Tuesday, March 31, 2009
One with a smear.
807 SPX coming into play here. For those who bought yesterday, selling here makes sense. If you want to short, the gap of 809-813 is some good resistance. Looks like someone wanted to goose this market a little bit. I cannot remember the last time I saw $MSFT up over $1 on a day. Makes sense, you can put some good size to work in a beaten down name with cash to burn.
Monday, March 30, 2009
Que pasa.
For those who followed my advice, congrats on a 6% pullback. Seeing 782 SPX as a fib, so shorts I would cover, those looking for a quick trade, get long with a tight stop. Any upside should be capped at 807 for now. Target on this downmove is 768-750. Financials telling the story right now, but lots of news out there that could whipsaw this market all over.
Watch the VIX as last weeks new high in the market did not get us to close under 40. We should see a confirmation of the rally with a lower low in this index.
How the market handles this dip is crucial. We should make some headway by the end of the week to turn the calendar and hopefully the charts up.
1000 SPX still in play.
Watch the VIX as last weeks new high in the market did not get us to close under 40. We should see a confirmation of the rally with a lower low in this index.
How the market handles this dip is crucial. We should make some headway by the end of the week to turn the calendar and hopefully the charts up.
1000 SPX still in play.
Wednesday, March 25, 2009
Down to the Waterline
At home dealing with plumbing issues today. See the market broke over Friday's high, as we held Friday's breakout on yesterday's close. (823 to 803 SPX). Charts looking like they are bending backwards, tends to be a sign of the rally running out. Most technical targets out there looking for 835-840 gap fill, so the odds are is that is where some supply rests.
Money flowing out of large, into small. Seems we are ready for a dip in the averages. I would lock in any gains from 675 SPX here by buying calls and selling stock, or collaring up. You will get some ammo to load up for that 750 dip.
Money flowing out of large, into small. Seems we are ready for a dip in the averages. I would lock in any gains from 675 SPX here by buying calls and selling stock, or collaring up. You will get some ammo to load up for that 750 dip.
Monday, March 23, 2009
All I want to do, is have some fun.
We are back at 800 SPX via the next round of Government market intervention. Financials have stopped going down, hence they must go up. I still like buying gamma here as we should not take each day's move as the prevailing trend. We spent the last 8 months in a down trend, going up is still counter trend.
Stealing a Jeff Cooper line, the second mouse gets the cheese, we should see a breakout above last weeks high. Whether that holds, I am not sure, but I am still waiting for one more push down to get the weak hands out of play.
Looking at the moving averages, we should see a negative slope on the 50 and 200 day as January's high comes 50 days past, and last years high comes 200 days past. This will make the charts start to look really good soon if we rally from these levels. My 1000 SPX target still in play.
Stealing a Jeff Cooper line, the second mouse gets the cheese, we should see a breakout above last weeks high. Whether that holds, I am not sure, but I am still waiting for one more push down to get the weak hands out of play.
Looking at the moving averages, we should see a negative slope on the 50 and 200 day as January's high comes 50 days past, and last years high comes 200 days past. This will make the charts start to look really good soon if we rally from these levels. My 1000 SPX target still in play.
Wednesday, March 18, 2009
Hot Child in the Citi
Having a great discussion with Adam W. about what's going on in the C options today. http://adamsoptions.blogspot.com/2009/03/citi-not-sleeping.html
It seems a few big customers are paying $1.05 for the June $5 conversion. In laymens terms, that allows you to put on a synthetic short in C, but it will cost you 33% to create a borrow for the shares. Why? I believe the reason is to play the preferred/common arbitrage that was created when Citigroup agreed to convert those lousy TARP preferreds for lousy common stock. What they did was sell the preferred at $25 face value, paying between 6.5% and 8.25% dividends. Now with the common so cheap, they offered to take the preferrerd off your hand for a premium to where it has been trading in exchange for the common shares. Without getting in too deep, you can buy the preferred for lets say $8.00, it is convertible into 7.3 shares of the common, which was trading about $1.25, so you are creating about $1.125 of value. As the stock has run to $3, the spread between the offer and where the preferred is trading has gone kablooey. Today, you could have effectively created about $8.40 of value!!!. Remember, you can only lock this in with a short of C, so that is why the options reversal traded so wide.
By the way, the WSJ picked this trading activity up so you can read about it tomorrow.
It seems a few big customers are paying $1.05 for the June $5 conversion. In laymens terms, that allows you to put on a synthetic short in C, but it will cost you 33% to create a borrow for the shares. Why? I believe the reason is to play the preferred/common arbitrage that was created when Citigroup agreed to convert those lousy TARP preferreds for lousy common stock. What they did was sell the preferred at $25 face value, paying between 6.5% and 8.25% dividends. Now with the common so cheap, they offered to take the preferrerd off your hand for a premium to where it has been trading in exchange for the common shares. Without getting in too deep, you can buy the preferred for lets say $8.00, it is convertible into 7.3 shares of the common, which was trading about $1.25, so you are creating about $1.125 of value. As the stock has run to $3, the spread between the offer and where the preferred is trading has gone kablooey. Today, you could have effectively created about $8.40 of value!!!. Remember, you can only lock this in with a short of C, so that is why the options reversal traded so wide.
By the way, the WSJ picked this trading activity up so you can read about it tomorrow.
Pop Goes the Weasel
Call this the Bernake Short Busting rally. First the financials are being scooped, then everything else. As I write this we are sitting at 800 SPX with money flowing into retailers, home builders, you name it. Get out a shopping list, because the bull is back. I still like straddles here as a way to play the gamma and give you a real shot at buying the dip, whenever that may be.
Around Here
Financials with the big perk up this morning. AIG near a buck and a half from .40 earlier this month. Buying gamma in some of the big banks here an easy shoe in. Either we have busted out of a trading range in them, or else the shorts have covered and we head back down. Either way, the ATM struddle looks nice. With a bearish bias, I would maybe sell some out of the moneys also, but only for a trade.
The IBM/SUN deal rumor put a fire under the tech group, but the oils and consumer staples are dragging. Would not be surprised for that expiration week vol swing from these levels. We held 750 SPX, would like to see a recut of that level before I get super long again.
The IBM/SUN deal rumor put a fire under the tech group, but the oils and consumer staples are dragging. Would not be surprised for that expiration week vol swing from these levels. We held 750 SPX, would like to see a recut of that level before I get super long again.
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