The rally definitely had legs. By mid-morning, it was obvious we were going to break through 804. It was time to play a long position at least for the rest of the day. At 804, it presented a wonderful straddle opportunity on financials and tech. These are going to swing quite dramatically. The straddle is going to give good upside potential along with protection. It avoids overextending yourself.
How about the VIX? Pretty interesting to see it fall off only a couple of points and staying close to the 20dma and over the 200dma. This is a very interesting move. It is very difficult to figure out what the VIX is trying to tell us other than that there are many still not convinced in this rally. The expectation certainly has to be for a 10-15 pt move down in the S&P on Tuesday, if not more. We can't expect more than this unless bad news comes into play. The likelihood of the rally going forward on Tuesday is low. Technicals indicate we need some sort of pullback to at least 805-810 (new support level).
I wish I could say more about the VIX but it seems to be in somewhat of a neutral position. Although it is leaning on the bearish side only because of its relative small move on a big move up in the market. There will be better entry points for both bulls and bears and there is really very little reason to risk much here. You have to lean to the bearish side for the short term only so the rally can let some air out. I will be really interesting if the VIX can cross the 20dma in any market pullback. But I don't see that happening.
I would still stay away from playing financial ETFs other than options. Way too much risk. I entered a straddle on FAS Monday morning and it has already been a nice paper profit. It gives me protection and potential large rewards with little risk.
SRS took a beating today. But I don't care. I don't suggest following me on SRS since I am a long term investor in SRS and I am not trading other than covered calls. I think SRS will be a great buy soon but you have to let some of the dust to settle.
I will be adding to my GOOG put positions tomorrow. Good time to average down with some great potential of gains. RIMM is also looking like a great opportunity now.
Now, can someone tell me why the banks still have not stepped up to give their opinion of the Golden Boys new plan which is suppose to save them???? Does anyone consider this rather surprising other than me???? You would think bank execs would be all over the TV telling us how grateful they are for this plan. I have to assume this means the banks are not prepared to endorse this plan. Investors get little risk, but that is at the cost of risk to tax payers and the banks. I think the devil is in the details and the banks are trying to understand any risk factors. That is their business. Risk management. Well, OK, that is theoretical because they sure did not practice risk management over the past 4-5 years.
The market is still a great trading market. Just don't get caught overextended in a volital market.