So today ended our second consecutive quarter of a 7.5% loss on the DOW, with JUN recording the largest Monthly drop since AUG 1998…!!!  That followed a 6.5% drop from the OCT high to the end of 2007.

For the first time since NOV 2003, the DOW also closed this quarter below the 50-Month MA.  The S&P also closed below its 50-Month MA for the first time since JUL 2004.

Only the NAZ has held above this important LT trend-line, but it is now within just 20 points of this crucial LT trend.  It certainly doesn’t appear, at least from the overall market action, that either the DOW or S&P will be offering any significant help in keeping it from closing below this LT trend for the first time since SEP 2004.

Clearly the BEAR is here, and looks to be settling in for the summer without some significant change in market sentiment.  The only possible event on the horizon that we could see possibly boosting this broken market is to see gasoline and oil inventories rise substantially, causing a major correction in the escalting price of oil and other commodities.

In light of this quarterly close, we have decided that the prudent move is to lighten up on many of our LT positions, rather than continue managing the downside, which is becoming consistently more difficult.  A mistake that we have made in the past is being over-confident in our ability to manage these cycles, and more than once we have paid for that over-confidence.  This time, however, most of our LT positions are still healthy but we are beginning to feel that twinge of “over-management”.

Our experience has taught us that when we begin making adjustments too regularly, that this is the time to cut back our activity, and our exposure, and wait for a better environment to emerge.

As a result, beginning tomorrow we will start closing portions of many of our LT Long Positions and reducing our risk considerably, thereby reducing the amount of management time required, especially in some of our larger positions, like AAPL, ATVI, ELON, NVDA, SNDK, USNA and HLF. 

We also will be looking to trim some of our Long Stock positions, specifically our Royalty Trusts that have had great runs over the past few months but have seemed to stall over the last couple of months.

More updates tomorrow or Wednesday, depending on market.

Coach BD 

06/30/2008 at 10:14 pm
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