3 Weeks To Go
1/25/2008 6:17:20 PM
Our services' net portfolio gain for 2007 was 107.8%! For a full break up of this performance, CLICK HERE.
Our system has now moved into Buy mode. Does this mean we're in clear blue sky now? Not yet, at this stage the market is taking an in breath from its dramatic exhalation, although there are signs that we may be on the road to recovery.
On January 17th we sold an SPX Feb 1280(SZPNP)/1270(SZPNN) Put Option Spread for a net credit of $1.50.
(i.e. a total premium received of $150 per $1,000 of margin)
SPX Chart - Bigger Picture
We're still in a vacuum between about 1370 and 1320. A weekly close above 1370 will be the first sign that a bottom is in place. At this point, uncertainty and volatility is the name of the game.
SPX Chart - Shorter Picture
In the shorter term we have a band of resistance between around 1375 and 1425. We came close to the overhead resistance today and retreated, 1320 now holds the key in the short term.
What we've witnessed this week is an event that generally only happens once or twice in a decade, a good old panic that flushes out all exuberance. In the past these types of panics have paved the way for some descent rallies. Time will tell if that's what will happen this time, but in order to undo the technical damage, we need to see a break above 1420 to start with and then a continuation through the 1450 region.
Overall, the S&P500 dropped just under 20% and the Nasdaq, just under 25% from their highs of 3 months ago! The sudden drop added a greater momentum to the rubber band effect we discussed last week causing a 100 point swing on the S&P from the low on Wednesday to today's high.
From the perspective of our 1280/1270 February put spread position, we came very close to pulling the trigger again but the support around 1300 held on a daily basis and there is now some breathing space in our position. We are however still in a delicate period.
We have three weeks to expiry left on our put spread, which feels like a long time under the current circumstances. We'll monitor how the bounce plays out and will consider closing our position if we go into sell mode.
This week's quote is from Mahatma Gandhi, "I do not want to foresee the future. I am concerned with taking care of the present."
Have a great weekend and feel free to email me at email@example.com with any questions or comments.