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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

June 21 2011 - Bottom or Bounce?

Three up days in a row. Is this the bottom? Is the correction over? I sold my SPY Puts within about 10 minutes of the morning open convinced the market would move higher. For some answer I have looked at the various indexes. The S&P is back above the 200 day average. It only fell below twice and both times did not close below. The NASDAQ though fell through the 200 day and it was not until today's big move that the index recovered. That recovery though included a rise in RIMM.

The DOW failed to break the 200 day at all. The fact that the Dow failed to break through its 200 day EMA is part of the reason I am still convinced that the bull market is intact and this is a downturn or correction.

Meanwhile the XLF which looks at the US financial stocks, is way below the 200 day moving average and has a long way to go before it recovers to the 200 day. The TSX (Toronto Stock Exchange) is also below the 200 day and even with today's move it is still below the 200 day.

Finally, the US Dollar Index shows part of the reason for today's big move was the decline of the US Dollar which for most of the past three years, has been positive for stocks, while a rise in the US Dollar is poor for stocks. The fall of the US Dollar today is tied directly to the believe that the Greek Parliament will pass the austerity measures through a vote of confidence in the Greek Government. Overall investors seem to believe that Greek Crisis will have to be resolved through austerity measures and a new infusion of capital. By and large that seems to be the belief of this analyst with Stratfor Global Intelligence. He could be right.

June 21 2011 - Indexes

So what should an investor make of today's action? Volume was light as many buyers remain on the sidelines. For many investors the rally is suspect. They could be right. Technically the markets in general were oversold. In Greece the government won its confidence vote. Now though they need to try to get an austerity package of almost 112 Billion US$ passed and implement it. My bet is, this may very well be a bounce, but still it is nice to see the market stop selling for a bit. Perhaps instead of a resumption of selling, the market may move sideways. That would indeed be a nice break from the selling. The problem with a resumption of an uptrend is, can the market move higher with all the negative news? Today housing news came out and it continues to show no improvement in US Housing. The recovery is now more than 2 years old and yet unemployment is still terrible in the US. With housing and unemployment so poor, can stock really move a lot higher?

Meanwhile I see no need to hold my SPY puts for another day. That is the beauty of the SPY put strategy for my portfolio. It is a short trade often lasting just a day. So by closing for a small loss today, I can wait to see if we can pull higher before buying puts again. If the market can't move higher, then I can consider SPY Puts again.

SUMMARY

It is always tough to figure out a bottom against the possibility of a bounce. That's why I like to raise cash, continue to sell some puts out of the money on favorite stocks and wait for a clearer sign. Right now my guess is a bounce that could last more than a couple of days. If that ends up being right, then I will be buying SPY puts again. If though the market can regain its footing, I have a lot of cash to sell out of the money puts and I look forward to getting it back working. Right now though, it is a wait and see approach.

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
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