25 Jan 2011

Market Overview:

The market rallied broadly today. The Dow was still showing relative strength to smaller caps. AAPL rallied and that helped bring the Nasdaq higher.

SPY Options Trading:

I sold short some 28 Jan 2011 130 calls on the market strength today. I may have been a little early with this trade. I still think the market is due for a larger pullback. We haven't closed below the 10-day SMA since Nov 30. That's one hell of a run. If we rally further tomorrow I will look to start buying some Feb puts. The 129.50 level is my target for initiating put buying.

Key Levels in the SPY:

Resistance: 129.50

Support: 129, 128.75, 128.35 (10-day SMA), 127.50 (20-day SMA)

Individual Stock Trading:

AMZN -

I closed out my short AMZN put position today for a moderate loss. The stock looks sick as it broke and closed below its 50-day SMA, even after a late-day rally. Earnings will be released Thursday and I'd rather not gamble on that. I think they will beat big, but I'm not sure how the stock will react. I would guess that it will initially pop and then sell-off.

GLD -

I'm still stalking GLD. I'm looking for a test of 130 at which point I will look to sell some weekly 129 puts.

FCX -

FCX has failed three consecutive trading days at its 50-day SMA. I think this sets up a nice try at a short. I'll look to short FCX around 110, with a stop of 112 and a target of 100 or below.

Jan 2011 Trading Log

24 Jan 2011

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.