OptionPundit

Category: Daily Report

  • Markets at Crossroads

    We are in for one of the very interesting times when dealing with stock markets. Yesterday broader markets closed above widely watched 200days moving averages. It was also a 90% volume up day but more importantly the volume was below average. So  is it a “trap” to convince everyone that a bottom has been formed? we’ll find out later.  For almost 2 months I have been mentioning 3 points to watch especially on Dow and those are 10.7K, 10.3K and Feb’10 Low and it doesn’t really matter what either permabulls say or permabears says, nothing major is going to be achieved unless either extreme is going to be penetrated. Oh well, if you would like to read more about permabears, here is an interesting read.

    What do I think? Don’t waste time in readings tons of media. Let Mr Market do the talking.

    Here are the scenarios-

    • We need to watch if markets pull back today, is it on heavy volume or thin. If it is later, chances are that it is going to move up.
    • If Market moves above then 10.7K will come into play and we need to watch if it is moving beyond that level or not. If not, then probably stage is being set for a giant Head & Shoulder pattern.

    So, no hard rain is coming until unless Feb lows are broken. We’ll take it as it comes. My bottomline, I am still trading options for both personal and OPN accounts but I am not buying any equity as of now.

    Here is latest testimonial from one of the current OPNsubscriber. Pls click here to read more testimonials-

    I’ve been OPNewsletter for a few months and my experience so far has been extremely positive. It’s an excellent tool to learn as well as to earn income utilizing conservative income strategies such as calendars, diagonals, and condor spreads not to mention frequent speculative trades that are not part of the official trades. Every trade is planned in such a fashion that all the entry/exit points and profit/loss targets are predefined with close attention to support/resistance lines, options greeks and the overall fundamental and technical pictures. All the positions are closely monitored and timely adjustments are made upon necessary. My understanding is that OPN reports returns based on the margins employed and I think it’s totally fair. Although I admit I need to do a better job using the monthly tracking sheet. OPN promises to deliver 5-7% each month excluding commissions and it usually delivers far more than that in my opinion. I’ve shared my OPN newsletter experience with a couple of close friends and I will recommend it to people who, I think, are well suited for. OPN offers an excellent value to those who are willing to put enough time, effort, discipline, interest and dedication necessary to become a winning trader.

    Dan Danshi
    Seattle, Washington, USA

    Thank you Dan. I appreciate your kind words.

    Pls click here to read more customer testimonials. If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    Profitable trading, OPКартини

  • An Interesting Wednesday

    So far, past two days’ rally effort appears to reinforce that this is more of a 2-5 days technical rebound that occurs post a 90% Down Day (Friday’s sell-off). Today, Dow is rallying over 100 points and other indices are not too far behind.  It remains to be seen if, post FOMC announcement, markets can sustain these levels.

    There is apparent lack of volume over this week’s two sessions which is well below the sell-off volume on Friday, another indication suggesting that distribution days are increasing. All the major market indices dipped below, then kissed and are now bouncing above the 50days EMA. The short term resistance levels were at approximately 1060 for the S&P 500, 2080 for the NASDAQ Comp, and 580 for RUT. Only Dow has managed to hold above its short-term uptrend support of 50Days EMA.

    Uncle Ben hardly has many choices to please markets to run north on steroid, post announcement. He will be keeping interest rates unchanged and market participants know that. How he views future will be evaluated critically. If he is keeping rates low again too far in the foreseeable future, the economy is still in poor shape. If he hints raising rates, markets won’t like it either. Bottomline, I personally have a bearish bias. Hope this is not one of those “Buy in anticipation and sell on News” days.

    But in the end, there is always “what if”, what if markets rallies. Based on my past experience with FOMC announcements, markets tend to be very volatile during that moment. Pls trade very carefully during pre-n-post announcements and be very careful not to make decisions in haste. If you can’t avoid trading during that time, better, develop a “what if” risk management plan in advance so your actions are driven by a pre-planned game-plan vs emotion.

    Profitable Trading, OP

  • Honey, Show Me the Money?

    So we had a wonderful > 1% rally yesterday? Isn’t it? Then why smaller cap cousin Russell 2000 (know as RUT) closed lower? What about the Trains, what happened to the Dow Transports? Why are they not moving with the Dow Industrials if everything is fine? or is it the actual economics of Transports that is in shambles. Check out the last update from Bureau of Transportation Statistics (BTS).

    Well, who knows it might be revised to a higher number next month. You may want to read this to see if this is really the end of recession as we know it.  Or how about this? UK’s economy declined 2.4% vs 2.1% forecast. Well it may sound only 30 basis points difference, is a huge 14% off and when you multiply that by $2.3 or so trillions (UK economy) that’s a lot of billions !!

    If this is a bull market, then it gotta be different from the past century. Where is the volume? Where is the demand intensity? Where is the stock supply depletion? where is the value and the yield that is usually associated with bear market bottoms?

    I wonder if the complacency in the VIX suggest calm before the storm. More questions than I have answers for. What do you think? Any reasons why you think this is a bull market?

    We’ll know more in the coming days as best quarter in a decade comes to a close, and so are the bonuses..for the time being.

    Food for Thought.

    Profitable Trading, OP

  • Asia Rallies on Upbeat China Industrial data

    Nearly 2 years back I wrote about a unique trading strategy- “Time Zone Trading Opportunity” where I provided examples linked to US, Singapore, Japan, Indian stocks markets and so on. The strategy still holds true and I have been using it quite successfully. However, one thing, indirectly has changed since then.

    Who is leading whom? 2 years back it was pretty much clear that The US was the leader i.e. whatever was happening to “US market close and US futures”, the same appeared on Asian and European markets. While this is partly true even today, I have noticed that US futures are now fueled by what’s happening in China.  Asia, particularly South east Asia, is surely following China’s movement.

    Just today, when US stock futures were lackluster and Asian markets were behaving so so, Industrial production heads-up, posted by some Chinese newspapers, fueled a bull. The Hong Kong Market jumped nearly 4% on the upbeat data and this tide lifted almost all the Asian boats as well US stock futures.

    I haven’t had chance to analyze the data yet. However, I shall surely encourage to peel the onions. Get into the facts and figures to review if it is the “fundamentals” or “headlines” that are driving markets higher. For my personal perspective, Markets internals aren’t improving and buying has almost come to a halt. In such an environment even a slight selling can trigger panic…my usual thought thought “Forget the past you lose one of your eye, live in the past and you will lose both” (It’s not mine).

    So let the facts and figures be your guide.

    Profitable Trading, OP

  • Is It Another Locomotive?

    I shared my thoughts time and again, about the TARP, PPIF and a lot that’s going on. You may wanna read this or this one on Banks’ windfall to review where is the interest of Tax Payers? Is the “creative accounting” meant to fulfill self-interest only?

    Here are key points I would like to bring to your attention-

    Economic Data– We are receiving all the wonderful data that convince, in general, that the “rate of decline is slowing” and it is, generally, perceived as “growth” otherwise what else could really justify such a quick turn in “confidence” also reflected via sharp market runs particularly in the emerging markets where stock markets have almost gone ballistic; over 50% in many cases. (Check out- “O-Benti trio might be winning” ). Step back for second and think of it- If, even after trillions of dollars we can’t see “green shoots’ then the whole world is very serious trouble. We will see jumps in economic activities  driven by massive spending.  The question is, is it sustainable? Is it really improving the fundamentals or just replacing spending via printing press? has the private borrowings jumped, etc.?

    We get the data, and a lot get revised downward the next month; but by that time who really cares. April Personal Spending -0.1% vs -0.2% consensus; prior revised to -0.3% from -0.2% (that’s by the way 50% downward revision); Factory orders for April rose 0.7% on a seasonally adjusted basis versus a consensus estimate that called for 0.9% increase. The prior month, meanwhile, saw a big downward revisions with orders off -1.9% versus an originally reported decline of -0.9%!!! New orders for manufactured durable goods increased 1.7% in April, which was down slightly from the previously published increase of 1.9%. New orders for manufactured nondurable goods slipped -0.1%. Overall shipments decreased -0.2%, marking the ninth straight decline. Unfilled orders fell -1.2%, which was the seventh straight decline for that category. Inventories were off -1.0%, which was the eighth straight drop there.

    An interesting insight on commodity surge, hopes and reality. And the data is out Crude up 2.87Mb, the Oil is coming in, is it going out? As of this writing Crude futures are down almost $3.

    I don’t participate in dooms day kind of theories and I sincerely wish for healthy economic recovery sooner than later, and I wish all the efforts that governments around the world have put in works out wonderfully. I, however, worry for the retail investor who might be trapped in bear rally, if it turns out to be (which so far I think is, but I may very well be wrong as “this time may be different”).

    Be careful though, the larger the rise, harder the fall. So keep your parachutes ready for just in case. I hope “Green shoots” or call it “light at the end of tunnel” is not another locomotive.

    One can’t buy his prosperity through printing press only. Take care and trade carefully, we shall not be offered a “bail-out” should something goes against our portfolios or hard earned trading capital..

    Profitable Trading, OP

  • Is It a Follow Through Wednesday?

    A few days back I mentioned about “show me the volume“; It was no different yesterday in spite of such a huge market rally. And even after what might look like a resumption of the bullish trend, it was no way closer to a 90% upside day for NYSE. So handle with care. Pete of option-1 suggests not to buy into this rally. We’ll see if markets can follow through yesterday’s gains to push it to higher levels. Be on the lookout for volumes.

    The coppock curve has stopped declining, for the time being, and now flattening to turning positive.  This is has been one of the most accurate indicators to predict market’s turn but do note that this is a lagging indicator and often recovery might have taken place before it gives a signal. But more often there is room for further play once this gives a signal.

    The US economy will begin to expand next quarter, according to 74 percent of economists in a National Association for Business Economics survey. Key Highlights-

    • The NABE forecast panel expects a further decline in economic activity during the second quarter, making for the most severe economic contraction in over half a century.
    • The near-term weakness is largely due to a sharp retrenchment in business investment.
    • Rising government spending will provide vital support to the economy, as the only major expenditure area posting positive growth in 2009.
    • A modest second-half rebound in real GDP is still expected.
    • Growth in 2010 is slated for a return to near its historical trend, with real GDP rising 2.7% on a fourth quarter- to-fourth quarter basis.
    • Labor productivity remains impressive and is expected to improve.

    Government Motors (GM) is about to file for bankruptcy. GM bondholders had until midnight to trade $27 billion in debt for a 10-percent ownership stake in the reorganized company that U.S. officials have said could emerge from a quick trip through bankruptcy court. Markets hardly seem to bother with the “potential” news. Gone are the days when a move in GM was a move for the America, or at least for the stock markets.

    Monsanto (MON) is down almost 4% in pre-market. It may find support at around $80. It may influence other agrochemical stocks i.e. POT, AGU, etc. Watch-out for weakness as well as weakness or strength in US$.

    Trade carefully, also be aware of window dressing,

    Profitable Trading, OP