US markets suffered big losses last week. The DOW was down 3.3%, S&P 500 was down nearly 2.5%, Nasdaq was down nearly 1.5 %. This was OPNewsletter’s first week since we opened our July’08 portfolio and including commissions OPN’s is up+4% and x-commission it is up +5.8% for the July expiration cycle. We opened 5 mini-portfolios and all are positive in spite of major market falls in the week that just passed. And guess what, we haven’t made any adjustments so far to any portfolio. Excluding normal income trades, I also shared directional bonus trades like GLD (+68% my returns, OPN subscribers have multiple points), POT (+50% mine), RTN (+25%) and GS (which was closed for -30% intraday). If you would like to subscribe to OPNewsletter, pls sign-up for the waitlist here.

Dow was down nearly 3.8% for the week and it closed below 12K, a key psychological support point from a chartist perspective. It is not very far from the March Low. All the 30 Dow Components closed in red yesterday. And to add more pain, the downward move cam on above average volume. Earlier it had touched 200Days moving average but since then it has follows a pattern one week up, next down, another up, next down and that has been the case for the past 7weeks. Where is it headed, it tough to make that call. It may see a bounce next week. RSI is just about to touch the oversold level from daily perspective. However, if you take a weekly perspective, the story is different. RSI is not even close to oversold area, simply saying that there is room for further fall and 11,670 may work as an interim support while DOW work out it’s oversold region.

Other things that you may want to check out is that “Number of new lows” on NYSE are rising (though slowly), Number of stocks above 50days moving average or 200Days moving average are also declining slowly. These are not good signs and one needs to be really careful while interpreting these.

I think we are about to see a correction in commodities (x-oil, as Oil is now determined by several factors) and it may be possible that once June is out, we’ll see a retracement in Energy sector as a whole. I may be wrong here but the sense that I am getting for these sectors is of “Top Heavy”.  I am positioned for DBA and DBC bearish strategies. But I am quite flexible in cutting losses the moment I see a further surge in the commodities. And other contrary thought is that we are probably just a few months away in seeing turn around in financial as well as Banking sector as a whole. May be, November. There is amazing resilience in the Transports, specially Rails. Energy (Oil, Oil Services), Coal and Mining has been trending up and up.

International markets are also falling apart. Since the start of the year, India is down significantly, China is down nearly 50%, Japan’s Nikkei is down and so is London’s FTSE. RBS just warned for a 300 points drop in S&P500 in next 3months.

So here we are, at the crossroads again. What to do next? Attached is a “sector rotation” chart from “StockCharts“. They have pretty good charts that you may want to check out. I think value is slowly emerging in Banks and Financial sectors, Commodities may offer short term pull back opportunity, Inflation is riding high so I’ll hide in gold, trains and shipping industry are doing good but if goods are not going to move then why will they run so watch out for world trading activities via Baltic Dry Index and consumer spending. If corporate earnings are not going to go high, I don’t see a reason for Tech to win either. No matter who is the next US president, govt spending needs to take place and therefore defense may offer another stable opportunity. Home and construction-they need to fix their foundation first before we can think of any castle above that.

Whatever you choose, be careful and be protected as much as possible. I can’t think of any suggestion if a black swan event happens, but yeah, try protecting your hard money in case markets move in either direction by a combination of calls and puts and/or by having a right assett allocation mix so one’s effect nullifies the other. Oh by the way, you may also choose to join OPNewsletter if you are looking for just 5-7% per month.

Profitable trading, OP

Are you ready for 300 points fall of S&P 500 in the next 3months? or more? At least that is what Bob Janjuah of Royal Bak of scotland thinks. According to him -

“A very nasty period is soon to be upon us - be prepared”. He further stresses that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

And as the outlook is grim, and so is the timing. It created shockwave amongst the “learned” ones and it’s “hot of the press” news in almost every financial portal. Bob became a star after his grim warnings last year about the credit crisis proved all too accurate.

Let me remind you this famous quote-

“Ignore the past and you will lose an eye. Live in the past and you will lose both of them.” -Friedrich Nietzsche

There was another bearish outlook by Morgan Stanley some days ago. I think his timing couldn’t have been better. It’s after the rights issue of RBS and oh yeah, haven’t we been seeing marketing falling apart by nearly 1,000 points or so in past few weeks. Every now and then, we’ll hear some prominent or not so prominent analyst will come with bullish or bearing predictions and someone gotta be right and “that one” will be star. Be prepared, ah that’s the best message anyone can give. But how as an individual you can prepare? Stay on sidelines and remain in cash. Not bad either.

Keep your parachute ready? are you ready for a fall? I am not. I am not ready for a sudden fall that might happen overnight and if I don’t have time to react by the time market opens the next morning. I am ready for a slow and steady fall, even though there are “dead cat bounce” along the way.

I shall share my thoughts soon, meanwhile why not share your thoughts how do you want to protect against the fall, if any,

Profitable trading, OP

I yesterday highlighted Raytheon and Coca Cola. Well it really didn’t touch $56 as was mentioning but then i placed my orders when it started to bounce from $57 area. A +25% profit for 1 day holding. Congratulations to all those who profited.

Profitable trading, OP