[Weekend Summary]
Dear Member:
Each week, I try to include a paragraph or two about general market conditions that I send to subscribers of $10 and Under, Trend Trader, and Option Trader. This weekend, I think it is particularly important since the markets as measured by the Dow 30 Industrials, Nasdaq and SP-500 remained in bearish mode. Wednesday did give some hope for a rising tide, but until there is a follow through or until the markets capitulate (neither of which has yet occurred) it looks like the direction remains down.
Downward market direction is significant because most stocks follow the overall direction. Option Trader is the one that has been making money in this market. As subscribers to that service know, I closed a spread on the Diamonds (DIA) for a realized return on risk of 81.2% before commission in 6 weeks. I also closed a part of my bearish put position on QQQQ today with a 25% realized gain on the contracts closed. Indeed, money can be made when the markets fall, but generally speaking, the money must be made with bearish strategies. Of course, the markets will turn back up, we just don't know when that will happen.
Option Trader is designed to take advantage of whatever direction the market takes. Trend Trader and $10 and Under each are more dependent on a bullish market direction since the only strategy employed there are bullish, i.e. buying stock. I am very wary about establishing new bullish positions in a down market and I, therefore, have only two active Trend Trader positions, one of which is up and the other down as of Friday's close. In the $10 and Under category, my positions are small, and though I added a stock this week, the general performance of those cheaper stocks in my portfolio is currently poor. Unfortunately, in a bearish market, that is to be expected. When the markets turn back up, I would expect to enter more bullish positions and enjoy additional successes. In the meantime, my general inclination in Trend Trader and $10 and Under is to stay mainly in cash. It is every bit as important to my mind to know when to stay out as it is when to get into positions
I already mentioned the moves on DIA and the QQQQ puts. Once again, the Nasdaq closed at a level of support. Of course, today was option expiration day and that often is a bit crazy. If the Q's drop below this support, it'll be time for me to add more puts. I'm waiting to see whether to add bearish positions on the Dow Industrials using the Diamonds (DIA) and the SP-500 using SPY. As you recall, I did sell some Aug 128 calls on SPY against my longer term position and they are profiting handsomely for now.
The Conoco Phillips (COP) straddle is in the last month and needs a serious move in one direction or the other to become profitable. It did break down through a support today so maybe the put leg will become the profitable side.
On Sirius Satellite Radio (SIRI), the Dec 5 calls I sold can now be bought back at a profit and I'll do that on an upturn. Meanwhile, I still own the $2.50 LEAPS calls.
Micron (MU) has dropped and today formed a candlestick that may signal a reversal. It does need confirmation, but so far, no adjustment makes sense and I'm just riding the spread.
XLK is at support, and I'm waiting to see which way from here before I create any spreads against my LEAPS call position.
Until the market tells me otherwise, I remain bearish and expect that new positions will try to take advantage of the downward market bias.
Have a great weekend.
Bill
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