JP-- The chart you have posted reminds me of 1994 Bond trade I was involved in-- we had this huge long term bull run towards the top of the move the volatility became very high and soon after it had made a double top and sold full two percentage points. I think any correction may be to the 50 days MA on most of the indexes and if everyone is talking about a double top its advent may be delayed but the fact remains market move up and down it is never ever a one way traffic. This time for deep in the money call holders this is the time to replace them with out of the money if you think market will run away from you. A little profit taking off the table will never hurt I still see people who missed the boat at 1320 hail and hearty looking for that inevitable to come which never came but their enthusiasm encourages me to say come on when every one is a buy we need to look at the whole thing very seriously, undoubtedly this break would be huge break out like NDX had over 1482 but the problem is that for that happen the NDX needs a new breakout a new explosive move if not more atleast nothing less than 1482 breakout, the 100 need to take this thing further yesterday we saw a sign of the new breakouts in MSFTS TXN and CSCO may soon break like ASND did this is one sign of huge momentum which can take this market higher to 1230-50 area or as I had earlier indicated NDX 1750..
Now, I am looking at this chart yours 50 days have still not crossed the 200 days MA to give a long term buy signal, once this happens we may see this 1750 in no time, we already see huge amount of money coming into ASNDS, MSFT's INTC's- so the core portfolio is doing just fine, I believe that we have seen a huge run from 1050 on NDX or 1320 on composite I would like the market to take a breather here but I still think until SPZ 1150 is taken out the up-trend is still intact, it is a blow out as I have written on 1482 break of NDX, if that was something to gauge for future of SPZ, this indicator has a lot of room.
However all said and done I am suffering with this fatigue of long huge run, it is not consistent with moves of the past may be something new is happening in the market. I see my TXN at 85 and NOK at 110 and MSFT 134, the core portfolio looks great but I do feel that this huge move has to retreat, much as I would like the market to continue the opportunity I will patiently wait for is that move on down side which will come to test the 50 days MA-- I see that 1750 target is doable before 50 days although my preference would be other way round.
For me this is a break out if for next couple of days we see similar actions like we saw yesterday. I will not be placing new positions rather happy with my core portfolio and remaining 30% in speculative positions, but at some point I would rather sell TXN at 92, my cost basis is so low and the potential profit is so high that I would rather take the profits in strength.
That I have rarely done, even that temptation has never occurred to me, I am now inclined to see what happens at today's 1192 level, we can see some good 1200 test but 1180 will be tested once or twice for sanctity of the support, if we have good few tests during the course of week we shall be alright and move to that higher 1230-1250 objective but if we break 1180 we go lower, yesterday even pits were shorting at 1185 although I did not agree and maintained a disciplined approach, they all think that a move form here up would be explosive but mired with danger, this level for me is OK where my cost basis are low but new entrants no- taking profits -yes- if 1150 is taken out one can take profits on options, we will always see a chance to reestablish at some where lower.
Speculative accounts holding deep in the money option positions should be replaced by out of the money options like I did with MSFT replacing 90's and 105's by 135- coming quite handy now same with NOK.A replace deep in the money by 115 or 120-- if you have 70 's NOK.A why to risk 40$ for a 20 gain, risk 5$ for potential doubling, the returns form options are best when premiums on the table are reduced, I will advice that to take advantage of this move keep shifting your strike on keep increasing your cash levels- the advantage of leverage is great imagine if you are only invested 30% but have control of much bigger positions than your entire portfolio. If you are holding 50 calls of NOK.A at say 115 $ and you pay 5 $'s for them although this total position outlay is 25000$ but until expiry of option you are holding a position on 5000 share of NOK.A above 115$- the chances of 100% returns are far higher on the other hand if you are holding 70 calls of NOK.A the 40 $ on the table far exceed the rewards associated with a 20 $ move of NOK.A. At 130$ you will see your option worth 60$ but 40$ were at stake to make 60 whereas in case of out of money your total stake was only 5$ and you made net 10 $ a much higher return this is what I am doing reducing my exposure but increasing the leverage, I am playing the market with least possible cash on the table and maximum leverage, if the explosive move has to come I am well placed but if it breaks the loss of premiums will be much lower, times have taught me of this hard lesson and I am not going to budge from it, it is working perfectly well and ofcourse it is rewarding but I have ridden this move from 1050 and now I am just defensive I have to be- it has never been so good and so big.. Market rule is clear when it start becoming too good it is time to be cautious. |
