OOPH!

Damn that stings. 200 point up when I'm long on two positions and short on four. Yes, I took a beating.

Though volume was up on a 3% positive day for the NASD, this was a bounce based on nothing from an oversold condition. It could last, yes, but the indications tilt towards no. Volume was up, but not by much, and nowhere near where it should have been for such a bounce.

In the meantime, I'll begin covering some of my shorts that I wasn't already bounced out of. Still very much positive for the month though!

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Volitility is back!

Interesting market... I just bought Jan 45 calls on CYMI. It is near its 200-day MA, and against what might be the beginning of a Head and Shoulders top. I'll play the right shoulder up to 47.5 or so. If it dips below its 200-day, I'll sell at a loss. Bought puts on ADM, UNP, and MEE.

I split my bet because, while I think the intermediate term is bearish, there is still a bit of a bull left, not much mind you, and I thought I'd play out the volitility while the bearish patterns complete their last upleg. I bought puts because, well, I'm bearish, and all those stocks have topped and are butting up against resistance.

Very likely that one or two will go sour, so keep your risk controls tight, and let the good ones ride a little.

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Pulled my rear from the flames!

I was short on MRVL. Before you call me a genius (but by all means do), I was about 35% down on this Aug. 50 put as of yesterday because I failed to keep my risk controls tight. I should have pulled the trigger at about 25%, but I didn't.

Anyhow, this morning, MRVL announed that it was buying an Intel unit in Israel for $600 million. The market seems to think that is too much, and MRVL dropped 12%, turning my 35% loss into a 50% gain.

Considering both that I had just been given a mammoth of a free pass (thank you God), and considering the Fed uncertainity that will be revealed on Thursday in a possibly hugely revealing move, I pulled the trigger and banked that 50% gain.

Just so you know I'm honest, last week I lost 10% on an OII put and a whopping 40% in six days on a DIA put (again, a failure of risk control). With that said, I'm up about 25% since the market began to tank about a month ago. I'm very proud, and with that statement, I've been completely jinxed. Expect these posts to become far darker in the near future...

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Eyes open...

Read Robert Colby's analysis about the current market. The market looks a bit frightening right now. We are still at a crossroads, and my picks were singed, spooking me out of a couple, but there are some frightening divergences going on right now that look VERY bearish.

A move above about 11,250 would signal the resurgence of the bull. Any move downward will be decisive and rapid. Keep your eyes open.

A couple of short picks: UNP, MEE.

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Getting my ass handed to me.

So I was short on DIA and OII, both of which have bounced upwards pretty hard, kicking me in the cohones. Everyone takes a beating sometimes. So if todays gains hold, this may be a several week uptick for the markets. Look at how DIA has violated its H&S top.

I'll wait to see what happens, and I'm now about 80% on the sidelines.

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Read This!

I'm going to insist that all you readers out there (yes, both of you) read THIS. This is what I believe is going on, and it it far more enlightening with some good graphs.

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Big couple of days...

So the Dow got just above where I thought it would go. Didn't think it would do it all in one day though. Starting right now, noon Eastern, and going through tomorrow, we will be deciding the short-term trend of the market. I suspect the trend will be back downward for some time, but there is a chance that this was a big correction, and the bull will reassert itself.

The reason I believe the bear will win is just because of the technical damage done to the major averages over the past weeks. In addition, the VIX has been going hay-freakin-wire and has shattered its downward trend. All the fear built by the past two weeks was taken out yesterday, and that is not good for the bulls.

I am not totally confident, but I am looking at a downward reassertion. It is now 12:27 EST and the Dow is down 13 points. Let's see what happens!

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Flying!

Wow, this market snap-back has been steep. I don't think it'll last. As I said yesterday, I expect this to peak with the Dow just short of 11,000. We'll see. There are no guarantees.

