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MARKET DIRECTION CALLS
August 2 2011 - Selling Intensifies
August 1 2011 - Bear Returns
July 28 2011 - Before The Open
July 27 2011 - Down But Are We Out?
July 20 2011 - Stock Market Volatility
July 18 2011 - Investors' Nervousness
July 15 2011 - Earnings VS Bleak Data
July 14 2011 - Below 1310
July 13 2011 - Ugly Looking Chart
July 12 2011 - Razor's Edge
July 8 2011 - Nasdaq Leads The Way
July 5 2011 - Expected Weakness
July 1 2011 - Overbought
Jun 28 2011 - July Rally?
Jun 27 2011 - Mixed Signals 
Jun 21 2011 - Bottom Or Bounce?
Jun 16 2011 - Raising Cash
Jun 15 2011 - More Downside To Come?
Jun 14 2011 - Bounce or Bottom?
Jun 12 2011 - Batten Down The Hatches
Jun 6 2011 - Bounce Sometime Soon?
Jun 2 2011 - Sell Signals and Warnings Everywhere
Jun 1 2011 - How Bad Could The Selling Get
Jun 1 2011 - Tread Carefully - Markets Remains Overvalued
May 31 2011 - Success - 100 Day Moving Average Tested
May 17 2011 - Be Careful Out There
Apri 18 2011 - Two Bears Compared
Apr 13 2011 - Why I Bought Puts Today
Apr 4 2011 - Breaking The February Highs
Mar 16 2011 - The Art Of Being Wrong
Mar 15 2011 - Market Remains Resilient
Mar 11 2011 - Trend Is Down
Feb 25 2011 - Trend Turning Bearish
Feb 11 2011 - Still Up - But Watch For June
Jan 3 2011 - Trend Remains Positive

 

Market Direction Call S&P 500


July 18 2011 - Investors' Nervousness

 

Investors Remain Very Nervous

Today's action is indicative of investors' nervousness.  Gold pushed easily through $1600 US an ounce as investors and world governments hedge themselves against further deterioration of the Euro, sovereign debt woes and the US Debt Ceiling issue.

The chart below shows today's action until around 1:30 PM. I was holding 30 SPY puts at the open after buying them on Friday following my market direction call for more weakness in the markets.

 

SPY Stock Chart - July 18 2011

With the market down almost from the open and because I have no idea where the market may be headed, I felt it prudent to sell 20 of my SPY puts and I am continuing to hold the remaining 10 SPY puts. I think investor concerns will still push the market to retest the 200 day moving average, and losing such a terrific rally from just a few sessions earlier is a real blow to the market.

Many analysts feel the bull market ended in May. The recent strong run up and then sell off certainly would support that argument and I imagine it has caught a lot of investors off guard.

Calling market direction is a difficult task. I am wrong as many times as I am right. However the whole concept of using the ETF Hedge through SPY Puts is to keep building up the cash I make through every profitable trade. That way my cash cushion gets bigger and bigger to help "cushion" me for those times when I will be wrong. Therefore since I had 30 puts, I took some profits by selling 20 of them, in order to defray any possible loss from here should the market turn right around and try to run back up and it could easily happen.

If the European Central Bank and European Union get their act together and set up real solutions then that could stop the sovereign debt crisis for a while longer. The same with the US Debt Ceiling issue, which I am sure will get resolved. These two events could propel the market higher.

Last year on the SPY Hedge trade I made $65,000 and this year I am up just 21,000 so the market is still showing some resilience still. But the XLF is down even lower today which remains a poor sign. There are just so many negative signs that any bounce up really will be suspect for a while.

Therefore I sold 20 SPY puts, added a huge profit to my cash cushion and am ready for either a bounce back up or a drop further down.

My best guess is, the market will retest the 200 day moving average.

With the July options expiry I have a lot of cash freed up. I plan to put it to use over the coming weeks and months, particularly if more weakness enters the market, putting some of my favorite stocks on sale.

In Canada, bank stocks got hit with declines across the board. Investors are nervous and with that nervousness comes concerns about all banks Canada included, and their exposure to European Debt and US Debt.
All banks, whether Canadian or not, will be hurt with any kind of sovereign default. Investors don't believe that these banks will not see any losses. Therefore investors sold the Canadian Banks. Even National Bank of Canada was sold which is a Quebec based bank which invests in primarily Quebec was hit by a 2.21% decline, among the largest downturns. This shows investors being very nervous but it also shows that it was over valued and still is at $77.50

A few more days of selling in Canadian Banks and I will be back looking to sell puts on them again. Royal Bank for example has October $50 puts today selling for over 2%. Just a little more pressure and Canadian banks will be attractive again.

 
 

 
 

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