7/18/2008 9:55:08 PM
Summary of Position For July
We took a big hit this month as the markets relentless decline broke through several key support points. We entered a Jul SPX 1250/1240 Put Option Spread on Jun 20 and received a premium of $140 per spread. Then on Jul 16 we closed this position to defend our capital, the cost of this was $720 per spread.
The combined total of this equates to a net loss of $584.56 per $1,000 of margin used or 58.45% after commissions! (using Interactive Brokers commission rates). The official CBOE settlement price for the July SPX options was 1264.17. Some of you chose to not close this position and I'm pleased for you that the position expired worthless.
Several readers have provided feedback and I'll take these onboard to consider. A final point is thank you for your support, this was a particularly difficult week and I'm sure the experience will make the service stronger going forward.
Nil (no fill today, watch for a new trade on Sunday evening).
The system remains in Buy mode.
SPX Chart - Bigger Picture
The bigger picture is quite interesting. We pierced through support at 1250 and tested 1200 but closed above 1250, this is setting up some decent divergence as the market indicates that the push lower may have been over done.
Dramatic rallies are often seen in bear markets, lets see what the shorter term indicates.
SPX Chart - Shorter Picture
We're at an interesting juncture In the shorter term too, the circled area shows that while we've pierced the sharper down trend line, it's still an area of resistance. The probabilities are that if we get above 1280, then 1320 is a likely target in the short term.
The market is setting up to be one of the best buy points in 4 months. We could see some pull back next week down to 1240 but a full retest to 1200 is also possible. After this though, the rally to 1320 should be underway.
Just by way of interest, I read this week that we've had the longest decline without a 5% rally in over 25 years. Even the 1987 crash took only 11 days before rebounding (the magnitude of decline is another story!).
For next week, support is 1200 - 1240 and resistance is 1270 - 1285.
The quote this week is from Marcus Tullius Cicero, "If you pursue good with labor, the labor passes away but the good remains; if you pursue evil with pleasure, the pleasure passes away and the evil remains."
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