Just so you know I'm putting my money where my mouth is, I bought puts on OII. Oct. 75's. Ran up $5 plus currently, but the volume on OII has been peaking for a couple of weeks, and is showing more downward momentum than upward. A 7% upward move ought to be accompanied by far higher volume if it is to be sustained.

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dodged a bullet!

So I sold my puts on BA and CYMI yesterday (for gains of 114% in two weeks, and 33% in three days, if you don't mind my tooting my own horn...), as I had predicted an end to the correction for a few days. Well, the market continued to slide, but look at what BA did today... currently up over 4 points! Yeesh. Dodged a bullet there.

The market is now up 60 points, and steady. The Fed meets June 29th, and we can expect a bit more downside over the next two weeks. Inflationary data came in at 0.3%, vs. the expected 0.2%. Seems the smart money is on a .25% hike on the Fed rates, with an outside shot at .5%. Nobody knows what to expect with Bernanke, but there is some fear that he'll shoot for .5% if the numbers keep looking inflationary, since he might be trying to prove his inflationary fighting zeal. Smart money is still on .25%, but we'll see I suppose.

Either way, I'm looking for a bit more of a bounce, perhaps as much as 200 points on the high end for the Dow, though I think the NASDAQ is wrecked for awhile. After that, I expect more downside.

One cautionary note: the S&P 500's current P/E ratio is at its lowest point since 1995, so this market is NOT overvalued. This bear may be a mild one, so keep your eyes open. The problem with this market is government spending, not corporate idiocy. If new treasury secretary Paulson inspires some conservative vigor in spending cuts and fiscal dicipline, this market sould move forward in short order.

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The end?

I'm picking a near term end to the correction. The bear in the room is just too obvious to too many people (check out Robert W. Colby on the link bar). The Dow is coming up on major resistance at 10750, SPX just took out some resistance, but just barely and may snap back, or continue to fall toward 1160. I think the Russell 2000 still has some major downside to 650, so I'm still bearish on the small stocks.

What's gotten me rethinking the bear is the NASDAQ, which is at major resistance, and has long term resistance 50 point lower.

I could be wrong, but since I'm pretty positive on my short term short positions, I will likely begin unravelling them tomorrow. I'll keep you updated...

Find the balance between complacent and jumpy...

So today I sold my OIH calls. There was 15 days left in them (including weekends) and I was a little spooked, as OIH was caught in a range all day. I had an order in to sell them at $4.00, and they hit $3.80 x $4.00 in the AM, but fell back to about $3.20 x $3.40.

I was determined to sell these calls today, as I was in the black about 20% and wasn't going to wait for events over the weekend that might kill my gains, as I am short-term bearish. I've been at home studying for the Bar all day, so I was constantly checking my quotes.

It got to be about noon PST, and my calls bumped up to $3.50 x $3.70, and I pulled the trigger. Pulled in about 25% over 10 days. Not bad, but of course, by closeing today, OIH had moved up, and my calls were going for $4.20 x $4.40. Damn. I would have gotten my $4, and made about 40% instead.

What did I learn? Not a hell of a lot really. I stand by my call: short time left on my calls, short-term bearish outlook, slightly positive going into a weekend, you pull the trigger. I'm just pissed I missed out on that little extra bump... I suppose the point is just this: sometimes when things don't turn out exactly as well as they could have, it doesn't mean you made the wrong decision. Stay the course, stick to the plan. The only change I will be making is I will look for slightly longer term options, even if I don't intend to stay in long... Keeps me from getting too jumpy.

Meanwhile, I've loaded up on puts. Looks like the bounce might be over for at least a few days. I'm betting on the next week being decidedly downward, though I've certainly set tight stops just in case.

I'm in puts on BA, SPG, and MRVL. I hate being so aggressive, but this is a short-termers market, and you're either a buy-and-hold guy, which I'm not; a sideliner, which I'm not; or you're playing the short-term plays, which are most wisely played in options right now. We'll see how it goes. When the VIX cools down, perhaps I'll move back into a long or short position.

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