31 Jan 2011

Market Overview:

Friday saw the first big sell-off in the markets in over 2 months as news of the growing political unrest in Egypt hit the wire. For the first time since Nov 30 the S&P closed below its 10-day SMA. This upcoming week will be driven by how the crisis unfolds in Egypt. I suspect most other market news will simply be ignored. I'm expecting the sell-off to initially continue on Monday then for the market to stabilize above S&P 1250.

SPY Options Trading:

If we open down big on Monday I will look to sell weekly 124 or 125 puts in SPY. I think SPY will find support around its 50-day SMA (~ 125) this week.

Key Levels in the SPY:

Resistance: 128.15 (~ 20-day SMA), 128.85 (~ 10 day SMA), 129.25

Support: 127.20, 126.25, 125 (~ 50-day SMA)

Individual Stock Trading:

GLD -

I got stopped out of my short GLD put position last Thursday. It sure looked like gold was on its way down, then the Egypt news hit and changed everything. I think that downward bias returns this week, so I'm going to look to fade this rally in gold. I suspect gold will open higher this evening and thus GLD will open higher tomorrow morning. I'm going to look to sell weekly GLD 132 or 133 calls on strength Monday morning. There should be some resistance in GLD around the 132.50 level.

USO -

I expect oil to continue higher this week. There will be a lot of volatility so I may look to sell some weekly options in USO. If oil gets back to $95/barrel, then I'll look to sell some weekly USO 40 calls.

26 Jan 2011

Market Overview:
It was a volatile day with a lot of ups and downs. The market bounced off the low of the day around 3 pm and rallied to close basically flat. We closed above the 10-day SMA once again to keep the streak alive.

Tomorrow the Fed announces. The Fed statement will be key. I suspect they will just say they are going to keep the party going with QE2. If so, this will likely give the market and commodities a quick boost and the dollar a punch in the face.

SPY Options Trading:
I'm still short the 28 Jan 2011 130 calls. If we get a big bounce after the Fed announcement tomorrow I may look to add to this position. If we happen to get a big sell-off tomorrow I will look to sell some weekly 126 puts on a test of the 20-day SMA (~ 127.70)

Key Levels in the SPY:
Resistance: 129.50
Support: 129, 128.80(2-day SMA), 128.50(5 & 10-day SMA), 128.20, 127.70 (~20-day SMA)

Individual Stock Trading:
USO -
Oil continues to pullback. I'm targeting crude = $85 as a place to get long. I think that works out to USO around 36. If we get a sell-off in oil after the inventory report tomorrow I'll look to get long USO around 36, with a stop around 35 and a target of 38.

GLD -
I sold some weekly 129 GLD puts today as GLD tested 129. GLD bounced around noon and closed over 130. I'll be using that 129 level as my stop in this position now. If we go back down there again, that's bad news for me.

NFLX -
Earnings are tomorrow after the bell. I have no intention of playing this stock ahead of earnings. I think NFLX is setting up for a fall though. A lot of these high multiple stocks have sold off even after good earnings. I expect the same from NFLX. I expect them to beat, the stock to briefly pop and then sell-off. I will likely be too chicken to play it though.

12 Jan 2011

Market Overview:

The market remains stuck in a pretty tight range as rallies are sold and pullbacks are bought. The SPY has been trapped between 126.15-127.80 since the start of the new year. I'm still expecting the break of this range to be to the downside.

SPY Options Trading:

I sold to open weekly 128 calls on the pop this morning. I'm thinking the market stays capped below 128 for the rest of the week. I wouldn't be surprised if we see a false break to the upside. If that happens I'll probably try to sell more calls. I will most likely only look to sell weekly puts if we see a major selloff.

Key Levels in the SPY:

Resistance: 127.50, 127.75

Support: 127, 126.50, 126.15

Individual Stock Trading:

USO -

If we see a pop in USO after the oil inventory report tomorrow I will look to short it. I don't think the economy can support oil around $95/barrel yet. I'll look to short USO around 39.50 with a stop at 40.50 and a target of around 37.

3 Jan 2011

Market Overview:

As the new year begins it looks like the market wants to go higher. We may see a repeat of January 2010. Last year we had a nice rally the first week in January when everyone was expecting a pullback. This squeezed out the remaining shorts. The market did eventually rollover later in the month.

I'm seeing a lot of individual stocks in a consolidation pattern. AAPL, RIMM, AMZN, SNDK for example. If these stocks break higher then they will likely take the broad market with them.

SPY Option Trading:

Despite my short-term bullish thinking, I'm currently short the SPY via selling naked 22 Jan 2011 SPY 126 calls. I'll be looking to sell some weekly (7 Jan 2011) SPY 127 calls on a pop this week. To the downside we should have support at 125 and then 124 in SPY. I'll be looking to sell weekly SPY 123 or 124 puts on a pullback this week.

Individual Stock Trading:

USO:

If we get another rally in oil this week I will look to short USO. This short is mainly a fundamental play. I don't think the economy will be able to support oil prices at > $90 barrel for long. I'll look to short USO around 39.50, with a stop of 40.50 and a target of 37.50.

RIMM:

RIMM is trapped between its 50-day and 200-day SMA. I still like RIMM to pop higher here. Admittedly, I should have pulled the trigger on this trade last week. I will look to get long if RIMM breaks above 58.50, with a stop of around 57 and a target of 65.