Bye Bye Love

Market made a new high, then sold off, then gapped higher, then sells off. Hmmmm. Distribution is the name of this game. How am I to play it? Looking at DIA options, buying the 82/78/74 put fly for $0.85. Thats 4 weeks for the market to retrace 5% and nearly a 4 to 1 risk reward. Don't wait for the goods to be on sale, buy now and I will throw in a Graty :)

Swingtown

Elliot wave theorists looking at this recent up move from 850-875 SPX as a 5th of 5 wave. I see it as a bull trap. That is when the market charts make it look easy to buy the new high, but we will see what pain the market brings. Raising some cash and getiing hedged here at 875. If we make a new low on the day, then this bull move should be done for a while.

I'm not waiting on a lady, I'm just waiting on the FED.

Apple Pie

So its time to see if the recession has slowed down iPod's and iPhone sales. AAPL reporting tonight and I would have to say any whiff of disappointment may send the shares lower than the price of an ishuffle. Earnings plays make you pay for the move in spades. One way to offset the premium is to sell time spreads. In this case, I think we see lower prices so selling the June 130 calls and buying the May 130 gets you about $2.30. I would also sell the June 100 puts and buy 2 x the May 100 puts. This will get you another $0.50 and some juice for a big miss.

I don't want to kill you, and you don't want to be dead.

So a 4% selloff from the expiration high is what the market gives us. I am still looking for increased volatility during the next 3 weeks to shake out both the new longs, as well as those shorts who have still not covered. Once that happens, we should see that move to 1000 SPX that I have been looking for.

If you have been leaning from the overbought camp, today get us back to the top of that 815-835 SPX range from 2 weeks ago. My play here is to get the shopping list ready, and start to place some bids at some names that have truly showed a bottom. Watch your charts, and keep tabs on the new leaders. We know the true rally will not be from the dead money banks. Not sure if energy or natural resources will have the juice, their charts are not looking so well. Large cap tech seems the next logical sector, so I will come up with a QQQQ strategy to follow.

Be careful out there.

NBA and NHL playoffs in action. Spurs need a win tonight or else they are done.

Back to back to back.

Seems like old times. Chart says buy, you buy and the market goes your way. People are getting a little frisky out there. Bank stocks trading like 2007, come on get real. Pain right now is to the down side as shorts seem to be very wary here. I am looking for a 6-8% selloff into expiration next week. Would buy in the money puts as a way to play the negative delta as well as the sub-40 VIX.

Dy dayenu...

Market is marking time in the 815-835 range here for the past couple of days. That is enough to knock the VIX sub 40. 200 day MA drops to 875 as the calendar from last springs highs drop off. This is acting like a real bull. My guess is we get a rally soon as most people out there are waiting to buy the next dip.

Earnings season is here and the time is right for calendar spreads. You can do this in two ways. First, about 3 to 4 weeks before earnings, you want to buy the earnings month vol, and sell the front month against. So for instance, last week or so, you would have bought IBM MAY 110 calls and sold APR 110 calls against them for about $0.60. Today, that spread is worth $1.40.

A second play would be about a week before earnings to buy the May, and sell the next month against it. In this case you could sell the MAY/JUL 110 call spread in IBM for about $2.50. That currently does not look that appetizing to me as you are selling the JUL options on about a 35 volatility, not very pumped in this market. I will scan for better plays out there.

See you on the other side of the Seder plate.

Cop and a Half

A quick reversal off of that 809-813 SPX level this week led to a test of 782. A gap breakout over last weeks/months high, has turned the charts into bull mode. Heck we are a short 9.5% away from the 200 day at 911. Remembering some of Prof. Coopers work, 911 SPX is a big number.

With this in mind, huge good news, breadth, trend, the market will give us a "bait and switch" move to leave us in doubt. My guess is a break of 782 SPX, with a quick flush reversal. VIX staying above that 40 handle until jobs number tomorrow.

Time to play ball, but don't swing at the first pitch. I think we let this first one go by, and wait for that 2-1 fastball to rip up the middle.