Wow, talk about a round-trip.
All that work last week and here we are, right back at last Monday’s close with Tuesday’s open looking like last Tuesday’s open – which was a gap up that led to a flatline of a day with a sell-off into the close. In our first alertof the day lastTuesday, we were watching for breakouts at: Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420 – the samelevelswe blew yesterday. We were also cautious of a possible retrace to the downside, our 10% (off the non-spike bottom) levelsof Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402. That sure does make todayeasy as we’reright between thetwo again as ourstock market rollercoaster makes another loop around the tracks.
My additional commentaryin that sameMember Alertwas: “As usual, the Russell is going to be our best indicator, so over 425 is good, 420 is dangerous and 402 is very bad. Also, note in the morning post that if we adjust our breakout targets (which were set two weeks ago) to compensate for the 7.5% drop in the dollar we still have a ways to go before we can relax and go long: That’s going to be Dow 8,000, S&P 847, Nas 1,585, NYSE 5,321 and Russell 456.” Keeping an eye on those levels last week allowed us to get out right at the top and flip bearish, where we rode out the 7.5% pullback (so far). We went into yesterday’s close 55% bearish -after enjoying the ride down, we’re ready for a change but not yet willing to throw caution into the wind. The adjustment to bullish is easy, we simply sell more short puts against our long puts and we hope to have good reason to add to our 1/2 covers this morning but it will take more than the 1% bump I’m seeing in pre-markets (7am) to get us to saddle back up.
As usual, we made our bullish plays yesterday, while everyone else was selling. We once again got our $5 FAS entry and selling the naked $5 puts for $1 means our worst-case scenario is FAS is put to us for net $4 – that’s something we can live with long-term! We were too early trying some SPY calls but we got a nice entry (we hope) selling X puts, a fun C spread and evena play onGM calls, where we played the $3s for…
