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| Up, up and away! |
The S&P gained 2.1% today handily reclaiming the 1,150 level as the market leaders retook their places at the front of the line for investors. I have been on the sidelines since before the FOMC announcement two weeks ago anxiously waiting for the pull-in that occurred last week. But today was a day to jump back in even though it felt early, as it always seems to. The rally's cause has been pinned to the Bank of Japan's announcement last night that it is embarking on an unconventional quantitative easing initiative that involves buying ETFs and REITS. How crazy is that! Central banks, seemingly just since Alan Greenspan, have shifted the core of their focus to inflating financial asset prices, a major departure from their past stated goals of measuring CPI versus employment.
The large gap up was expected by very few traders and I likewise did not anticipate it and missed the bottom prices of yesterday. Yet, I shook that off and went after a few names early on after today's open. Notably, I snatched up Google (GOOG) at $529, Salesforce.com (CRM) at $114 and F5 Networks (FFIV) at $109. GOOG is back in breakout mode and heading higher while CRM was less exciting but I'll stick with it as it holds $110. FFIV had no pull-in at all in the last two weeks and looks primed to run. I missed the buy on Apple (AAPL) and am still kicking myself for not buying it early in today's session. I am most confident about AAPL and GOOG given their relatively low valuation and still very exciting businesses.
Amazon (AMZN) and Baidu (BIDU) also got away from me and their rich valuations have me hesitant to chase. I'm also watching Netflix (NFLX) and VMWare (VMW) closely for possible buys. Anyways, after messing around in oil service names, I was happy to get back to stocks I'm more comfortable trading. I have also recognized some clear mistakes I made in my oil trade. Murphy Oil (MUR), Hess (HES) and Apache (APA) are names much more levered to the underlying price of oil in contrast to the derivative service names I bought last week. This is painfully obvious now in hindsight and I will not make this mis-allocation in the future. I'm sticking with this trade for October but will be looking at better levered names on a pullback.
Ventured into a dollar long today
I bought the dollar (UUP) as per my post this weekend where I outlined my belief that pessimism is far too high against reality. The dollar index has a 57% allocation to the euro so the core of the bet is against the euro. This is precisely the trade I want to make as I think the US's economic prospects are much brighter than Europe's.
I've got some good thoughts together for a post I am writing for tomorrow titled: "Traders' Least Understood Concept: The Coefficient of Likelihood". So look forward to that!
Brandon R. Rowley
"Chance favors the prepared mind."
*DISCLOSURE: Long GOOG, CRM, FFIV.