Weekend Equity Market Comment - 3/29/08

The end to a fairly volatile week came to a close Friday with a very strange grinding down day that could not really be classified in any measurable.

It is days like these that many times are a pre-cursor to a shift in the short term trend.
Because of this market action on Friday, I took my profits on the put options we had purchased for a little better than a 20% return in 2 days. I have yet to get any type of signal to buy call options so I remain flat in that account.

So far, the decline we have seen is quite normal and nothing that would give the impression that the market is on the threshold of another sharp push lower. However, we need to get the complete picture of this correction in full and as of now we are about 1/3 through it.

It would not surprise me to see 2-3 days of higher prices followed by the ultimate low for the correction really not very far from the current levels.

I remain with a very defensive 50% allocation to equities, but should this correction turn out to show signs of another push higher after completion, I will be bumping my stock allocation up to 75% for quite possibly a counter trend rally that in essence could test the highs of the S&P 500 at the Mid to Upper 1500's.

Time is going to be the teller of the markets next move, but I am preparing to capitalize on what I feel is a high probability of a strong rally off these deeply oversold conditions we have just experienced.

Take Profit On 3 Day Cycle Put Option

We exited our SPY 134 Put Options at the close Friday for a 20% return in two days.

Not a bad return, but less than I thought would come our way.

The main reason I have decided to take profits on the puts, in what may seem like an early
exit is that the odds of a snap back rally have gotten very high and I would much rather sell out of the position and buy it back cheaper then watch it go back to breakeven.

Presently I do not see a trade with call options to play the snap back rally as the risk level remains too high to purchase call options. What I will be looking to do is to get back into the April 134 SPY call options on any strength we may see over the next 1-3 days.

Therefore, the 3 Day Cycle Option Account is Flat.

Keep The Analysis Coming Your Way

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Equity Market Comment - 3/27/2008

Today gave us some confirmation on the shift of the short term trend from up to down.

The turn down of this model is just one of those confirmations.

The NASDAQ gave a short term sell signal today with the stochastics crossing.

Volume pick up a little as well which also shows some very short term weakness should be ahead of us.

Like the NASDAQ, the S&P 500 also confirmed the short term trend shift to down from up and as you can see on this chart the confirmation came from a multitude of time frames.

On the ultra short term, the action today looks like we may have completed the first leg of this trend shift and from here we might see a little temporary move up and then a final push lower.

As I have stated recently, This potential pullback is going to tell us much about the intermediate term health of this market and what we should be able to expect over the next few weeks.

I continue to support the idea that we have put in a major intermediate term low and upon the completion of this first pullback in prices, I will begin to bump the allocation up to 75% with good quality stocks that look priced to outperform the market over the intermediate term.

I also made the investment into the Chinese ETF's today, so I currently have a 25% stake of the funds segregated for foreign investments in the Chinese Market. I will also be bumping this allocation up also in the very near future.

Many Thanks

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Brief Equity Market Update - 3/26/2008

My apologies for the update being so late this evening and how brief it is going to be as time is of the essence right now.

It appears that we have put in a short term high and we should be looking for some lower prices over the next 3 or so days. It is important to keep in mind that this correction we may be entering needs to be rather shallow in order for the market to remain intermediate term healthy.

I have exited all of my short term long positions and will await an erosion in prices before I bump the main equity allocation up to 75% from the current 50% level.

There are also some opportunities here for the Chinese market and some very strong ETF's are how I will play this sector. FXI and PGJ are two of the best to own. I will be putting 35% of my dollars allocated to foreign investments to work in these Chinese ETF's. Currently my foreign exposure is zero, so this will bring the total allocation up to 35%.

On another note, we are officially out of Gander Mountain with a 20% gain in less than a week, so I am quite happy about that. Also, for the aggressive minded, the Three Day Trend Just purchased put options at the close today so take a look at the sidebar for more details about which options I purchased.

So we wait to see exactly the personality of this potential correction and from there we will get a fairly strong idea as to what to do next.

Three Day Trader

The Three Day Trader purchased Put Options at the close of trading today.

Please look to the sidebar under Three Day Trader for specifics.

Vote For Me and I'll Make You Green!!!

