Weekend Wipe-Out, the Second Wave!
by phil - January 29th, 2010 5:57 pm
Another week another 100 points lower.
Yep, that's all it was, we lost all of 100 points more than last week, when we fell from 10,725 to 10,172 (553 points) and this week we dropped from Friday's Dow close of 10,172 all the way down to 10,067 yet you would think the world had come to an end to hear the media and the traders freaking out. I'm not going to try to explain it, I can't. Maybe it's because going into last week we were very bearish but, starting on the 22nd, we let ourselves finally get a little more bullish AND THE MARKET BETRAYED US!
How could the market not zoom right back up? It always zooms right back up, doesn't it? As I said a week ago Friday: "Boy, when sentiment shifts – it REALLY shifts!" My closing comment on Friday the 22nd was "Back to cash but leaving disaster hedges, which are looking great now as this is shaping up to be some disaster" and our weekend "Global Chart Review" showed us to be at some very key inflection points, letting us go well prepared into this week:
Manic Monday Market Movement
My Jets lost on Sunday so I was not in the best of moods on Monday. My outlook that morning was: "We still have our disaster hedges in case things get worse but, on the whole, we’re expecting a 1% bounce in the very least off our 5% lines (anything less will be a bad sign)." We were pretty much at the 5% rule on Friday's close so we focused on the bounce we wanted to achieve in order to get more bullish.
I noted that the levels we were looking for were not exactly 1% retraces (see post for reasons) and our target retraces were: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625. What were the highs for the week on those indexes? Dow 10,310 (+10), S&P 1,103 (-2), Nasdaq 2,227 (+2), NYSE 7,098 (-2) and Russell 621 (-4). So that's a net of +4 points out of 21,355 points worth of predictions on the retrace, accuracy to within .019% - not a bad showing for our patented 5% rule.
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Weekly Wrap-Up – 10,000 or Bust!
by phil - October 17th, 2009 8:27 am
I think I was right on the money last week when I said:
The bar for corporate earnings is still set at very easy to beat levels yet, like this limbo-playing child, when they announce their beats of very low expectations we’re going to get all excited and tell them how great they are doing. The problem is, these are not kids who we hope may grow up one day to be President or CEOs of major companies. these ARE CEOs of major companies and they are being paid top salaries for top performance and we, the stock purchasing public, are paying top dollar for what should be SPECTACULAR performance, not beating 75% off last year’s earnings by a penny!
In that post, I rattled off a list of stocks that seemed overpriced to me: AMZN, BIDU, AM, PALM, NFLX, PCLN, URBN, UHS, CERN, CREE, GMCR, CY, SWM, TRLG, BKE and you would have had a fabulous week just shorting those stocks as only NFLX, URBN and CREE stayed positive. Now most newsletter writers would quit right there and make a giant ad saying they were 12 for 15 on the week but, as our members know, THAT'S NO BIG DEAL AT PSW! I'm just going to remind members that they can refer friends to FREE advice like that in our trial newsletter and earn 20% or more off their subscriptions for doing it.
Picking stocks is easy but a few percent here and a few percent there isn't much fun is it? On that list, the two we attacked were AMZN and BIDU, both of which ran (in our opinion) way too high AND had very liquid and very overpriced call options that we could sell to collect premiums. AMZN is a staple short in our $100K Virtual Portfolio and we had set up BIDU the week before, selling Oct $420 calls for $8.30 and the Oct $430 calls for $7,20. While both went higher on Monday, the fact that we had a plan for managing the trade kept us from panicking and, thankfully, Monday was the only day those positions gave us trouble and both finished the week worthless (100% profit for us).
Adjusting our positions kept us busy this week as we STILL have a slightly bearish…
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Thrill-Ride Thursday: Jobs, What Jobs?
by phil - October 15th, 2009 8:12 am
Yesterday was very hard for us.
Our theoretically conservative $100,000 Virtual Portfolio dropped 6% in one day as we had a farily bearish position into options expiration that I stubbornly refused to adjust this week. Surely, I thought, after running up 250 Dow points from Thursday, 10,000 would act as some kind of resistance? We're also up a neat 500 points for the month of October so that's our 5% rule and to not get a 1% pullback, even in the most bullish of markets, is very rare indeed.
So we stayed bearish yesterday and got crushed by the AMZN $90 calls we sold as well as UYG calls we sold and our PSQ calls we bought for protection got slaughtered as the Nasdaq flew up not 5% but 5.5% for the month and up 6.2% from it's October 2nd low. While we are disappointed, we're not terribly concerned as we're only going to roll the calls to November anyway and I did promise the members that, if we hold our breakout levels for 2 closes, then I'll be shifting more bullish. I've been trying to identify more bullish positions this week but our mix has still tended bearish as I'm just having so much trouble buying into this rally.
In yesterday's Member Chat, my comments on the current situation was:
I do wish we were more bullish, this is a very smart group of people and we’re pretty bearish but so is the general investing public or there’d be volume to this rally. I have a hard time ignoring the fact that 600,000 more people lost their jobs this week and, even if it’s "only" 500,000, I still think that’s not really a sign of a healty economy. I think the REITs are off in fantasy land and I think so is the government, who cannot keep borrowing money at these low rates. The dollar has dropped 25% of it’s value since March so the market is only 25% ahead of the currency fall which means a flight back to the dollar, which could happen very suddenly if an EU nation like Spain collapses, could send our market down as fast a 9/11.
That being said, we have no choice but to follow the technicals and now that we can look at nice, easy support levels like Dow 10,000,
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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. She manages the site