Tuesday, March 31, 2009

In Sync

I am feeling very much in sync with the market this week. Monday did as expected as did today, although the dive at the end was a bit surprising. Either way, I held all of my positions anticipating more buying going into the "faux" news knows as M2M easing.

The VIX fell just below the 20dma which is not surprising since yesterdays action did not get far enough above the 20dma to call for a continued downtrend in the market. I was anticipating the VIX to fall slightly which is what it did. It really should have gone a lot lower with the market going up significantly during the day. But it held and that is starting to create a bit of stress on the ViX

I like this action. No, I love this action. If I am in tune with the market as I say I am right now, I see potentially a market dip in the morning followed by a significant move up during mid-day. If you are a bear, do not chase the early down movement. It is a trap. Let it go. Bulls will win tomorrow. Let them win. If all goes well, the VIX will close at about 42 on a market which may go up 2%. What this means is the VIX is being set like a spring, waiting to be released and jump much higher. The action yesterday, today and tomorrow have been setting up this spring. Yesterday it showed that the VIX wants to spring but it wasn't loaded enough. Today and tomorrow will show the spring loaded heavy and ready to jump. There is no momentum for the VIX to move higher tomorrow. And it won't (at the EOD) and thus the market is free to move higher. If we can get the VIX to 42 and the PCR at a low number (sub .25), its time to go all in short.

This also matches the upcoming news events. While tomorrow may not be a great day to play shorts, it may be a great day to enter short positions very late in the day in anticipation of the upcoming breakdown in the market.

Earnings season is just around the corner. The market can withstand some bad news but there will be some major misses by some major companies that will drive the market lower. TA experts claim that we may fall down to 743 or so then jump to 900. I don't see it. Market sentiment is positive right now in general but I see that reversing quickly on any significant bad news.

I am still holding my SRS and haven't flinched. Again, I am not day trading it and while I probably should be playing the swings outside of my core position, I am just letting it ride.

I am still riding the call side of my FAS straddle. I sold my put side yesterday at a very nice profit so my call side if it goes any higher will result in a nice net profit. I am also sitting on some calls on some specific banks, namely BAC and STT. They will be sold mid-day tomorrow, but wow, nice day today on those. I will be buying BAC May puts on Thursday ready for the ride down to sub $1.

Here are a couple of shorts you really should be considering. VMW and AAI. VMW will miss. Mark it down. they will hit new 52 week lows. May puts are still cheap.

AAI has some big news coming out in about 2 weeks. Just trust me on this one. April puts are a good play. Too bad AAI is not a $25 stock. It is also too bad because AAI is running a good ship right now. But the news will hit them hard.

Good luck.


  1. omg calling earnings....be safe man lol.

    glad your crushing it tho dude....

    how about GOOG, will they miss? :o)

    i agree w/ the bac may puts play, they are toast.

    check out BLK....garbage can right there waiting to explode too, imo

    i surprised w/ your srs love you dont play SPG puts more often.

  2. Not crushing it because I am not risking a lot. But the percentage of gains is significant due to options really coming through. SRS is a drag.

    You know, I am starting to hedge on GOOG. I think their price is too high right now even if they hit, but now that analysts have quitely lowered earnings expectations over the last 2 months, GOOG may hit. AT 5.00 they would have missed but now they will have beat. I am still riding the June puts, but not going to add to them like I was planning on.

    On SPG, I have been wanting to play the puts but man, that POS makes no sense. I have to believe SPG is being propped by something.

  3. seen the chart on spg? propped up by what?

    there is a chart on my blog under the m2m trade thread. (first chart to the upper left)

    EVERY time it hits the top chanell its a killer short entry.

  4. beamer
    you expect BAC to <1, what is your target on faz? Is 50-55 reasonable for faz due to time decay.

  5. do you think financials will test Mar low when bac down to 1?

  6. Erik, what I mean is, why isn't SPG going diagonally down? Who invests in it? How can anyone imagine improvement in the commercial RE biz?

  7. kacey, first, let me be clear. It is my belief based on nothing more than a hunch taking into accout BAC's recent history and reading between the lines of Geithner and Bernanke, that BAC is insolvent. I have no data to back this up, so before you go investing your money into this, do your own research. Geithner made it clear some major banks need a lot of help. Citi already has help. I think BAC and WFC are next in line. If BAC fails the stress test, they will be a $1 stock as the Fed pumps in billions and dilutes its shares.

    That said, I think some of the major banks will do fine and some regionals will as well. So I am hesitant to recommend any of the financial ETF's.

    My post tomorrow night will focus on the banks and my view of where things will be in 30-90 days

  8. You nailed the dip in the morning hook, line and sinker. Let's see how big the run up is. Do you have a target as to when to enter into short positions? Love your posts.... Thanks.

  9. I don't have a target level for S&P. I have a target for timing. I will enter some short positions around 3:30 today. Nothing too deep though. Tomorrow add more late in the day.

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