What a crazy week!
I’ve been very busy updating the Buy List for Members so now let’s turn to what, if anything, justifies this bullish posture now that we are finally over our breakout levels. I am DETERMINED to find good news to report so we’ll see what I can dig up. Of course, our buying premise is based on my 2010 outlook that determined we don’t really care about the Economy, not the one that affects the little people, the only ECONOMY the stock market cares about is the one that affects those of us in the top 10% of society as we are the only ones still playing the market anyway.
We hit the targets I laid out for this run back when I ran the "Last Charts of the Decade" back on Dec 30th. Those charts had the Fibonacci levels there so let’s keep an eye on the next set of levels, assuming we get some follow-through next week (still uncertain) to confirm the breakout. Until we get that confirmation, let’s augment our Buy List with the same hedges we used to protect our old bullish positions as I updated in our last hedging article:
- DXD Apr $26/33 bull call spread was net $2.40, now $2.20, down 8%. I still like this one as it’s $2.31 in the money and that last 200-point run only cost us .20 so I think that’s an acceptable loss against our long gains with the 300% potential upside return if the Dow does fall (about 10% should do it).
- FAZ July $20/35 bull call spread at $2.60, now $1.60, down 38% – these got murdered but XLF was one of our key long plays and they flew for us this month. When you get a spread that drops like this you can roll both ends lower and here we can drop to the July $15 puts for + $1.60, which puts us $1.80 in the money and is excellent protection against aggressive upside bets on the financials.
- FAZ July $15 puts sold for $2.10, now $2.45, down 16%. This is why we prefer selling premium for coverage - so much less damage on the same FAZ ETF in the same month. The only difference is one side we bought premium and one side we sold it. If FAZ breaks below $16, I think we can assume the financials aren’t likely to run back down and this play becomes less desirable.