We have a very energetic start to the new year, with everything except oil attracting buyers. Breadth is better than 2-to-1 positive and technology stocks are leading the charge.
Keep in mind the psychology of trading to start the year is to get a quick start. There is a great desire to rack up some early gains and there also tends to be cash inflows from retirement plan contributions that allow funds to chase strength. Good economic data and a sharp dip in oil is also helping matters.
I'm using this rather frantic buying to rebuild a position in the QID which is equal to twice the inverse of the QQQQ. In other words, a long position in QID is equal to being double short the QQQQ. The key to hedging into strength like this is to make sure you do it incrementally. The way to get in trouble is to do it too quickly and not have any capital left if the market continues to run.
P.S. Will you be there when Cramer makes his next move?
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Rev Shark Blog Traders Clean the Slate 12/29/2006 4:25 PM EST Rev breaks out a virtual noisemaker and ends the year with a look toward next.
At the time of publication, De Porre was long QID and short QQQQ, although holdings can change at any time.
James "Rev Shark" DePorre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.
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