Printer Friendly

eMail Article

July 29, 2007

Position Update
by Angelo Campione

7/29/2007 7:16:52 AM

Our system remains in Sell mode and while the market fell around 80 points this past week to close at just under 1460 (a drop of over 5%), our Call Option Spread at 1615/1625 has essentially become worthless (which is profitable for us). In theory, we could close this position now and have made a profit of around 5% in a week. But this service isn't here for the quick ins and outs, we're here for monthly cashflow and consistent profits over the long haul. It's a marathon not a sprint, so we'll enjoy the safety of our position and let the next opportunity presents itself before taking further action.

Position Recap:

On July 23 we sold an SPX Aug 1615(SPBHC)/1625(SPBHE) Call Option Spread for a net credit of $0.55. (i.e. $55 per $1,000 of margin)

SPX Chart - the waterfall effect!

What a week, just as it seemed that the market was breaking out into new highs, it turns dramatically and reveals a bull trap. I'd imagine that a lot of the old bears would have also closed their short positions out of frustration prior to the drop. Nevertheless, for anyone trading actively, this past week would have been very profitable, given the succession of down days.

From our perspective, the timing of sell mode last week could not have been better, we effectively now have a buffer of 10% (i.e. the market can rise 10% in 3 weeks and we'll still be safe).

The chart above shows that we're approaching some major support and if that was to break, then we'd be looking at a crash scenario. This is unlikely for several reasons:

1. As of last Tuesday, the commercial traders (often called the "smart money") held the largest net long position since the stock market bottomed in March 2003;
2. The 200 day moving average is at 1448 and is generally a good long term support point;
3. The uptrend channel that developed from a year ago, is around 1450 and this is support;
4. 1450 - 1460 coincides with the highs from February 07 and previous highs often act as support on the way down;
5. The RSI indicator is approaching an extreme oversold level that has often been a turn around point in the past

In summary, we could get a little more selling this week, but in the short term 1450 is a major support point and a bounce is highly likely. If that bounce happens this week and our system gives a buy signal, then we'll be entering a Put Spread for August also.

Feel free to email me directly at angelo@stockbarometer.com if you have feedback or questions.

Cheers,

Angelo Campione

To Learn more about us at: Click Here

Not a subscriber yet? Want to be? Click here and sign up for a no cost trial. Sign up for our TRADE TUTOR weekly newsletter at no cost to get a trading education from Pro Traders.

Important Disclosure:

Futures, Options, Mutual Fund, and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.

Copyright © 2007 Angelo Campione

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »