Is it Celebration time for Bears?

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Last week’s stock markets’ actions must have pleased Bears, as they are breathing in fresh air now. Markets did react in a pretty much “pundit way”. It touched 13,774, rested for a day and then touched 13,511 the next day. I am not a good chartist, but when I do see simple signs, I share. Was it very difficult to anticipate this action, not so much, check out the earlier post. One thing that has changed now though is my perspective. I wrote that I am with bulls and won’t change until DOW closes below 50day MA, and guess what, it did close just below 50day moving average. Good and bad! Good as Dow is now reaching oversold region, bad, it has another ~400 points to fall before any strong rebound (kinda Aug 16th action). If it’s going lower any further, it’s going to test a full retracement to 38.2% fib which is also a 200MA (~13140). So be careful!

Call it luck or missed opportunity, I was not around on Friday as I was engaged in shifting my house. So damn tired that I really didn’t take any trading action. But when I opened my trading platform, the picture wasn’t so nice. 1 day alone wiped out full 6% point gains from my Nov’07 portfolio.

One thing that worked very nicely in my favor was, closure of October portfolio well before October expiration. Old time subscribers know why I give away theta gains of the last fews days and either roll or close portfolio.

October was a record month for OPN. I added three speculative sections, simply because those 3 had great (simple) set-ups for bull run. Overall October delivered +57.36%, a record so far. Here is a recap of October plays, all posted on the forum’s OPN section (access not opened):

Speculative OPN:

  1. CAT -20.4%
  2. EJ +122%
  3. SNP+93.6% [This was a speculative trade for 120 call, don’t say I was out too quickly. I have lost appetite for 1000s% gains now :)]

Income OPN:

  1. CAM +53,1%
  2. OIH +34.3%
  3. SPY +16.9%
  4. GDX +41.8%
  5. COP +13.1%
  6. FCX +47.5%

One note for the old subscribers, note, everything is new except OIH. In Oct’07, OIH met my selection criteria and hence I added it, but all other were new. I was out of OIH from October portfolio before Friday, simply because SLB was announcing earnings and OIH contains 11.86% value in SLB. I think it was a good decision decision as OIH fell >6% in a single day, a very big move of OIH!

Moving forward, IV has risen, same scenario what it was around Aug 16th. Seems history is repeating itself, so, again I am keeping cash ready for 1) Good plays that were beaten last week and may weaken even further and b) We will soon get into traditional “feel good” months. I will be a “speculative player” at the first convincing sign of bull’s return as I am fully invested for Nov’07 income portfolio to deliver my +6.9% month target (to double capital every year).

A tip for earning players, next few weeks will have earnings from energy/metal/infrastructure players. Most of them are in bull run, so learn from SLB and play accordingly. I suggest with a bearish bias because missing earnings for any of those bulls will be disastrous for their price action. Before I wrap-up, as Cramer says, there is always a bull market, you need to hunt it for today, for this month, for this quarter !!

Gold continues to shine, and if (and a big if) Fed cuts rates again, even better for the shining metal,

Profitable trading, OP



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2 responses to “Is it Celebration time for Bears?”

  1. Dayton Avatar

    Are you going to start your service for subscribers anytime soon? Please let us know, so we can make money.

  2. OptionPundit Avatar

    Dayton, there are few big changes that I am currently going through and that’s why I am hesitant re-starting the service. I expect JFM’08 period probably be the time when I can “write” more and hence will re-open the service. Thanks for your interest in OPN. When I re-open, I’ll inform via blogpost.

    Profitable trading, OP

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