1/10/2010 7:55:24 PM
Current Positioning:
SPY: Short 75%
General Commentary:
Well the week didn't quite pan out as anticipated, while we got the expected pop up on Monday, the weakness expected for the rest of the week didn't happen.
What does this mean? Well, not a great deal, the system remains in on a sell signal and has been diverging with the market for a while now. One of two things will happen soon, either the market starts to move lower or the system will move into a buy signal.
I know that it's frustrating to be positioned on one side when the market moves in the opposite but it seems that this is all part of the trials on the journey to the tribulations. We need to follow the system and not be swayed by the short-term appearances, and hopefully you aren't leveraged to a point where you're losing sleep over this market action.
We're heading into options expiration this week and while this is a traditionally bullish period, we could see a bit of choppiness during the week.
SPX Chart - Bigger Picture
For the medium term we continue to see a rising bearish wedge, with the market closing at the upper end of the wedge.
I've drawn a line at 1200 to show the next resistance level if the wedge does in fact break to the upside. At this point we maintain a bearish stand.
SPX Chart - Shorter Picture
With the market making a new local high, the rising wedge is taking a slightly different path to that reported last week. In any event, the negative divergence on the MACD continues and we could get some choppiness in the short term.
For the week ahead, support on the SPX is 1120 and resistance at 1150 - 1160.
The VIX Picture
Just like the above wedge for the SPX has been adjusted for the extra rise last week, so too has the falling bullish wedge been adjusted for the VIX.
With the substantial drop in the VIX this past week, we're seeing that the market is beginning to believe that it's smooth sailing ahead. You can bet that when the crowd starts to lean to heavily on one side, the likelihood for a reversal increases substantially.
The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.
Performance
We're using a starting capital of $5,000 and allocations are based on 25% of this or the remaining balance.
| SPY | ||||||||
| Entered | L/S | Price | Qty | Value | Closed | Price | P/L | Balance |
| 11 Jun | Short | 94.05 | 13 | $1223 | 30 Jun | 92.72 | $17 | $4,976 |
| 23 Jun | Short | 89.47 | 14 | $1246 | 30 Jun | 92.72 | $45 | $4,931 |
| 15 Jul | Long | 91.81 | 13 | $1194 | 17 Jul | 94.06 | $29 | $4,960 |
| 31 Jul | Short | 98.65 | 13 | $1282 | 24 Aug | 103.39 | $62 | $4,898 |
| 12 Aug | Short | 99.56 | 12 | $1195 | 09 Dec | 109.58 | $120 | $4,778 |
| 01 Sep | Short | 101.95 | 12 | $1223 | 09 Dec | 109.58 | $92 | $4,686 |
| 23 Oct | Short | 109.69 | 12 | $1316 | ||||
| 16 Dec | Short | 111.20 | 11 | $1223 | ||||
| 23 Dec | Short | 112.00 | 10 | $1120 | ||||
Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.
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Regards,