CAST YOUR VOTE!!
THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

The 3 Day Trader - New Feature

I have gotten quite a bit of feedback regarding the need for a more short term approach to the trading portion of the blog and in answer to these requests I added the 3 Day Trader.

The 3 Day Trader looks to capitalize on the ever present, but sometimes elusive 3 day cycle in the equity markets. If you look to the right on the sidebar you will see the 3 Day Trader and the instructions thereof.

The maiden voyage of this new section was very successful with a clean double in our option in just 4 days. Currently the model is flat, but is leaning towards the Buy Puts side. The model will work best if you use at the money or just in the money options. I trade the Diamonds and the SPY options. They are very liquid and have very small bid ask spreads.

Keep in mind that index option trading is a very aggressive undertaking and only true risk capital should be allocated to these signals. We carry a flat 25% stop loss on all the option trades, which means if you get filled on your options at $3 you will put a stop loss in at $2.25 in order to limit your potential risk.

I will also try my best to give intra-day price levels to look for in order to complete the trades, but more than likely these will come near the end of the cycle.

It is going to be your responsibility to determine which options you are going to trade, which as I said before should be right at the money or 1 to 2 strikes in the money.

I will start with a $10,000 account and allocate no more than 10% of the account value on each trade. With the most recent trade that was just completed, our account balance is now $11,000.

Lets see what we can do with this baby!

The Bear Market In The Grains

The first leg of the bear market in the grain complex looks to have completed last Thursday.

There is telling confirmation all over the place that this most recent decline was not simply a corrective move, but in fact the start of a major bear market with the hardest hit to be wheat.

The two largest signs of this being a blow off top in the grains is:
1. The Commercial Traders Have Been Massive and I Mean Massive Sellers of the Grains
2. The Small Investor is Jumping Into The Grains With Both Feet, Just In Time To Get Slaughtered.

So now we look at how to capitalize on this secular shift in these markets.

What I am going to do is let the grains rally from here and look to sell them short on the next indication of running out of gas.

Some prices of interest in the grains are as follows:

Wheat - Sell Short 11.63 , 12.07 with a stop loss at 12.75
Soybeans - Sell Short 13.96, 14.41 with a stop loss at 15.06
Corn - Sell Short 5.43, 5.52 with a stop loss at 5.66

Now obviously as these reach the preliminary targets (lower price targets), I will assess the market and determine if in fact the odds face a reversal in trend. I am not simply going to sell these short at the prices I have listed. The reason for this is quite simple also. With the power of the bull market the grains just went through and the always present possibility that anything can happen, we do not want to be sitting ducks for the bulls just in case they are not done running the prices.

So keep the grains on your watch list, because if in fact the bull is over, we stand to make a mountain of money in a very short period of time with the bear market. Bear markets in the grains, especially the Soybeans, have a tendency to get very ugly on the downside.

Gander Mountain - Tighten the Stop

Gander Mountain has made a very nice move of 30% from our entry at $5 based on the close today.

I am moving my stop up to 5 7/8 to lock in 20%, as we had a bearish close on the stock today.

Moving the stop up will do 2 things for us.
1. Lock in a very nice 20% return in a very short period of time.
2. Allow us to continue gaining on the stock should it prove to work even higher from here.

Equity Market Comment - 3/25/2008

Today could have been nothing more than a consolidation day after some very impressive gains in the market over the last few sessions.

However, with the declining volume as the market has moved sharply higher, coupled with the inside day and an up close, we are starting to get signals of a tired rally and a possible short term decline.

You will notice also that the 3 day cycle mode for option players went flat today from being long calls. We had a very nice double in the call options, but did not want to wear out our welcome and give any of that back. The model did not give a signal to enter puts just yet, but is very close to giving such a signal.

If we are to be greeted by some type of decline here, it is going to tell us quite a bit about the health of this market and whether or not we can label the most recent low as an intermediate term low. Right now all systems remain on green for this past low being a very trade able bottom and until I get a signal otherwise I will be moving the equity allocation up as the market retreats.

Right now, stay with the 50-60% allocation, but prepare your stock, ETF or LEAP option picks for a potential secondary low.