Terrible Tuesday – Duck this Fip!
by phil - March 15th, 2011 7:49 am
Now THIS is a panic!
Ordinarily, I would be very enthusiastic about buying but we were in an overbought market so we need to be very selective about what we buy. Once again we had a lot of discussion of the Global situation in Member chat and a special 12:21am Alert went out to Members and there was a follow-up at 6:52 this morning and, frankly, we don’t really have better information at 7am than we did at midnight, which seems kind of crazy with all these 24-hour news channels and the web and all. Instead of getting the facts instantly, it seems what we get is information overload where it’s almost impossible to separate facts from rumors.
I want to thank both Zeroxzero and Pentaxon for their excellent analysis of the nuclear situation in Japan yesterday – without their now-obviously accurate observations, we would have probably gone more bullish. We did do some dip buying but generally with well-hedged positions except for the $25KP, where we did take a risk on FAS that will bite us in the ass.
Once again, I apologize that it’s my job to get analytical when talking about a massive human tragedy but we need to step back and assess the situation. I have been suggesting that people, in the very least, text REDCROSS to 90999 on your cell phones to donate $10 to help with the relief efforts in Japan – 250,000 people read me each morning and that’s $2.5M and if you pass this along to 10 friends and so on and so on we can really have some impact so please, Please, PLEASE – when you are about to buy something today – think of something you can do without and instead send $10 so a child in Japan can get fresh water to drink and a blanket to sleep on. Thanks!
What an interesting day for a Fed statement (2:15)! We also have the normal Tuesday Retail Sales Reports, the Empire State Manufacturing Survey, Import/Export Prices, TIC Flows and the NAHB Housing Market Index – all important stuff but all overshadowed by events in Japan. So, what is REAL over there? In the morning alerts we discussed the status of the disaster and we have Members who are clearly better than I am at discerning the facts so we’ll deal with that…
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Technically Troubling Tuesday
by phil - August 24th, 2010 8:27 am
We finally blew our levels!
Sadly, it’s time to flip bearish until we can retake our watch levels at Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635. If we can’t retake at least 2 of them today, we may be seeing 2.5% drops back to Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619. Since the Russell already blew 619 we have to consider the possiblitlity of even a test of our 5% lines at Dow 9,690, S&P 1,016, Nas 2,090, NYSE 6,460, and Russell 603.
Fundamentals are great but once panic sets in the market is all about technicals and we just need to strap in and go along for the ride. We have been playing for a bounce off our 10,200, 1,070 lines but, now that we lost it – it’s time to flip bearish – I was wrong and that’s that, time to move on and make some downside money. Of course it will take more than a single day to give us a trend but the same way we don’t get very bearish until we loser 3 of 5 of our center levels, we don’t get bullish again until we break back over. Yesterday I sent out an Alert to Members as we broke down, saying: "We could very easily drop 250 from here on the Dow (2.5%)."
We added a fresh DXD hedge but we already had a proper hedge from Friday when the morning trade idea was:
A better way to hedge at the moment is the DXD Sept $27s for $1.70. They have a delta of .62 but can be transferred into a vertical if the Dow goes up by selling the $25 puts (now .20) for .50 and covering with the $29s (now $1) for at least .70, leaving you in a $2 spread for .50. That would be the ESCAPE, at the moment I like the plain DXD $27s at $1.70 until we get a real move back up.
That was an addition to the Morning Alert Trade, which was the DIA Sept $99 puts at $1.50. Neither the DXD or the DIA plays have been paying off so far but they did provide cover for our speculative bullish plays as we tried to play the line. Of course we take our major disaster hedges when the market is high (it’s cheaper then),…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.