down kicks in our hedges and keeps us from losing too much. You don’t hit a lot of home runs following this strategy but your batting average usually leads the league!

Balance is also key in this kind of market, we’re slightly bearish overall, maybe 60:40 but we’re moving towards 70:30, which is as extreme as we ever get in our positions. If you are 100% bearish and you are wrong, and the market goes 20% against you – you have 80%. If, on the other hand, you are 70:30 bearish and the market goes 20% against you, you end up 56/36, which is 92 – 18% better off and you only need an 8% gain to recover but, from 80%, you need a 25% gain to recover. 20% in your favor gives yields 84/24, which is 108 but you have that 108 when the market is at 80 – so plenty of money to take advantage of the dip. See: “How To Get Rich Slowly.”