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January 10, 2016
Charles Moskowitz Discussion
Who’s Naughty & Who’s Nice ???
Week one was a small gain of $408 (4%) and for the first time in 5 years we have no open positions. For a week that saw the market down 6% that’s not too bad. This year I expect to see a lot of what we’ve seen for the last several weeks, dramatically increased volatility…IN BOTH DIRECTIONS.
Well, the question above basically deals with Santa’s list and why he decided not to provide his self-named rally. This week represented the worst 3 and 5 day starts to a New Year ever. So what do we do about “the first 3 days set the tone for January and January sets the tone for the year?” Well, the January barometer works roughly 60% of the time so it’s slightly likely that the year will be down…however, the speed with which this market has shrugged off problems is remarkable. The bottom line really is summed up in a very simple piece of advice…”Trade the market you get, not the one you want or expect…”
I spent the last several days of the year looking at what I was expecting to see, a Santa Claus rally and a setup for a great start of the year. My positions all looked great in that light. However, the fire in Dubai scared me enough that I decided to lighten up going into the long, holiday weekend. I also bought a few GLD calls and made sure I was no longer short Oil. This was fortunate and it made me look at the charts with a little less bullish set of eyes.
A look at the weekly S&P500 shows a minor rally early last year and then essentially a bunch of flat tops (nominal new highs) all the way until early August and then the late August break from 2110 to 1867. We had a tradable rally for a month back up to 2020 and then a successful test of the low leading back to the highs of 2100. It looked (through my bull goggles) as a 9-10 week flagging out…Except that instead of resolving to the upside it broke hard the last days of 2015 and this past week….from 2080 to 1992. Looking at the OBV (on balance volume) we are more oversold than we were just prior to the late September-to early November rally.
So, is the bull market over ? Does it really matter ? If you weren’t in the stocks in the dramatically narrow (pointed out here repeatedly) leadership group you didn’t participate anyway. I am looking for some follow through tomorrow morning based solely on momentum and margin call selling. But I also expect that since we are so oversold and with 78% of the AAII survey respondents either bearish or neutral we should have a bounce. We’ll try to buy some SPY calls under the market and see what develops……CAM
All trades were based on your participation in the texting service to receive updates. Previous closed out trades not listed here may be seen in previous market letters.
New trades $ 10,000 account...In Texting we have a limited amount of words. In the interest of brevity: OPTIONS ONLY: 1 January , 2 February. The Quantity and Strike Price for each trade is specific. Trading is hypothetical. We may trade weekly options and they are noted: SPY 1/25 147 for SPY Jan 25th 147 Calls or Puts.For questions please call 702 650 3000. Closed out positions are found in previous letters dating back four years: Jan 4th; Dec 28th;21st;14th; 7th; Nov30th; 23rd; 16th; 9th; 2nd; Oct 26th;19th;12th; 5th;Sept th;21st;14th;7th;Aug 31st; 24th; 17th;10th etc
( 1 ) Buy 4 SPY January 190 Calls @ $ 1.68 O.B.
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