Feb 26th – Recap. Fundamentals, shundamentals

The Funnimentals will now have to test real overhead resistance.

The market is determined to move up to previous highs and the 50 day MA. Fortunately, yesterday I exited several of my shorts. AXP, SDS, COF, USB, WB as I was going to cut and run at the first sign of consolidation break. Good thing. Although, I didn’t get out at the absolute best price, I did save about a 1% from making an early break.
Pulling some cash off the table also freed me up for a few different type of entries.
Speaking of cash off the table, I diversified my holdings. I bought into a new project at Breckenridge at pre-construction pricing. True Ski-in, Ski-out, which is sparse in BreckenridgeGRAND LODGE at Peak 7 Wow, this place is going to be incredible. I have seen the master plan for the base of Peak 7 and 8 and Breckenridge. As real estate investments go, I am looking forward to this place. One major benefit for me is day use. I will be able to bring my students there for lunch, and have day use privileges. i.e. pools, hot tubs, parking, fitness center, inexpensive bonus room nights and other benefits of deeded timeshare and Gold Point Lodging.
The next door neighbor is Vail Resort’s Crystal Peak Lodge. CP is 100% owner purchased, with prices ranging from 800K to 2.2 Million +. The 46 units were sold out in about 45 days. Let’s just say, I paid a very small fraction of that for my place. And we received a few 90 minute massage certificates at the Grand Victorian Spa for taking the tour. If you would like to set up a tour or inexpensive lodging through Gold Point Lodging call them @ 888.783.8883. Tell them an owner, Jonathan Lawson sent you. It gives me some type of credit towards ‘Grand Lodge” bucks. I will buy you lunch with them.
Anyhow, that is what I am doing with trading profits. Now back to growing the portfolio.
The SP is at a critical level. Although, I think it is nearing a perfect short.
We are not only near a W4 doubletop, but we also have a 50 day MA (which is below the 200), for some technical resistance. Not only that, but volume has been below average, and the Oscillator has finally retraced more than 90%. EXCELLENT. And although Market Fundamentals have been poor, the market has risen on light volume. I am willing to make a stand, especially if we get a gap open or if we get weak action off of Mr. Bernanke’s testimony.
After 3 days of up movement on crappy data, this could be a great place to go the other way. That is my plan. I would like to use IWM puts, SDS, and a few select shorts.
Today I put on a few trades:
KO – Apr/May 57.5p and 60p calendars for .35 and .30. I put 3 units in total. The chart is not necessarily favorable, but I thought it was worth a trade.
AMT – Exited 4 units for .26. I made .11 on this trade. It blew out to the upside. I sold it just above it’s W4 top. It continued to run after I exited. Fortunately I bought this with a huge Volatility Skew. That saved me as the Vol corrected, unfortunately the underlying moved away too.
GS – 4 units of 2/3 Backratio Call spread July 170/185c for credits of 2.40, 2.70, 2.86, and 3. I like this trade. For several reasons. 1) Volatility is relatively low for GS, and rises in IV benefit me in this trade. 2) Below 170, I benefit from time decay. 3) As the price moves up I benefit from the bullish bias to this trade. I am planning to trade around a 2 unit core position.
GS Risk Graph
GS Volatility Chart- Volatility is the lowest it has been in 4 months. I will be watching this to see if it breaks down farther. It would be expensive to get it wrong.
Wednesday Morning –
UA- exited only unit for 1.30 on a $2 move down this morning.
GS – exited 2 units of Backratio spread for 2.10, and 1.90 debits. I am good with a 35-50% gain on my risk in this short of time. The underlying rallied from a gap down on heavy volume. Then tapped a technical level, retracing 50% on light volume. I waited for the underlying to move to previous highs, again the underlying complied with heavy volume. The caused me to hold onto the other 2 units. The next levels to watch are 179 and 181.5.
There seems to be a double bottom with a higher low @ 171.5. Very good for my positions.
By the end of the day GS closed above 180.80 and the spread moved to 1.25. Very nice
Bernanke Testimony – Bernanke is doing good job today, but the one of the Senators is a full-on-Ass. Amazing arrogance.
One of the announcements should work to free up money, and in turn bring down interest rates. 10yr bonds are rallying. Very good.
I was happy to be net long for the past two days. However, now I want to begin to exit longs and get short above 139.25.
SDS – Before I went to ski with Frank D. I bought the SDS for 60.04. I put my stop loss in, but failed to put my profit stop at 60.75. Bummer because it hit the profit target, and then fell off. That said, I think we are going down and that benefits SDS. If we have a gap down on thursday morning, I will move my stop below the opening gap and lock in a profit.
ENR – Bought 1 unit of May 100/85p spread for 5.95. I like this short as we are sitting high in the market, and this is below the 50MA which crossed below the 200 day MA last week. There is a clear stop loss here. (The W4 high). And we are at the top end of the Bolinger Band, and we have had a near perfect Oscillator pullback. Lastly, this underlying’s rally was on light (below Ave. Volume). Frickin Beautiful.
A near perfect day on the slopes, and the acct is up .8% on the day with very patient trading. Gotta Love it.
Check this SPY chart from today. It is going according to plan, it tapped against the 50 day MA then retreated.

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