I'm not bearish. The Averages are looking like they're tilting like the Tower of Pisa. But Pisa is still standing. This means total supply is large, and marginal demand can't sustain progress in upside price. The SP, e.g., has a tight head-and-shoulders top in place where the Oct break represents the peak demand price inversion. The Oct break actually was the Elliot 5th upside count of the '95 - '97 bull market. Marginal demand was so intense that when it can't get translated in upside prices, it ricochets and causes an instantaneous downside illiquid state. If you have all buyers and no sellers and booked buyers underneath, price makes a downside quantum tunneling move. The chart looks like a bottom at the top! The Dec sell-off was actually the head cutting neckline defining move. We are now rallying back up to expend remaining marginal demand which will form some kind of right shoulder(single, double, triple). The neckline of the structure is about DOW 7600. Without the inversion the DOW would have peaked at DOW 8600 in mid Nov. In Feb the downside move will cut the major uptrend around DOW 7800 after a Jan rally up to DOW 8100. The degree of downside translation can't be evaluated at this time. It could be mild and slow. News events could accelerate it of course. This is a normal sell-off, but you'll hear the usual end-of-the-world stories polished off and sent flying by the news makermedias. It could be exacerbated by institutional performance freaks. Investors should use the remaining strength to sell appreciated longs, then sit on side lines maybe for months. The above is just a guess based on state data. When the players discover money won't make it go, they'll realize they gotta get out. Any old reason will be exaggerated to "explain" why. But a bull market correction is not a bearish stance. It's just a recognition of the obvious.
Buying puts is, in general, better than buying calls or shorting stock. You'll get cleaned out, but slower. It's just gambling which is tantamount to engaging a negative expected return. The longer you play, the more closely you approach the rate of negative expected return. You're hoping to scalp and get some of that dough back the market stole from you. Why? The stress isn't worth it. If you stay out when the boys are tearing it to shreds, you'll be psychologically prepared to initiate good new long investment positions. Take a vacation from the market. Stay away. This is just as critical of a decision as buying or selling at an appropriate time. Did you hear me? STAY AWAY.
Why does your portfolio need protection? If you think your stocks are going to get whacked that bad, just sell them. Don't let tax considerations or non-investment reasons distort your judgement. That's Wall Street thinking. Wall Street = Poverty. No one has ever succeeded in Wall Street. They're all failures. ALL. Sell the plays that have appreciated. The ones in a base you just hold. The ones where you got strong fundamental conviction, you just hold. It's the big companies especially in NASDAQ that are going to get it. Why? Just look at a chart of DELL. That's why. And it's a fine company doing great things. It isn't clear that you should sell DELL if you own it. Probably it wouldn't make any difference if you did, but you would have lost your position. You don't succeed, you join Wall Street, when you lose your position. Get that trading mentality out of your brain now.
The MSFT call to 100 is reasonable. Don't play it.
I don't own NSCP, but I'm bullish on the company. It has to base and get its fundamental house more in order. It will be good, but you have to have the money and be psychologically ready. You will be able to do that if you STAY AWAY. NSCP isn't going to be bought out. Earnings are a long way off. Exciting plan will take many months to define and execute. Selling calls above is ok. Guess it gives you something to do, but it isn't a strategy for gains. I wouldn't have done that. I would have just sold the stock. Forward selling a low prospect company is inefficient. Just sell. I don't know how low it will go. How about 14 17/32? Close enough? Notice that's just enough to make a long sale better that shorting calls at 17. |
