Friday, August 5, 2011

Seller's remorse

9:22 am (Hawaii) How else can I explain it? Selling FAZ in the high 40s (or was it low 50s?) a week or two ago was prudent. Momentarily prudent. I didn't have the cajones to hold on to the small position or to hold on to my conviction that the banksters would be punished soon enough.

And, soon enough, what did we get? Euro banks and politicians having an orgy of confusion, mayhem and chaos. FAZ rising to nearly 66 today. Sixty-six. Ouch. I got up somewhere around 8 am Hawaii time. Caught up with the day's action. The jobs report. Bad news from Euro land. Then "good news" on Germany bailing out the latest dumbledee nation in severe debt. (I don't get why Germany has relegated itself to babysitter status.)

So, FAZ came off its high and fell to 58+, still up for the day. I'd been watching it closely yesterday near the close, but decided against entering. Today, a different story. I strayed from my anti-risk posture and dove in at 63.55, concluding that FAZ would make a run back to 65+ in this final hour. But I was cautious about profit-taking by traders who were sitting on a nice, fat gain. Sure enough, it pulled back and I sold at 62.70 for a tiny loss. I gave it one more shot on the way back up at 62.87, but again, up 5% for the day, FAZ faltered under serious selling pressure and I unloaded my little sack of shares at 62.70. I might be wrong, of course. FAZ dropped to 62.10 or so, but is now up to 63.25. It's always been a crazy mover in times like this.

The right course of action in FAZ is to buy low (40s) and sell high (60s or 70s). The minute-to-minute can be captivating, but it's just noise. For a few minutes though, it can be a little fun when I peel off these layers of armor and try to fast trade. QE3 is undoubtedly coming. The FOMC meets on Tuesday. The Fed meets at Jackson Hole on the 26th. Any whiff of positive news for the market will end this downswing/correction. FAZ could easily plunge back to the 50s and 40s. But once the effect of QE3 wears off — and it'll fade much faster than QE1 and QE2 did — FAZ will march to 70 just as quickly. FAZ at 100? Looks like a good "long term" bet to me. I'll wait for 45 to re-enter.

Photo: Denise Milani

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