Wednesday, November 11, 2009

Bookkeeping: Closing "Insurance Put" Position from Last Week, Going Index Long Again

This market is a freight train... working on 8 straight sessions of wins (yesterday's "flat" after such a hectic run up is a "win" for bulls as far as I am concerned).

Just over a week ago we opened a long term put position with 1.5% of our portfolio as "insurance", as the S&P was broken down - below the 50 day moving average.  In fact at S&P 1040.  6 sessions later the S&P is up 5%+ and all moving averages have once again been conquered.

I said instead of holding this put position until January 2010, I'd sell on any break over 1100 and already we're there. So we're going to take the 60% loss and save the last 40%.  Thankfully I did not go with my first impulse and make it a 3% type of exposure.

Resistance at S&P 1100 appears to have been breached as I type this without more than 30 minutes of proving any sort of wall. . The word resistance has become a joke.  To make a push right through old highs, without being turned back once... after coming on the back of a 5% "straight up" move is just not normal. 

We asked if it would be a double top, or double top breakout... looks like "breakout" yet again.  Same trade...over and over... and over... and over... for 6+ months.  For now we're back into our normal long index positions (TNA/calls), and I'll use S&P 1098-1099 as a stop out level, with the normal caveats that the "obvious" trade must fail eventually.  But it has yet to.  It makes little sense to me but this is the pattern.

This move we've had since March 09 surpasses even 1999 NASDAQ.  I am amazed at the relentless nature of it.  Even in 1999 we had some violent, if short natured, swoons... from time to time.... just to keep the bulls honest.  Not in 2009.  The level of confidence by bulls that their central banker will do whatever it takes to push up their investment values is thick in the air. Yet another V-Shape bounce it is.  Let the Mother of all Carry Trades continue.

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