June 21st, 2010

Like Carnival Barkers

Excuse me but I need to vent. I turn on the TV this morning to the news about the Chinese letting the Yuan increase about 8%, the Saudi’s having about twice as much gold as everyone had first suspected and, to top it all off, interest rates on 10-yr government debt was increasing due to the prospect of China likely less willing to buy it in the future.

The “talking head” rooting section on CNBC’s Squawk Box and Squawk on the Street were all trumpeting a strong market for today. The futures for all indexes were significantly higher than fair value (while I now can translate that into the level at which the market was expected to open, I still can’t explain what fair value means or explain how it’s calculated)

So what happened? Within a half-hour after the market opened, the S&P opened up about 0.6% and within 30 minutes was up 1.3%. to 1131.23. That level was exactly up against the bottom of the 100-and 50-dma’s which have now nearly totally converged. It was just too much overhead resistance and everything went into a tailspin.

By 1:30, the market slid back to the prior close, oil and everything related to it dropped 2.8%, gold dropped 2.0% and natural gas collapsed a whopping 6.8%.

I must confess that I got a little swept up in the euphoria. I sold a few of my SDS and bought a couple of stocks I’d been watching creep up last week. And it all came back to bite me in the you know where. I hope I’ve learned two lessons from this morning’s experience:

  1. CNBC’s Squawk Box can be hazardous to your financial health
  2. Stick to your own game plan and don’t be swayed by the noise and
  3. Never place a trade until until after noon, 12:00 p.m.

Ouch, it hurts! I could blame myself but it’s much easier lashing out at CNBC and their ostensibly expert, professional investment manager guests.

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  • Anonymous

    GURU,,on average how many times a month do you violate your 1,2,3 rules you posted today ??As the GodFather use to say,,just when you think your out,,they pull you back in..

  • Joe

    I violate my own rules:

    Rule 3, nearly every day
    Rule 2, 60% of the time
    Rule 1, 20% of the time

    Unfortunately, today was a day when I violated all of them. What saves me most is that everything I do is "incremental", I never swing all the way in a single day or in a single trade. I'm still about 45% in cash and I still have quite a large hedge position (i.e., shorts). But no one likes to get hoodwinked and that's how I felt today.

  • Anonymous

    GREAT ADVICE!

    That's been the lesson of my year… I have begun to keep a journal more fervently, and read my own advice in addition to others' advice.

  • Jesse

    hey we agree! CNBC = State Run Media/ Obama cheerleaders