OPNewsletter and Markets Ahead

What a week. US Markets almost collapsed, bounced and then again dumped in the last 6minutes of trading of last Friday. The news of the last week was and still is, Nikkei, which is at 25 year low. As of this writing, Nikkei closed, again, down by another 6.3%, talk about the fears, bears!!!

While losing less than markets comforts, there shouldn’t be any complacence in protecting trading capital. For OPNewsletter Nov’08 portfolios, We did so with our miniportfolio and have locked our loss to 2.75% only regardless of the extent and direction of the US Market. We are down 3.81% x-comissions and -5.2% including commissions and we have over 95% uninvested capital. It is a good situation to be in based on the current market scenario. We have few weeks till Nov expiration and I hope to convert these trades to profitable one while funding other trades at the same time.

Moving on to markets, at current levels, markets should be rising but those are not. The fact that this is one of most oversold level (based on simple MACD and RSI), it is bound for a rebound, but so far rebounds have been weak and weaker. Just look at the attached chart for the sickness of the market, from a MACD standpoint, it is the most oversold level including the great depression (based on prophet charts) and from RSI standpoint, this is the 2nd most oversold level (very close to 1970s bear market) including great depression

Even though this is a bear market, I have not yet seen the “Panic”, real panic to sell which generally precedes bottoming, and the fact that most are saying that this is bottom, also makes me skeptical that we haven’t yet reached the bottom. Bottom is generally the point (for a massive bear market) when there seems no future in equity, there is no hope, news is all gloomy, no one cares for fundamentals, media is overblown with scary news…But right now, there is still hope and a plenty of hope in the media and markets….

 Above charts projects a real big picture for a bull market that started from 1932 and based on this we have dropped below the 8,790 fib level and the next level will be 7120, maybe, that’s the point this market find support. If this is broken…let me not write what is about to unfold…

Trade very carefully and don’t yet be fooled by market rallies…capital preservation is more important than missing a potential opportunity…we, the option traders have plenty of opportunity far more than stock investors, provided we can protect capital for good days, scale-up investments, hedge and better manage the risk, and run a properly allocated portfolio…so it really doesn’t matter much whether or not it is bottom, what matters is “stability” of the markets…which is not the case currently…

Of course this might be bottom, might be greatest of all times for stocks, might be blah blah…Have fun but be serious, this is your money, not warren buffett’s…he knows inside the companies, he can twist management’s arm, CEOs of those companies die to dine with him, while at least me, the average Joe, haveno access to what goes behind the wall street except to make some knowledgeable guess…

Profitable Trading, OP



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