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Implementing Our Profit Protection Plan

Most of you who know me know that I have back up plans for most everything in my life, but in particular my investing activities.

Given the technical situation in the market, with so many of the indicators showing an overly bullish sentiment, we are implementing our profit protection plan as I write this.

We have reviewed all holdings of individual equities and ETF’s department-wide and any that have a >40% return year-to-date are subject to:

1. review to determine if we should sell 10% of the position immediately (may or may not be the case – we may add this 10% to the 15% below if there is enough positive momentum in the company stock to potentially keep it moving higher)

2. set a stop loss on 15% of the position below one of the following technical levels (13 day EMA, 34 day EMA, 20 day SMA, or two standard deviations below the 20 day SMA trend)

This whole market reminds me of the 1999 NASDAQ which continued to go up in the face of overly bullish sentiment. We sold early in that process and missed a lot of the ultimate upside – something I’d like to avoid in this market if it continues to move higher. But we also missed much of the big downward move as prices corrected and were able to have cash on-hand to identify the next big market mega-trend: oil and base metals.

The difference between this market and the NASDAQ in 1999 is that there are some changing fundamentals that should ultimately and positively move stocks up. Maybe they have temporarily gotten a bit giddy and are due for some sort of correction which we want to protect against. However, all of the monetary stimulus in the system will (at least for a while) continue to push stock prices higher – at least up to the pre-Lehman Bankruptcy level of 1250 on the S&P 500 Index.

Anyway, back to it…I just wanted to take a few minutes to let everyone know what we are doing and why.

More later!

Mark