I was given a rubber ball yesterday

It was innocent really. This rubber ball was taken from a student in one of my classes. It is one of those that will bounce high in to the air. One of those super bounce balls!

I needed it yesterday because I was mad at myself. Early this morning I was doing my research and noticed that the futures didn’t look any better than they did Sunday night. In fact they looked a little worse. I’ve held the view that that the banks, who have been one of the leaders of the recent stock market rally don’t have any real reason to do it. It’s not like the credit markets are running well again. It’s not like toxic assets are all gone, and it’s not like the real estate market is any better. Banks are still hurting but to watch the market, you would think that a big money tree had grown in the back yard of each of the big banks.

So why were they up so much? Earnings that looked a little better than dismal and depressing? (Keeping in mind that the government had something to do with that) There really wasn’t any good reason for it.

I woke up this morning thinking that shorting a bank may be a good idea today. It would have been a no-brainer except that I felt like I was a few days late. I should have shorted the banks on Friday but I didn’t so today was the day I was considering it. Who? I had narrowed my options to Bank of America and Citi.

I decided against it because their premarket trading looked awful and they were already down 6% especially in light of Bank of America’s no so great earnings announcement. I felt that the shorting may already be over and if there was any rebound, it may head back up.

Boy was I wrong. Bank of America was down 25% for the day and Citi was down 20%. It would have been worth it. Of course it’s important to remember that chasing violent moves in the market is rarely a good idea. Being hedged correctly and buying in increments on the way down and selling on the way up will take the guesswork out of the rally.

I threw the bouncy ball against the wall a couple of times for missing a great trade but in t

he context of the 4% drop in my total portfolio today, missing a little money. What goes down will come back up, right?

If you miss the move, know that another is coming.  Get ready now but don’t chase after the current one.  If we continue to correct, make sure you have something in your portfolio that will take advantage of it.

No chasing allowed.