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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: dclapp who wrote (39725)	4/26/1999 9:40:00 AM
From: James F. Hopkins	Respond to of 94695

dc: It depends on the person and their abilities , if they want to "leg" in and out and how good they are at that. I prefer to catch the MDY falling and short it first , if the Spy is also falling good just hold off on the long side until you see the SPY falling less than the MDY , and being I have to take closing price on a fund going long in something like VFINX is the way I balance the $ amount and if I have some $gain on the short side of MDY getting the fund on a down day can put me in cheaper ( more shares ) than getting it on an up day. Short term this hedge can bite you, but if you hold it long enough it will come around even if you don't leg in. So if you miss the mark you have an edge & as long as you don't panic it will come your way. Balance the $ short / long and in time the 500 will outdo the 400 and that's the key to it. The legging in/out can be tricky and it's difficult for me to explain. And what may work timing wise for me might not work for you as it's not likely we will see the "tide" of things moving the same way all that often. ---------- Today I'm still on the fence , fishing for a long on qqq, ( bid is in, but below the ask ) & I'm ready and waiting for signs to pull the trigger on a short DIA. ( no order in yet ) Jim

To: dclapp who wrote (39725)	4/26/1999 1:54:00 PM
From: James F. Hopkins	Respond to of 94695

Dc; This is what I did today in regards to the MDY/SPY hedge, and my reasons. I can't say this would be good for someone else who I don't know. I shorted the MDY @74-1/8 ( looks like I missed the top by a good margin ) After the short took I went long in the VFINX the exact $ with just $25 more than I sold the MDY for. This could look like madness as it's almost a reverse of what I said I would prefer to do. None the less today I noted the MDY going up faster than the SPY almost making a crossed sword, if that stays for the balance of the day I'll wind up with a few more shares of VFINX for the money than if the SPY were the one climbing the fastest. And I have to accept closing nav on the VFINX so I'm hoping it may even close down , at any rate not as much up as the MDY was when I sold it. I may miss the mark but it's no big deal if I do as I know in time TWO things can or will happen, that will offset any small amount that I miss the mark. ( Remember this is a percentage game not a raw numbers one ) ----------------- (1) The Spy % will soon out run the MDY% going on up OR (2) The market will do a real correction, large enough that the MDY falls % wise more than the SPY falls % Historically the Mid and Small caps fall harder in any large correction and that's just about written in stone. So really this hedge is set up looking for a market correction, more so than a run up. Short term it could move against me but I have full confidence in it giving any of that back and then some either way the market goes. -------------------- I will not exit OR leg out of it until it is ahead with some % plus expense. I hope to leg out of the long first during a down trend with the MDY still falling and only after the hedge has made a profit. ( I can keep it till that happens or hell freezes over no matter if the market goes sky high as I'm sure the long 500 will out do the short 400 even going up with enough time. Or the short 400 will fall more than the 500 if hell breaks lose. All I did today was get a small edge by shorting when the MDY was outdoing the SPY that is if it stays that way till the end of the day. I consider this a position trade not a short term sector trade. The expense on it to me is a total of $75 that includes the future cost of closing out both positions. The investment was not a large one so total expense will be 1/2 of 1% I wont leg out of either one until it clears at least 1% , and then will hold the other as long as that trend looks good. It's a very conservative way to set oneself up ahead of time in order to play a strong trend if it happens and after one is reasonably sure it's in place, this gives a comfort zone getting in a mixed up market. Later ( after it makes a profit ) just close the one that's against the trend. The trend can be your friend Up or down, and you can make it so. As the 400 is handicapped to the 500 over any longer time frame the 500 steals the 400's best runners in up trends, and in down drafts the thinner traded 400's fall like a rock when stacked against the more liquid 500's. --------------- Right now I'm counting on the more recent run up in the 400's to fix itself as I know in time the liquid of the market will find it's own level & when it fixes it will also over do it. In gamblers terms this is called a "layup" and I think the most important thing to learn in the market is how to spot a "layup" as being able to "see it" ( even if you don't use it )seeing it is essential to all the rest of the values you formulate about trading. Jim