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Back in the Saddle Again

4 Jan

SPY Monthly

Today kicked off a great start to 2011. Typically we don’t see the majority of volume return until after the MJK Jr. holiday, but a good way to gauge the day ahead is to look at the first 30-min bar of the S&P Cash Session (9:30-10:30 AM EST). Over 150,000 contracts traded is a signal of good participation, 200,000+ is great participation and a very liquid market, anything below 150,000 is cautionary and below 100,000 is a no trade day.

For those who feel they missed the bullish move of fall 2010, no need to rush into loading up here. As the saying goes, “When the VIX is low, lookout below.” Let the market retrace before contributing to new long term positions. This was a pretty interesting article on the current economic state and the fact that we may be in the Eye of the Storm, so to speak.

Wk47 Analysis

21 Nov

Thanksgiving week is here, which means the markets will be closed Thursday and a operate on a half day Friday. Monday is bleek for news, but Tuesday we have GDP and slew of news on Wedsnesday as well. Historically the day before thanksgiving is almost always an up day. Pretty meaningless for intraday trading, but a little something to make note of.

Wk46 Analysis

15 Nov

A great week ahead with options expiry on Friday. Everything will come down to the high or low of last Friday. If we break the high expect to make new highs on the year, if we break the low expect us to continue drifting lower.

Week 45 Analysis

7 Nov

A light week of news ahead relative to the monster truck rally of the fed last week. Ben Bernanke announced Wednesday that the US Central Bank it will buy $600 billion in long-term Treasuries over the next eight months.

What is Quantitative Easing?
Quantitative Easing or QE is a monetary policy implemented by the central bank to increase the money supply in the US Economy. In essence, the printing of money, except instead of printing pieces of paper with Lincoln, Washington, and Jackson’s faces on them, they are making it “electronically” so to speak, in the markets. The US Central Bank credits its own account with new money and then uses that money to buy assets, in this case long-term bonds. This leads to a weaker dollar, lower mortgage rates, higher inflation, and lower savings rates and potentially a bond bubble with the possibility of a massive recession.

As for new stock and option positions, go with what’s working. Now more than ever it is important to select those relatively strong and relatively weak stocks because in case of a correction (which is to some degree is highly likely beit large or small) the wheat will be separated from the chaff.

Market Internals are what we look to intraday to give us a guage of how the market is doing. Consider it like a heart monitor, measuring the markets pulse. See the video below for more.

Week 44 Analysis

31 Oct

Another week packed full of news including FOMC Minutes Wednesday. Looking to finally break out of the range we have been in for the past few weeks.
As the month of October comes to a close, we see a market that has been very resilient of a pullback. Since we put in highs in the S&P futures at 1193 we have seen a market that has been quite choppy. With targets at 1201 which should be reached this week, don’t be surprised to see somewhat of a breather or pullback in this market. A pullback and possibly of a trend change could produce some exciting moves for new trader setups in November.

The bulls have defended many crucial pullbacks this month, especially the 1170 level. When looking at the SPY we see a max pain level of 117, which is the most amount of pain or “heat” option traders are willing to take before a trend change. This 117 level also lines up with a failure of a 61.8% line of our last bullish setup, in the /ES, 1169’s. Look for a break or failure of this level for a possibly trend change.

Week 43 Analysis

24 Oct

We have seen a lot of chop around the S&P 500 $1180 level. This can be expected as we are in the midst of earnings season. We should see a break one way or another this week especially with GDP on Friday.
As a clue to the direction of this break we look to the VIX and as of late, it has been on the decline, holding in the upper teens. In order to sustain new highs we would need the VIX to break $17.90 and hold it.

Week 42 Analysis

18 Oct

News for the week…

Earnings announcements for the week…

Week 41 Analysis

12 Oct

News for the week…

Alcoa (AA) kicked off earnings season last Thursday so expect a moving market over the next few weeks. Nothing on the news docket for the first three days of the week so we are expecting a continuation of the current trend.
The VIX dropped significantly today breaking into the teens. As the saying goes, when the VIX is low lookout below. This also makes it a good time for option buyers as premiums decline. As always, we never like to be positioned 100% in one direction so adding some put positions as well as calls will dramatically help balance the portfolio through this earnings season.

As for intraday trading, we are seeing an incredibly technical market even on lower volume days. This great trading environment should remain until the holidays when things will slow down.