Trade Alert: Random Thoughts and Two Trims

A few thoughts to start the day.

I do think it’s getting closer to being more of a time to start trimming and building up our short hedges than to be so heavily long as we have been while prices were lower. Nothing to panic over, and I think the path of least resistance remains higher, not lower. But as you guys know I have been aggressively long for the last month or so and we’re up pretty big from the lows. I’m just going to look at taking the foot off the pedal a little bit, planning some gentle trimming of existing positions and building up of our shorts over the next couple weeks.

I am also sick of watching this PCXCQ flounder. Coal pricing, coal inventories, everything is horrible in that industry and that seems to be actually affecting our technical trade. I am going to go ahead and sell half the position right here for a tiny gain and I plan to sell the rest of it early next week, win or lose.

I’m also going to sell some of my closer-dated calls in Sandisk. The stock’s up almost 15% on last night’s earnings report and is now up 30% from where I was adding to it in late May. I’ve got some big gains on the ones I bought recently, and I’ve got a loss on some from earlier, but I’m net up on the calls right now. Anyway, I’m taking about half of my near-term SNDK calls off the table. I’ve still got some longer dated SNDK calls and some common that I’m holding for now.

Finally, here’s a research note I got in my inbox from a trader I admire:

The Bipolar Economy.Corporate earnings are up big! Great! Buy! No wait! The economy is going down the toilet! Sell! Buy! Sell! Buy! Sell! Help! Anyone would be forgiven for thinking that the stock market has become bipolar.There is, in fact, an explanation for this madness. According to the Commerce Department’s Bureau of Economic Analysis, the answer is that corporate profits accounts for only a small part of the economy. Using the income method of calculating GDP, corporate profits account for only 15% of the reported GDP figure.

Where have you heard that the corporate economy would boom while the main street economy would suffer? It’s playing out as I’ve said it probably would:

Look at the impact of unprecedented monetary easing and ongoing 0% Fed loans, or at the record-levels of corporate cash, both of which will continue funding buybacks, or simply look at the continued policies from both/either parties all of which are intended to expand corporate profits and lower tax payments for the biggest companies in the country.

None of is a good thing long term…but is it BEARISH for the stock markets? These macroeconomic trends and political forces are not good for the broader economy and they’re certainly not fair or good for main street…but all these trends that he’s talking about are WILDLY BULLISH for the stock markets.

Back in a bit with more.