This past week was another bull week. That makes 4 weeks of positive gains in a row. Does this mean that the bear market is over? I don't think so and I will tell you why.
U.S.
Dow => 8017.59, +246.41
Nasdaq => 1621.87, +76.67
S&P => 842.50, +26.56
Mine
AMD => 3.43, +0.06
F => 3.25, +0.41
NG => 2.96, +0.24
CVX QJ => 0.20, -0.35 (Bought To Open @0.55, 03/31/2009)
FPL QH => 0.55, unchanged (Bought To Open @0.55, 03/31/2009)
So Why Is The Bear Market Not Over?
The reason is simple, momentum is still slowing on this bull. The point increases this week are still relatively small. Two of the above closings are still within the resistance ranges I mentioned last week. And, although the Nasdaq moved over the resistance range I mentioned, it only did so by a point value that is marginally greater than the actual margin I mentioned.
All of the other reasons I mentioned last week are still relatively valid for this week, as well. The Stochastic and MACD for all three of the major indices are still overbought. The RSI for all three returned to their levels of last week. In fact they exceeded them, but they lost momentum on the last couple days. Their projection indicates lowering in the near future.
What Is The Opinionated Investor Doing?
Using the information I just mentioned I am definitely not buying Long or Call positions right now. I actually bought a couple Put positions for the time being, specifically, Chevron and FPL (of course).
Why Put positions? Reason number one being that I don't Short stocks. Not my style. Number two, I don't think spring break will be as productive this year as it was last year. Ill effects of the recession. Also, Florida's spring hasn't started out as hot as it usually does and the winter in the Southeast hasn't been that bad, so I perceive the need for these two energy producers to be less than usual, at least at first.
Explaining My Actions
Now I am playing them a little riskier than I normally would. They were bought about two strike prices OTM in higher multiples. There are a few reasons I did this. One, I actually spend less money on them. Two, I make more profit on them as they become closer to ATM and ITM. Three, the time decay is "slightly" slower than if I were ATM or ITM.
The normal and safer strategy is to buy them ATM or 1 strike price ITM. It is safer because you then at least have intrinsic value (the positive difference in value between the strike price you bought and the price the stock is currently). Intrinsic value is the only substantial value that is left right before an option expires. After an option expires, even intrinsic value vanishes. That is why options are never held until expiration.
If I know this then why am I buying OTM options? The reason is because I am consciously betting on my expectation that the stocks will reach, at least, ATM intrinsic value soon. I believe the following week will start off stagnant and then close lower. Maybe, only by a little. Afterwards, there will be further declines and then another rally that will shatter the current resistance level. I expect to be stopped out by the bounce. At which time I will be following up with the purchase of Calls and going Long on stocks that I will sell Calls against.
That is my opinion, you can take it or leave it.
Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.
Showing posts with label Market Outlook Bearish. Show all posts
Showing posts with label Market Outlook Bearish. Show all posts
Saturday, April 4, 2009
Saturday, March 28, 2009
The Weekly Report
As was mentioned in the last post, I will not be able to make daily reports for at least the next two months. Not reporting as often as I had will also increase the amount of information I have to pull from. So my reports will be focused on the U.S. markets only. Sorry, if there were any international readers, but I have no idea if you are out there since I haven't gotten any comments. So until I do, it is only my opinion that counts.
U.S.
Dow => 7776.18, +496.93
Nasdaq => 1545.20, +53.94
S&P => 815.94, +4.63
Mine
AMD => 3.37, +0.05
F => 2.84, -0.04
NG => 2.68, +0.32
AMD PG => 0.28 (Sold to Close 3/24/2009), -0.18 (Total)
F PG => 0.40 (Sold to Close 3/24/2009), -0.35 (Total)
FPL DI => 5.60 (Sold to Close 3/24/2009), +3.75 (Total)
Trend Report
Friday, the U.S. markets closed down for the day, but not enough to eliminate a third bull week. This shows a continued rally of the bulls but it also puts all of the indices into their respective resistance zones marked by the levels of seven weeks ago. So what does that mean?
