Splash Zone Weekly Wrap Up: 8/21/16

What a busy week we had. We made a lot of trades – more than we typically make in a given week. The market went nowhere – in fact on the week as a whole, it traded in just a 24 point range on the S&P 500 (SPX). That is insanely tight. And the market finished lower by less than one point. Also ridiculous. 

But that has been the personality of this market over the last five weeks; the market simply doesn’t move. That will change eventually, it always does. When the market is not doing anything, and the market is trading with low volume levels, it allows stocks to get lackadaisical and that can lead to odd types of sell-offs. We saw that in four of our trades in particular: WYNN, PHM, KMX and HRB. They stunk and the sell-offs were more than what would have seemed normal for the kind of day we were seeing in the market. Nonetheless, I made a lot of trades this week, and much of it was because 1) the market wasn’t giving us hardly any action, and 2) I was trying to find a combination of stocks that would allow us to do well in the market despite the lack of price action – like what we saw last week with NFLX, ADSK, and the rest of those trades. On Friday it actually felt like we achieved that. With the market selling off pretty good, we still were up on the day, and as it recovered, despite having a strong short presence, we still managed to increase our profits. I want to take that into next week and build on Friday’s price action. 

We are also well protected to the downside should things start to get ugly. We have a bullish tilt in the portfolio, but having IBM and particularly SPXU, allows us to offset any losses that may come about with our long positions should the market sell-off. 

I like this approach, because over the past five weeks, the market hasn’t really had any big trading sessions. So, I don’t expect there to be a big rally to the upside, which will limit the losses in SPXU. Meanwhile, I like the long trades that we are in and the ability they have to rally on marginal market moves. 

I’m looking forward to the new week ahead.