Trade Alert: Trimming and hedging a bit

I just got back to NM after being in NYC and LA this week. Let’s talk stocks for now.

Pull up your favorite charting program on your smartphone or computer and take a look at some various time frames for the major indices. Try a three month chart, a three year chart and a ten year chart of the major indices.

I’m thinking it’s looking a bit blow-off-toppish here and it might be time to hedge a little bit.

Look, you want to buy when there’s blood in the streets and you want to sell to the sound of trumpets. I hear ever more stock market trumpets on the radio, on TV and in the papers and a whole lot of crypto -trumpets blaring right now.

The market has for months probably been pricing in this big corporate welfare giveaway of a tax package. And with the announcement that McCain and other Republican Democrat Regime senators are going to probably vote to pass this giant corporate giveaway of a tax package, you’ve seen the market rally 300 points today alone.

Here’s what I think about the near-term set-up for the stock markets. If the tax package passes vote, the market is likely to have a sell-the-news reaction and I wouldn’t be surprised to finally see that 3-5% pullback that the market hasn’t seen in months. If the tax package doesn’t pass, I think you could see 3-5% pullback happening very quick, perhaps in just two or three days’ time.

Look, I’m still quite bullish about the overall stock market, the economy, and especially about the Revolution Investing approach we take. But I don’t like the near-term set-up — and I’ve been patiently waiting to put any new hedges or do much trimming/selling.

I’m going to make two trades here today.

First, I’m going to trim about 1/3 of my Lion’s Gate position, continuing to whittle it down. We’ve had some nice gains on this stock since we bought as part of my teenager basket (along with Twitter, which has also done well for us) and as I’d noted on the most recent Latest Positions Round Up:

“New highs for this stock recently but I’m wondering if we’re getting a bit late in the Golden Age of Great TV Content cycle. That is, how many more shows can Amazon, Hulu, Netflix, the old cable companies and the even older TV networks possible put out in the market place and hope to make money? Netflix will be okay and so too with Amazon, I suppose but spending on TV shows is likely peaking soon and this might be another name to sell sooner rather than later.”

I’m also going to buy some new IWM puts, which is something I do occasionally when I get a bit bearish about the near-term broader markets like I am right now. So I’m going to buy a small position in some IWM puts that expire in January and February with strike prices around $148-150. If the markets keep right on rallying, I’ll end up losing money on these puts but if the markets fade here a bit they will kick in as a small but potentially growing hedge.