Don’t Hate the Market
But I don’t Love it Either
We have written against all of our long call positions. This has reduced our costs and therefore our risk.
I’ve also gotten short AAPL stock (only 50 shares), bought AAPL puts, QQQ puts and bought a 200 share position in SPXU (inverse S&P500) in anticipation of what is known as a “countertrend” move.
The basis for these positions are the following statistics; 60% of the S&P500 are yielding more than the 10yr US Treasuries (a point at which we generally see a reversal, and 82% of those same stocks are above their 50 day moving averages, also in historic high ground. These 2 statistics and the fact that we have come well over 1300 Dow points and over 150 S&P500 points makes me think we have a tradable pullback. For that reason I’ve taken a few profits and completed the spreads noted above and am looking not for specific “point” moves, but rather I am going to issue sell stops for reversals.
These stops, as of tonight are:
AAPL trading above $97.70
QQQ trading above $112.02
SPXU trading below $23.97
Not only are these very close stops, but to further limit the risk, they represent very small initial positions. If in fact we are actually starting the “worst 4 months” of the trading year as mentioned in the cycles section of the Weekly Strategies letter we can add later on during rallies.
My feeling is that after 5 consecutive quarters of lower earnings we will start to have easy comparisons to beat and we could well be in for a 12-24 months of renewed strength….CAM
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