an tSionna 3.2.09: Game Plan

Game Plan: Above I have published two charts. The first shows the trading range we have been discussing since last fall. The second chart shows a weekly chart of the S&P 500 to give us some perspective about what's happened and where we stand.

One of the things that I believe makes us different than many other people who manage money for clients is The Game Plan. That is we have mapped out scenarios for different market environments and we currently have different strategies when confronted with different events which we then try to apply uniquely to our clients. So for example as we went into the beginning of the year we developed scenarios for among other things what we might expect in a market that goes into a bull market, one that trades sideways for 3-8 months and one that violates the trading range lows we established last fall. Friday and today unfortunately those ranges were violated in what turned out to be a very bad market.

What follows is a discussion of my thoughts solely for the clients and friends of Lumen Capital Management, LLC. You should either do your own work or discuss my thoughts with your own financial advisor before considering any of what we print below. We assume no responsibility if you follow any advice in this column without doing any of the above. Or better yet you can call us!

We offer no predictions on what will occur in the future. In fact for all we know the market could experience a large rally making the violation of these levels moot. But for now we must assume a higher degree of probability that the market's direction at least in the short to intermediate term could be further down. Accordingly we have been doing some selling for clients recently including today. We have not sold in every account. We have reviewed each in terms of portfolio size, risk tolerance and how the account is currently allocated. More important we have also determined other levels where we would be inclined to raise more cash. Also it is important to note that we have also been purchasing for the proper oriented accounts, ETF's with very high levels of dividend or interest payout. Therefore we have less cash right now than we might have in more normal market environments. We will discuss why yield intrigues us in more detail in a future post to you.

Stocks are very oversold at the current time and anything is possible. Governmental rulings that reinstated the up-tick rule whereby stocks cannot be indiscriminately sold would in our opinion instigate a furious rally in the markets. It is also important to note that stocks are very oversold so as we mentioned above a rally could come at any time. I would also note that we are unlikely to consider ever going 100% to cash as we believe that would force us to miss any ensuing rally Also there are certain levels or current events where we would consider taking on more risk by purchasing securities. Again we will discuss these strategies more fully in some future post.

Markets are not functioning normally at this time and the lack of coherence out of Washington is disturbing their normal equilibrium. Therefore we believe that the most prudent course is to be more defensive at this time.

On another note I have not sold any of the trading longs I established on on 2.10.09 but they are close to the levels where I will be forced to close them down. I will let you know if I do so.

*Long certain ETFs related to the S&P 500.