Archive for June, 2009
The Week That Was: 6/22-26/2009
June 27th, 2009 | 
Author: As indicated in last week’s post, a break of the swing low of 8461 on the DOW would likely set up a retest of the bottom side of the consolidation pattern from May, which is exactly what happened. We are now challenging the backside of the 200 sma and we are sandwiched between the 50 and 200 sma. The index could break either way out of this current consolidation. We are coming into earnings season soon and that could be the catalyst needed to move the market. The first target to the upside will be 8587 and then 8878. A break of the May lows of 8221 will portend a bearish move down to 8191 and then 7750.
The SPX successfully retested the 200 sma for the second time since breaking through to the upside on 6/1. We also got a bullish 50 sma crossover of the 200sma this past week. At 918, we currently reside at the double top from 12/8 and 12/17, 2008. Our first target is 930 from 5/18/2009 then 944 from 1/6/2009 and finally the recent high at 956. If the index breaks the Tuesday’s low of 889, we could go to the swing low of 879 from 5/15 and then the swing low of 827 from 4/21. I feel that 875 is stout support and it will be significant it breaks that level. I am still bullish.
The COMPQ is really the shining star!! I have maintained that the Tech sector will lead the way and it has. The index is bullishly above both the 50 and 200 sma. Immediate upside targets are 1880, 1897 and 1905. Downside levels to watch are 1793, 1773 and 1754. We are going higher!!
Week over week, the DOW is down 102, the SPX is off by 2 and the COMPQ posted an 11 point gain.
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Risk Graphs: Strap
A strap is a non directional bullish bias long option play. It is comprised of two calls and one put with the same strike and expiration. One may actually structure the trade with a greater ratio of calls to puts depending upon how bullish the trader wishes to design the trade. The risk is the debit in the trade and the reward is theoretically unlimited. Study the risk graph and you will gain insight into the risk and reward of this position. Best Robin
The Week That Is To 6/29-7/3/2009
ECONOMIC REPORTS
MONDAY 6/29
None
TUESDAY 6/30
Consumer Confidence, S&P/Case-Shiller Home Price Index, Chicago PMI
WEDNESDAY 7/1
ADP Employment Change, Construction Spending, ISM Index, Pending Home Sales, Crude Inventories, Auto Sales, Truck Sales
THURSDAY 7/2
Average Workweek, Hourly Earnings, Initial Claims, Nonfarm Payrolls, Unemployment Rate, Factory Orders
FRIDAY 7/3
None
EARNINGS OF NOTE
MONDAY 6/29
APOL, HRB
TUESDAY 6/30
SCHN, ZZ
WEDNESDAY 7/1
STZ, GIS
THURSDAY 7/2
None
FRIDAY 7/3
None
Commentary: Death, Taxes and Theta: The Trio of Certainty
There are not too many things in the life that are absolute. None of us are going to get out of this life alive, taxes are here to stay, especially now with record government spending and time will pass.
In the trading game, there are no certainties with the exception of theta. Theta is the greek that indicates the daily decay rate of options. If you are a holder of options, theta is your enemy because as each day passes, your option is worth less as time decay eats away at the value.
Because of the certainty associated with time decay as measured by theta, I prefer to be a seller of options. The certainty of decay is now working in my favor. I don’t need the stock to move and in fact, I would prefer it didn’t move at all. I can make money in all three market conditions, bullish, bearish or stagnant. I don’t need to hover over the trade and I can sleep at night. I can structure a program that will generate monthly income with a high degree of probability of working with a minimal need for adjustments.
If you are a seasoned trader, you may know of these strategies, but are they working for you on a consistent basis? If not, click here to learn more. Best, Robin
The Week That Was: 6/15-19/2009
The DOW broke through the bottom side of the flag pattern and pierced back through the 200sma on Monday and Tuesday and traded sideways to allow the index to touch the backside of the 200. Even though price broke the 200, I still consider this to be a retest of the 200. If the DOW breaks the swing low of 8461 from this past Wednesday, it will likely challenge the 50sma and the bottom of the shelf from most of May at 8221. Immediate resistance appears to be at 8778 from the swing high on 6/11. I don’t perceive this to be anything more than a profit taking pullback and then a resumption of the bullish move for a short while longer.
The SPX broke down out of the Bull Flag to form a Rounded Top and successfully retested the 200sma which was expected. The 200 and 50sma are converging to form formidable support at 900. Volume picked up on Friday’s session due mostly to Quad Witching. We have a bullish stochastics crossover on the bounce off of Wednesday’s low. This is nothing more than a profit taking pullback and we should rise once again to take another shot at the 956 level.
The COMPQ has led the way and will likely continue to be the leader of the pack. We currently have an inverted cup and handle. Key support on the chart pattern is the near lip of the cup at 1785. We also have the recent gap from 5/29 and 6/1 which should also serve as strong support. The 50sma resides at 1740 and is rising which should also act as solid support. The immediate breakout level is at 1880 and then the bottom side of the gap at 1905 from 10/3/2008. Again, I feel that we will continue to push higher for the short term.
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