Stock And Option -Intraday Comments For Oct 18 2012

I have received a few emails wondering why I did not update my market direction outlooks for the past two days. My apologies but the market direction outlook did not change and looking at the Technicals from last night, they still remains bullish. Just to advise that I believe the stock market has more upside from here. When the likes of IBM, Chevron, PepsiCo, Intel and others have earnings below expectations and the markets do not sell off, then the underlying strength in the market is strong enough for higher prices. In other words a true bull market.

Technical Indicators All Turning Positive

Below are the market timing technical indicators at noon hour. Momentum is positive. MACD is on the verge of issuing a buy signal after being repeatedly higher most of the week. The Ultimate Oscillator is entering overbought. Rate of Change is going positive.

The slow stochastic is signaling higher prices ahead and the fast stochastic is signaling higher prices today and tomorrow.

Market Direction Oct 12 2012 at noon

Market Direction Oct 12 2012 at noon

You must remember that bearish sentiment although high, has been continually wrong right since the bear market crash in 2008 to 2009. The bear market crash extends a shadow a long way. The bear market of 200o to 2003 had a long shadow as well. Investors are always fearful and right now investors look at every “blip” on the market as a sign of markets ready to roll over and crash. Crashes are rare and there has to be much bigger events than at present, to crash a market. A slow down in China will not crash this market. Greece leaving the Euro will not as well. Instead it will need to be something bigger or more pronounced and until that happens, Put Selling remains a practical way to stay in this market.

Remember that this little dips throughout the day are primarily being used by traders to pick back into their stocks and earn a bit more each day. They are not signs of a bear market or a more severe correction.

Stock and Option – Market Direction Portfolio

William’s market direction portfolio is another interesting way to trade within this market. He picks his entry points based on market timing indicators and then adjusts his stop-loss based on any move higher in the index. because he stays with the Ultra ETF’s he earns more than the market can provide and he has superior protection. It is a very simple portfolio and for some investors it is a way to earn income to compliment a larger portfolio. For example, William’s portfolio is over $700,000 but he uses only a portion of that in his market direction portfolio to augment what the rest of the portfolio is earning. He is preparing a strategy paper to discuss his strategy which is the only strategy he uses for stocks. It is worth checking out this simple method to “park it and forget it” as he puts it.

Put Selling Stocks

For myself, I believe Put Selling large cap stocks is the way to go. Put selling not only earns me income and thereby profits, but it also allows me to follow trends in large cap stocks and pick my times to actually own stocks. Put selling offers a lot of comfort when buying stocks like Intel and then watching it fall from $26 (my original naked put strikes) down to $21.50 for a capital loss of 17%. Yet overall through a combination of rolling options and reducing options I generate income and reduce my eventual entry price often down to present valuations.