I guess there are more buyers then sellers. Since I am still net long, I look for this as an opportunity to hedge the portfolio by throwing on some Covered Calls and Bear Call Spreads.
The risk to reward is to good not to.
The big story is the Fed starting to get creative and take back accomodation. Again, more buyers than sellers. Strange that they did it as a surprise after the close - I am not even going to try to explain why. By the way, has anyone been watching unemployment claims?
Am I surprised we retraced over 575.00 points in the past 2 weeks? Nope. Would I be surprised if we made new highs above 10,729 in $INDU and 1150 in $SPX, absolutely not.
February has been good as the downmove gave me an opportunity to sell option premium (expiring today) and I will play the range again by using this rally to sell option premiums for March.
February has also been a good month in the Forex markets as volatility gave us some decent intraday moves, but still relatively quiet as the equities are still in rally mode and volatility is still on the low side.
*******
I am not overly optimistic on the markets making new highs, therefore I am putting in my protection as I mentioned above. It is kind of like the weather in Park City - lots of "snow" in the forecast but no real dumps. Don't get me wrong, the snow is soft and you can find powder and from what I have heard, Little Cottonwood has been skiing great. But, I still could use a resort day with 2.5 feet of light and fluffy. The warm temps are keeping "the greatest snow on earth" from really reaching that level. (The guests at Deer Valley that come from the Northwest laugh when I say this is heavy snow).
So my optimism isn't as high as the weathermen when they say a storm is coming. If it snows, it snows. If the stock market makes new highs, great, I will cover my short term bearish trades. If it happens, it happens!
To the charts and retracements are in focus:
SPY: You can see how far we have retraced over the past few weeks - new highs are definitely in sight - especially if we cross the "line of death" at the 76% level.
Next, let's visit the world of socially responsible stocks - Whole Foods - WFMI. I said to sell calls at the 61.8% retracement level and that afternoon, SP upgrades their status and debt. We now are at levels previously providing resistance. May be another place to sell premium, protect the position (with tight stops):
And now to a socially responsible stock of another kind (see their corporate philosophy/social philanthropy) section on their website- VALE. Let's face it, we will all need steel and iron in our lives and my money is in commodities for the long, long, long term. Again, just taking the huge rally as a chance to protect my position.
Finally forex - the dollar strengthened on last evening's news and we aren't seeing much covering of the dollar. The dollar is very strong as you can see in this chart that the GBP is near the lows of the day. Small retracements USUALLY lead to another move to the downside. It is just a matter of how confident are you and how little of a rally are you going to sell.
Have a great weekend - get outside and do something fun - and oh by the way, show your passion with Locals Have More Fun apparel. Be Environmentally Cool!
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