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September 05, 2008

What a Week!
by Angelo Campione

9/5/2008 8:57:11 PM

The system is now in Sell mode.

Current Position:

On August 15 we sold a half position in an SPX Sep 1395(SXYIS)/1405(SXZIA) Call Option Spread for a net credit of $0.60. (This was done through Interactive Brokers, The auto trades didn't get a fill on this occasion)

On August 18 we sold a full position in an SPX Sep 1195(SPTUS)/1185(SPTUQ) Put Option Spread for a net credit of $0.90.

The premium received now is $120 per $1,000 of margin required per spread.

SPX Chart - Bigger Picture

While it was a big downer of a week, we're still part of a sideways pattern. I had anticipated that the sideways action would be 1250 - 1325 approx but it could now be 1200 - 1300 approx.

SPX Chart - Shorter Picture

Well, this week was somewhat of a surprise. Volumes returned and Tuesday began with exuberance, going above 1300 within the first hour of trade but it was all down hill from there and Thursday's 3% drop gave us the decisive move.

The interesting thing now is that while the market is looking negative in the short term, financial stocks are actually holding up. Financials tend to lead the market and while they remain steady, the market may not drop much further. In fact this supports the argument that we'll continue in a sideway pattern for the near term.

For next week, a bounce to 1260 is likely but the tone of the market is negative and there's substantial resistance up to 1300. The likelihood is that we gyrate sideways from here.

Support is 1220 - 1200 and resistance is 1260 - 1285.

In relation to our open positions, the Call Spread is clearly fine, the Put Spread we'll be keeping our eye on. For now, we're ok. With only 2 weeks to expiry remaining, no new positions will be entered.

The quote this week is from Arthur Rubinstein, "Of course there is no formula for success except perhaps an unconditional acceptance of life and what it brings."

Have a great weekend and feel free to email me at angelo@stockbarometer.com with any questions or comments.

Regards,

Angelo Campione

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