This Market Requires Caution

Dow Above 11,000 (.DJI), S&P500(.INX) above 1,200, Nasdaq-100 (.NDX) above 2000, Russell 2000 above 700; no resting just plain simple advance for the past 6wks that too when markets have been continuously in a overbought state; Buying interest was intense and demand was even stronger on the NASDAQ, which probably recorded 90% Up Volume of total Up/Down Volume, qualifying as 90% Up Day. Wow, what a rally! To me it seems more like panic buying that occurs before any pullback, but who knows; it’s been happening for long time. Remember the old adage “The market can remain irrational longer than you can remain solvent.” – John Maynard Keynes

Certainly markets staged a strong rally after a dull period of past few days. Strong rallies (or pullbacks) are not good friends of income traders. For OPNewsletter (April’10), non-directional trading, we were already out else a huge chunk of profits would have been taken away by the markets yesterday.

Did I learn any lessons from the 2007-08 meltdown? It is that “It’s my money and “to protect or not protect” is my responsibility“. Sounds new? Well we learn it time and again, but sadly, in the “hindsight”. I am becoming risk averse again but I also don’t want to fight with the tape. Thus we opened some VIX Bullish Call vertical positions yesterday. The assumption behind the VIX trade is that we are nearing a short term pullback. However, we also know that this pullback may not materialize and hence it is being treated as a speculative play.

Google (GOOG) and Intuitive Surgical, Inc.(ISRG) are the two big names that will be announcing earnings after market close on Thursday. If you would like to play earning, here are 4 different types of trades that I opened on Google. Read on to benefit from those.

Time to trade carefully again,

Profitable Trading, OP







4 responses to “This Market Requires Caution”

  1. […] rally when markets are overbought for 6 continuous weeks; and shared my bias for bearish stand via $VIX bullish spreads.  Those OPN Members who followed it generated about +28.5% returns for 2 days holding. It could […]

  2. […] I mentioned earlier, current situation requires caution. The incremental gains are going to be tough going forward and at times we may observe abrupt pull […]

  3. […] might have noticed my cautionary tone over the past week or so which I started by saying that this market requires caution and Little Johnny’s are coming to the market who are usually the late comers to the party.  […]

  4. […] You might have noticed my cautionary tone beginning Mid April when I started by saying that market requires caution and Little Johnny’s are coming to the market who are usually late comers to the […]

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