To say the past 12 months have ben interesting is certainly understated hyperbole. My view of my own record is at best one of "win some, lose some". I was happy with my large spring short. Nor was I blindsided by the September and October decline. But I blew it on the November - December debacle. I don't mind missing the election tie (Who'd a thunk). What I deplore is not realizing just how fragile the market was at the beginning of November. I have always maintained that the only surprise in the market would be no surprises. So the market again humbles me. Not the first time and I'm sure not the last. Again, I'll try to pick myself up from the floor and "live and learn".
I mention the above to emphasize that that which I'm about to post should be taken on a FWIW basis only. I offer it only in partial repayment to the many fine posts on SI from which I daily learn.
Market View
Currently I'm a bit perplexed. Longer term I believe the secular bull (not to be confused with RR <gg>) is intact. Moreover, I subscribe to the idea of an IT uptrend before any last "test of the lows". Within this IT uptrend, I believe we may have "gotten ahead of ourselves" - i.e. ST too bullish. I'm nonplused because too many (both on SI and in the professional prognosticator camp) agree with my IT and ST views.
If my scenario is correct, IT we should be in an upwardly biased trading channel with Naz 3050 to 3250 on the upside and 2400 to 2550 on the downside. The current Fed liquidity pumping (not interest rate cuts) is the principal reason for my IT perspective. My ST view stems from sentiment measures (Rydex, VXN, etc.). Whether we head up a little more because of the ST overly exuberant bullishness or next week (heralded by this past Thursday) start a mini correction, I wouldn't hazard a guess.
As suggested last weekend, I'm playing the market with CC (covered calls). Since there may well be some more exuberance for the market to express, I try to carefully select particular stocks that exhibit IMO unsustainable bullish spikes and that have calls with large IV components. Then write front month calls to capture both the IV and the fast decaying theta component. There are never any guarantees, but if one's calls have the above characteristics, some insulation against "the market moving against you" is provided. As always, careful monitoring of front month options is required.
While the more conservative will derisively characterize CC writing as "picking up pennies in front of a steam roller", judiciously utilized I've found the technique to lucratively provide funds for (secular bull) LTB&H positions. In that respect, this choppy market provides both nice LTB&H entry points and the funds to acquire the positions. All
JMO
lurqer |
