OptionPundit

Tag: market bottom

  • 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

  • Tug of War Continues

    Here is what I mentioned about last Thursday rally to OPN subscribers before the market open last Friday, rest is history-

    Overall volume was only 3.7 billion yesterday and upside volume was only 62.8% of up + down volume. Furthermore, breadth was very weak — this is a weak rally and I don’t buy into it….

    What a day today! Huge up rally that lost half of steam by lunchtime already. S&P still couldn’t sustain it above 1,300, let’s see if it can by today’s close. The VIX didn’t give-up much even though we saw a big rally!! The only thing that comes to my mind, be very careful in this environment. I think somewhere ahead we will see a major panic selling to wash out the weak traders from the markets, value will emerge that will drive bulls mad. I am staying on sidelines and taking this time to learn about past recessions and screen list of the stocks that will make a major move once markets come back on track. Where is that bottom, I don’t know. But I think when it happens I hope to have a vague idea that a bottom is in place and how to benefit from that.

    For OPNewsletter, after a rocking Aug’08 when it lost nearly 13%, first time ever in OPN’s history, we are up again +3.3% for September cycle. We have invested 38% of 10K capital and have 62%capital that can be employed should we see value emerging. I usually target to invest 60% of 10K.

    China- According to Bloomberg, Ten of 11 Summer Olympics host nations analyzed by Morgan Stanley economist Stephen Jen saw growth and investment slump in the year following the games; the only exception in his study, which stretches back to 1956, was the U.S. in 1996. Government officials in China, whose expansion was already slowing before the Beijing games ended last month, are determined to avoid what Jen calls the “Olympic Curse.” China has already eased lending restrictions and halted an appreciation of the Yuan that was starting to pinch exports. Now, after four straight quarters of decelerating gross domestic product growth, the government is considering a fiscal stimulus of as much as 400 billion Yuan ($58 billion), according to economists and reports in domestic news media.

    Australia- the commodity and natural resources kingdom’s central bank cut its benchmark interest rate for the first time in seven years amid signs the nation’s $1 trillion economy is slowing. Housing is slumping as well. The story isn’t different in many other key markets.

    Do you smell deflation?

    Profitable trading, OP