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stock market course, stock market
[Weekend Summary]
Dear Member:
What a wild week in the markets! I've been warning about a bearish tendency for the past several weeks. In many respects, the past few weeks have been a demonstration of how emotions can control the movement. Of course there have been credit issues and as soon as some money was taken off the table the markets began to descend at a faster and faster rate. The fed move to lower the rate before market open on Friday served to turn things around, perhaps more quickly and with greater acceleration than logic might have dictated. By the way, do you think the fed cat may have been out of the bag to some of the big boys before the public announcement? Just look at the market behavior on Thursday -- a big reversal after the markets were really tanking. I don't know, probably just a coincidence that the announcement came the next morning. What do you think?
In my estimation, the fed action was good, but just a band aid. If we think there are problems with mortgages, what is there with credit card debt? That chicken will come home to roost one day and will rock the markets. The credit card companies were smart to lobby Congress to protect themselves when the recently revised bankruptcy laws were enacted. It seems to me that while there has been a little fix with the fed action, the credit problems have not disappeared. For that reason, I believe those with hedged positions who are also watchful for a return to the bearish side may be well served. That is not to say that bullish plays cannot be profitable. The bulls just need to continue to exercise caution and realize that one day does not a rally make.
The whipsaw got me with my AAPL spread this week where I was forced to exit at a loss. As I have said before, one really good thing about spreads is that the loss is limited.
On the brighter side, I did close the short leg of my Citigroup (C) spread for a 26.5% gain on that leg. I still hold the Jan 45 calls and the stock moved up very nicely Thursday and Friday. The SPY and Sirius Satellite Radio (SIRI) continue to look ok and I may be making some adjustments next week to attempt to benefit from recent movement.
I also closed my position in the Jan QQQQ puts and made 12.9% on that move before commissions. Unfortunately, last week, I had suffered a loss on short leg I had sold against my long position to bring in income.
Have a great weekend.
Bill
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