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Tuesday, February 2, 2010

Market Thought... a coin

There are two sides to every coin. The two sides of this market are no different, just a tad more complex.

I have made the case that the market valuation is not optimistic when recent earnings are taken into account, and yet have given the purely technical view of the bearishness that can potentially bring the markets to their 200SMA.

To put it bluntly, it is a mix signal and its confusing. That confusion can be annoying.

So its time to stop being annoyed, and gain clarity.

When we look at this SP500 chart, with the July as the starting point, there were clearly buy signals.

Buy signals were triggered around Aug 17, early Sept, early Oct and late Oct/early Nov.

These were triggers because for the dynamic of this rally, the fear level was too high at those point.

However, look at mid Jan. There is no inversion yet, the fear has not triggered a bottom. IMO, we need to see a SP500/VIX inversion to trigger short-term bottom to this weakness.

Based on this, we need to see more weakness. BUT, when that weakness comes, I will enter heavy. As that weakness will bring individual stocks to levels that can not be ignored.

My fundamental thesis has not changed. When I see the inflection, I will go heavy in IBM (120 jan 2011 calls), AAPL (190 jan 2011 calls) and GOOG (520 calls).

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