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






3 responses to “Tug of War Continues”

  1. NWL Avatar

    $RVX at 27 now, upper bollinger. One of Sheridan’s adjustment lookout.

  2. OptionPundit Avatar

    NWL, can you please share more what adjustment are you referring to?

  3. NWL Avatar

    PS. IC should now have 4% of margin as insurance on put side.

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