Meaning
First let's describe a resistance zone. A resistance zone is not a specific point or value. I would say that a safe assumption is a point value +/-5%. For example, the Dow is approaching the 8000 point level, where it stalled around for a few weeks before dropping through. So the Dow resistance zone is 8000 +/-5% (400 points), a range of 7600-8400. Currently it is in the range at 7776.18.
For the Nasdaq it is 1500 +/-5% (75 points), a range of 1425-1575. Currently it is in the range at 1545.20. For the S&P it is 800 +/-5%(40 points), a range of 760-840. Currently it is in the range at 815.94.
Lets continue. Because I am a swing trader, I use one chart interval for trend and a tighter one for timing. In this more volatile market I have been using the tighter intervals of, weekly for trend and daily for timing. The trend report above was done using the weekly chart information, so for timing I am obviously using the the daily charts. But I am also using the indicators that I mentioned several times before in my previous posts.
Timing
So on the daily chart of the Dow we have a strong, but weakening RSI of 58.19. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is showing signs of increasing weakness.
The Nasdaq has a similar report. The RSI is strong, but weakened to 58.6. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is also showing signs of increasing weakness.
Finally, the S&P. The RSI is strong, but weakened to 57.65. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is also showing signs of increasing weakness.
Conclusion
All though it has not occurred as quickly as I was previously expecting, this rally is going to have a short life. I am expecting stagnation at this zone and then a pull back to the lows that were put in three weeks ago. I am also hoping that the markets will bounce from those lows and then blow through their current resistance zones. But currently the timing indicates that research into Puts and Shorts should be the daily routine. Look for your ins and prepare your outs for your Calls and Longs.
That is my opinion, you can take it or leave it.
Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.
U.S.
Dow => 7776.18, +496.93
Nasdaq => 1545.20, +53.94
S&P => 815.94, +4.63
Mine
AMD => 3.37, +0.05
F => 2.84, -0.04
NG => 2.68, +0.32
AMD PG => 0.28 (Sold to Close 3/24/2009), -0.18 (Total)
F PG => 0.40 (Sold to Close 3/24/2009), -0.35 (Total)
FPL DI => 5.60 (Sold to Close 3/24/2009), +3.75 (Total)
Trend Report
Friday, the U.S. markets closed down for the day, but not enough to eliminate a third bull week. This shows a continued rally of the bulls but it also puts all of the indices into their respective resistance zones marked by the levels of seven weeks ago. So what does that mean?
Meaning
First let's describe a resistance zone. A resistance zone is not a specific point or value. I would say that a safe assumption is a point value +/-5%. For example, the Dow is approaching the 8000 point level, where it stalled around for a few weeks before dropping through. So the Dow resistance zone is 8000 +/-5% (400 points), a range of 7600-8400. Currently it is in the range at 7776.18.
For the Nasdaq it is 1500 +/-5% (75 points), a range of 1425-1575. Currently it is in the range at 1545.20. For the S&P it is 800 +/-5%(40 points), a range of 760-840. Currently it is in the range at 815.94.
Lets continue. Because I am a swing trader, I use one chart interval for trend and a tighter one for timing. In this more volatile market I have been using the tighter intervals of, weekly for trend and daily for timing. The trend report above was done using the weekly chart information, so for timing I am obviously using the the daily charts. But I am also using the indicators that I mentioned several times before in my previous posts.
Timing
So on the daily chart of the Dow we have a strong, but weakening RSI of 58.19. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is showing signs of increasing weakness.
The Nasdaq has a similar report. The RSI is strong, but weakened to 58.6. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is also showing signs of increasing weakness.
Finally, the S&P. The RSI is strong, but weakened to 57.65. The Stochastic is bullish, but has been overbought for over a week. And the MACD is also bullish, but the histogram is also showing signs of increasing weakness.
Conclusion
All though it has not occurred as quickly as I was previously expecting, this rally is going to have a short life. I am expecting stagnation at this zone and then a pull back to the lows that were put in three weeks ago. I am also hoping that the markets will bounce from those lows and then blow through their current resistance zones. But currently the timing indicates that research into Puts and Shorts should be the daily routine. Look for your ins and prepare your outs for your Calls and Longs.
That is my opinion, you can take it or leave it.
Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.
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