The is no direction, but the bearish case continues to establish itself. My portfolio remains under some pressure, but by the end of day the market had a strong day. The SPX was up 18, and the Dow 119.
By the end of the day the acct looked better, and I am just .1% from my high NAV. Whew. I was happy to trade my way out of the potential mess.
I have been watching ADM and a few others this morning.
But first, a little laugh. I hold these type of memories with my kids as the most precious things I have. This Vid is a simple reminder.
LOW – I have fully exited this position. 4 units of 27.5p calendar for .25, and 2 units of 30c. The Dec 30c premium was incredibly low, and I just wanted out. I exited the spread for .18. I lost .02 + commission. Very manageable when the trade went against me that much. I Made .03 on the 27.5p spread. So I pretty much scratched this trade. I did make a nice profit earlier in the week when I was buying for .17 and selling for .26. Overall a decent trade.
ADM – I was listening to the conf call this morning. The stock shot upward to 37.50, my stress test was accurate and currently the spread Dec/Jan 35p bought for .19-.25, is trading for .30. With a little pullback in price this spread should work very well.
NVLS – 1 unit of Dec 27.5/30c vertical for .65, and exited the same number of Nov/Dec 27.5p calendars @ .60. With the stock at the bottom of it’s range, I changed things up a little and “Texas Hedged” this position. NVLS has recently added to its stock repurchase program. Perhaps it will help. @ 26 my spread reaches it’s breakeven, a price at which this spread turns Theta Negative. A move upward in the underlying will do wonders for the position. A move below, will still allow me to get out with a 90+% profit in this trade.
UNG- rebounded to the backside of the 38% retracement($41.88) and then headed lower. I will adjust my collar @ the 61.8% retracement (40.35) by selling the 43p and buying the 40p as protection. UPDATE – I sold the Nov 43p and bought the Nov 40p for a credit of $2, the underlying was printing @ 40.18. Let’s run Natty Gas! So far the Collar strategy is up about $80 per 100sh, over just owning the underlying.
USB – the underlying rallied a bit today. I am happy to see this. The more it sits in the channel the better I will do as we move toward Dec expiry. I would pick more of this up @ .15 if I didn’t have so much already. In fact, I may look at some possibilities tomorrow.
PGH – I am riding this uptrend unhedged. It has broken above 19.17 previous high. The trend looks to be my friend here. I may even use a “retarded” strategy of the covered call, selling the 20 calls against my position as there are previous highs @ 19.60 back in July.
The Outlook: for me I am bearish, at least for a few hundred more DOW points:
The reason: Technically it makes sense we at least test the 50% retracement to 13,715 (tertiary trendline & 50% fibo), My money is the test down to the 200MA & 61.8% levels (13,177), and if there is the secondary trendline so far away? I would have like to have been more alert to the fact that no long after the Dow hit the top of the channel it then broke its trendline and formed a Wave 5 top. These tops often make a full retracement to the bottom of the wave 4 (12,500).
The SPY daily is slightly positive:
The SPY seems less bearish to me, albeit still short term bearish. The Wave counts are setting up for a strong end of year. I would like to see a move to the bottom of the channel which would bring down to around 147.35 (50% retracement). My guess, is that it will hit the 200 day MA, run through stops, and the volume will lighten down to the 50% fibo, then recover. That is what I will be look for anyway. I will be looking to go long as it breaks this daily downtrend.
Conclusion: From reading these two graphs, my thought is this. Global Growth (DOW) is a very crowded trade and it is in need a great shake out. Also, I have been looking to get long MTW and the XLB (S&P materials), and when I decide to go long it is a good time to fade my late-to-the-party-charlie tendencies. Also, the downfall of the dollar is good for the S&P earnings as an export trade. So, long S&P, short Dow, and long live selling Volatility into the panic.