January 22- A big drop, then fill

I write this @ 4:30 am. I am looking forward to the day. Last Tuesday night I sent an email out to family and friends saying, “Get short, get very short”. I thought this might happen, but I am somewhat amazed by the speed of the drop. On monday the world wide markets fell hard (4-7%) Today the US Markets are getting hit. SP down 60 in premarket. We will probably open around the SPY 126.20 level. Notice it is right on the 61.8% retracement of the Feb 2003 lows, and a previous consolidation. This is as good as any place to bounce, and for me to look to nibble on a few longs.

Look for FED intervention today. .50 to 1 pt. Their hand has been force. But will they do it in premarket, or will they let all the stops be hit and washout everyone.
There is a good possibility that we eventually break below this level. And before I do any significant long buying I want, to see some market confirmation. Namely positive UPVolume vs DownVolume, and some favorable TRIN readings. As for right now, the morning is going to get ugly. But I would not be a panic seller into the open, there will be plenty of others willing to do that.
I took some advantage, but not full advantage of my “nuts on” short call. As I was teaching on Thursday and Friday, I don’t like being unhedged short with any significant size. I would have loved to have made some cash on the selloff, that said I feel fortunately to be 92% in cash. I am short DSL (bearish spread), CAL (put butterfly), and AIG (put butterfly). These should post nice gains upon the open, however high IV could minimize some of the gains. The VIX should be sky high, so there may be some very good sell Vol opportunities out there. I am not looking to get long much, but I will be looking at some Feb butterflies, and a few “Canroy’s”
Specifically I am looking for CME to hold 497, then buy a bullish butterfly (there will be some CRAZY Volume pumping through the exchanges). MHS – I like the fundamentals and technicals for this Medical Co. PGH will have nearly a 18% dividend, HTE needs to hold 20 @ 20 it offers a 17% dividend. There are some new Royalty laws for 2011 which effect some of these Canadian Royalty trusts, but nothing too severe. And I like this as a very nice way to play Oil and Nat Gas with a significant dividend. I am looking to up my exposure in PGH and HTE over the next few weeks, perhaps as much as 20% of my portfolio.
Going into this I am not a bull, until the US Gov’t directly responds the proper issue. Creating a true fix for the problems with the Monoline insurers. And giving you and me $800-1600 as a tax rebate to spend, IS NOT IT. Until that point I am selling the rallies, and selling Volatility.
I bought some AAPL time spreads on Friday Feb/Apr 160p that will be a little underwater this morning. AAPL announces earnings Tuesday afternoon. We will see what happens. I have a floor on AAPL @ 151. In the premarket AAPL is went as low as 149. It has rebounded to 151. Hopefully we see an earnings pop, but I don’t think the $800 “Go spend me credit” can help this provider of discretionary products. I guess some one could use their new MacAir and iPod Touch while pushing around their shopping cart on the streets. GOOG was down 45 and RIMM was 7, AMZN 5, AAPL down 12 in premarket. I guess we have the 4-headless horsemen. Now one thing I know for sure. I will use GOOG to search, I will continue my blackberry service, and I will by stuff on AMZN using my Amazon search bar on my website (I get 4% everytime someone buys through it. It supports my ISP fees, so click away), and I am going to be buying a new iPod very soon, probably with my $800 tax rebate check. So perhaps the world will survive. That said, I hope you have protected your portfolio and left some powder dry. This too shall pass.
ALERT!!!
FED announces .75 basis pt drop! @ 6:20am. The S&P futures jumped from -10 to +20 in an instant. This saved lots of people, lots of money. I am happy for those people. But, darn I was looking for some longs. And I had a good mind going in. Look for all the world Central Banks doing the same thing today.
Holy Canoly.. The S&P futures rallied up 20 on the morning twice, now it is back to even. Incredible. I imagine that was a great opportunity for Hedge fund managers to hedge their long exposures by selling S&P futures, and minimize their losses.
An explosive rally this morning. I sat on hands for the first 30 minutes. PBH dropped as low as $13. I didn’t buy, but wow, that was off huge. Now it is nearly back. I just didn’t have enough, guts or maybe good sense to buy into that selloff. Chicken me.
The middle of the day period is grinding sideways, SPY between 130 and 131. Durring this time I like to read around. I like Barry Ritholtz article on Seeking Alpha.com
Trades:
SDS off the top I bought SDS @ 67.95 (SPY @ 130.50), sold at the bottom of the previous bar 68.21 (SPY @ 129.95). I got out quick, because I was premature in buying it. I should have waited to buy it when is rose into previous consolidation resistance.
WEN- 2 units of Feb/Mar 22.5p for .19 (underlying @ 23.75)
USB – Out finally. exited 4 units of 32.5p feb/mar calendar for .45. That make for an actual profit on this trade. Amazing. That was a wild ride. I still have a few Mar puts and calls. But very little exposure now. Now the market can tank.
AAPL – exited 2 Feb/Apr 160p calendar for 5.55 and 5.60 with a very small profit. I don’t want to ride this through earnings. I was trying to get more out of the 3 day weekend than I did. I made a very small profit, and I am pleased to be free of this.
UPDATE – AAPL beat numbers, but lowered guidance by .15, the stock dropped by 22pts within a minute. Wow. I feel very fortunate for not trying to game earnings.