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January 24, 2016
Charles Moskowitz Discussion
Week 3 was dramatic in its ability to turn on a dime and make a good recovery. We had only one position to start the week (a short) with a small commitment to the QQQ 2/99 puts. Those were sold and we bought another small position leaning in the other direction. We bought CL 2/62.50 calls and sold the whole position on Friday at just over a 100% gain. The total for the week was a gain of $761 and bringing our YTD gain to $1,493. Not too bad for a market that put in the worst performance in the history for the start of a new year.
Oil was the star of the recovery along with the ECB promising that they would continue to do “whatever it takes” to help their economy along. As I said last week, we were historically oversold and the sentiment was “absurdly skewed” to the bears and we were in for a tradable rally.
Earnings continue to disappoint. This week some of the “best of the best,” have not made their numbers. Notable were AXP (-12% Friday) equal to over $50 in the DJIA, and SBUX just making earnings but missing on revenues and not great guidance. In fact, the reason we sold the whole position in CL was because we don’t want to deal with their earnings this coming week. NFLX beat and after a $10 rally in the extended hours opened down the next day.
Clearly the problems still exist, and a short term sprint in the oil futures doesn’t chase all of the problems away…. The US$ is still too strong for our exports, the world is still oversupplied with oil, Putin is still a thug and we have the most partisan do nothing leaders in Washington. On the upside they will have to clean up the 2 feet of snow before getting back to what they call work….
On the technical side I see plenty of areas of stiff resistance, so let’s discuss the “measured move.” In mid-August we broke from 2080 for a 5 day move of 200 point S&P500 cascade lower. It took about a month to rally halfway back into the resistance @ 2000. After a 10-day decline we tested the lows (1865) and rallied back through that same resistance for an almost identical move up…..170 down, 80 up, 80 up, a 3 week consolidation and finally 80 up right into the old highs….These may not be exact numerical halves and doubles but they are certainly close enough. After the 2 month consolidation (Nov.-Dec.) we started the year with 270 down and now looking at the overhead resistance around 2000, just about 135 points from the low…..The only issue for me is how long we consolidate between here (1906) and the first real problems of getting through 1950 or so. We are already slightly overbought from our 3 day move from 1812 to 1906. I am therefore going to stay only lightly involved and keep away from the earnings reports………..CAM
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