Market Thought... ?

At the moment I am not getting clear signals. I keep hearing around 1100 is a strong SP500 resistance, but I do not know where this is coming from. (Literally I understand where it comes from via the charts, but the market dynamic is not the same as the previous year, let along 5 years ago, so I do not subscribe to it.)

My market thesis has not changed from before. I am waiting on the TNX to provide a hint as to what is going on. It is still stuck in resistance, and I do not think it has the juice to breach the negative trend line. Although it may breach the 62SMA in the next two weeks or so.


In the very short term, the market looks to want to consolidate a bit. The SP500 may see its 62SMA. With earnings out of the way (or an excuse to sell), and enough big boys believing 1100 is a resistance, the market may come in.



But for the mid term (ie until the end of the year), the pattern of the market should not change, unless there is a policy change from the Fed or Gov. that merits a destruction of the market uptrend.

So, if the market do decline in the next two weeks or so, I will be entering GS Jan call options. However, I am watching indicators that may suggest rate hikes very carefully, and act accordingly (as I stated in previous 'Market Thought' posts).

One word on Apple...

nice.

Nice report. Nice trading... just, nice :)

Needless to say, I took profits.

Playing AAPL

I will be playing Apple through earnings Monday. I currently have a position in AAPL call options due to last weeks decline. While, there has not been a heavy decline, the stock has consolidated, maintaining a tight range and still in its uptrend.


Below is how I will play AAPL Monday and Tuesday...

Monday:
1. If the stock declines Monday morning, I will add to my call position.

2. If the stock rise Monday morning, I will enter the report w/the position I currently have.

Tuesday:
1. If the stock declines after the report, IMO the most severe decline it will see is 175 to 180. (I am not expecting a breach of 180.) I will enter more long positions w/ a decline to 185 or so.

2. If the stock rises after the report, I will wait to unload the current position until the stock is overbought. (If the report is pretty good, I would not be surprised to see AAPL break 200.)

Market Thought... overbought

Overbought conditions are across the board. Its very impressive, especially with such a high momentum. Very few things are not, and those are the stocks that I have kept and am keeping an eye on. This includes BKE (added today, my chart was screwy yesterday but I doubled down on the correct support), SQM, PWR and Natural Gas is seeing its pull back.

Due to the capacity issue with Nat. Gas I was waiting for a collapse, most likely due to the physical dumping of the commodity causing the price to decline.


With this, I will probably play CHK before Thursday. (keep in mind I am becoming a dollar bull, but Nat Gas should not be moving w/the dollar at its price is locally placed, not like crude)

Because of the massive overbought conditions, I did start to protect myself via shorts on MCO (moody's). It is very overbought, considering its crapy situation, and hitting some major resistance. IMO, with a declining market, MCO's decline will be amplified. If the market goes up, MCO's upside should be muted here.



Now, with respect to the market, I am very close to go long the 'king' dollar. (stop laughing :)

I am not crazy, just like I was not crazy shorting the hell out of oil at 140, or selling my entire portfolio except the market short the Thursday before Lehman went under.

I will enter an initial position when the UUP hits around 22.25 due to its support.


I will then enter another position when the 10yr yield breaks the 62 sma upward, unload all call options, probably sell most of my stocks and start going short the market.

When the yield breaches 3.7 (the down trend), I will go very heavy the UUP and short the SP500 for the 'shock' play of rising rates.

If the yield decides to consolidate here, before breaking upward, I will enter a position in TBT. (but only if it consolidates at these levels)

Market Thought... what recession?

Intel and CSX hit home runs. A clear showcase of strength, and the futures are reacting to them.

If this earning season continues down this path of strong beats, my thesis from my previous 'Market Thought... be prepared.' post is very relevant, and I am paying close attention.

Trade - BKE

Just an FYI... BKE has been taken down today. The only reason it went down was due to the special dividend pay day. (Purely for technical reasons.)

I purchased here for the trade. It usually bounces off the 20 sma while in a strong rally.

BKE has been issuing consistent special dividends for some time. So much so, that BKE dishes out about 7% a year annually. It should be no surprise as this company has such a high ownership by insiders.

Based on the frequency of special dividends, BKE should be valued more appropriately. But instead, it consistently trades between a trailing PE of 10-17. For a stock that typically yields 7%, and grows as nicely as BKE does, the multiple is simply too low. (But I am no crusader, just pointing out the patterns.)

Trade - GS

Everyone and their mother (via the media outlets) are distributing the amazing, ground breaking story that the bearish of the bearish has down graded her only 'buy' rated stock... GS.


Why is this so worthy of mass distribution is beyond me. Since it does not makes sense to me, I used this to enter Jan call option in GS.


GS is the direct beneficiary of a stable bullish market. High frequency computer trading does extremely well in the current environment we are and were in. So I am a believer in the whisper numbers of +5.00 eps for the quarter. (Not to mention the other positive points on the quarter regarding fixed income, that she herself mentions.)


Due to the perceived negativity, GS is now nicely consolidated and currently maintaining its high momentum uptrend via the 14 sma.




If the 14 sma is broken, GS will need to break the 175 level (IMO) to truly have a break down. However, I do not think it will break the 28 sma. I am actually having a hard time seeing it break the 14 sma due to the belief in the whisper numbers.