Market Overview:
The market is giving me mixed signals. DIA and SPY are still looking relatively strong, but QQQQ and IWM are showing significant weakness. Generally, the bigger the market cap, the better the stock did this past weak.
There are a boatload of earnings reports this week and those along with the Fed announcement on Wednesday will likely make this a volatile week of trading. The 20-day SMA on SPY (~ 127.30) will be a critical level this week. We tested that level last week and bounced. If we break through there then we will probably test the strong support ~ 126. To keep the uptrend going we will want to break and close above 130 this week.
SPY Options Trading:
Last week I got out of my short 22 Jan 2011 126 call position at nearly break even and made a nice gain on my short 22 Jan 2011 129 call position which expired worthless. This week I'll be looking to sell weekly 130 calls on strength and weekly 125 or 126 puts on weakness.
Key Levels in the SPY:
Resistance: 128.50, 128.70 (5-day SMA), 129.15, 129.50
Support: 128, 127.30 (20-day SMA), 126
Individual Stock Trading:
AMZN -
I sold some 28 Jan 2011 175 puts on Friday as AMZN approached its 50-day SMA. I'm looking for AMZN to bounce here ahead of earnings. If we get a good bounce I may look to turn this position into a strangle by selling some weekly calls.
GLD -
GLD is approaching strong support at 130. I'll be looking to sell weekly 129 or 130 puts on further weakness. I suspect GLD will see some strength after the Fed announcement, which is likely to be dovish (it usually is) and further weaken the dollar.
I think this recent weakness in gold is due to inflation fears. I think gold is actually not a good thing to own during inflation. During inflation you want to own something that has a high yield to keep up with the inflation. Gold yields 0%, thus if the price of gold is not rising at the same rate as inflation you will lose value in real dollars.
AAPL -
AAPL is approaching its 50-day SMA (~323) and strong support at 320. I will be looking to sell some weekly 315 or 320 puts on further weakness this week.
GE -
GE popped on positive earnings report on Friday. If we get a pullback to the 19.50 level I will look to get long with a stop of 18.90 and a target of 21 or above.
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