Thursday, November 12, 2009

"Double Top" for Now

The hedges we threw on this morning around S&P 1098-1099 immediately went in the red for a few points but the index never jumped over S&P 1103 so we stayed in the trade.  They are working out well now and giving us gains to offset the losses from the core equity positions.

EDIT 10:15 AM - I put some index shorts on for hedging purposes, will stop out of these on any strong move over S&P 1103. 

We are sort of in no man's land here as a double top is forming (for now) on the S&P 500, and the dollar shows a little oomph.  Again the currency is so oversold, there had to be a bounce somewhere.  It might be for a day, 3 days or 3 more minutes.  Who knows.  Sadly the Wall Street Journal has a front page story on how many of our international friends are frantically trying to offset what Ben Bernanke is doing to our currency; it's sort of a sad / pathetic headlineWorld Tries to Buck Up Dollar

At this point I don't know if I should be even looking at stock index charts anymore as it seems its irrelevant when the dollar is the thing.  But to humor myself, we are in about a 28 point range between the 20 day moving average (1072 and rising) and "resistance" at S&P 1100.  At 1089 we are simply in the middle of this white noise area and it could go either way.

With 10 S&P points gained (or lost, I suppose) in about 5 hours, we locked in 2/5ths of the gains in the SPY puts (I used November 110s - SPYWF) - the puts jumped about 30% - and instead of using S&P 1103 as a stop I'll now push down mental stops so we leave a winner no matter what.  Outside of a "gap up" tomorrow morning of course.  That mental stop has moved down during the day from "break even" to roughly S&P 1096 right now.  If the market continues to work in our favor (i.e. down) we'll keep moving that mental stop loss down in 2-3 S&P point increments.

We've done our normal short against TNA as well and I am just going to sit on that for now.

With all the selling we did yesterday morning during the euphoria, our positioning has changed substantially from how we entered the week.  We're about 12.5% long (equities), 8.5% short (equities) with the remaining SPY put exposure 2.7% short.  We entered the week 26% long, 3% short... quite a shift.  In a perfect world the S&P will drift back down to the 20 day moving average in the coming days (while the dollar concurrently rallies into resistance) where I'll get rid of much of the short exposure and then I suppose "buy the dip" because that's that's what all the cool kids do.  Then the dollar can be trashed again and we start the new leg up as we celebrate the Santa Claus rally!

In a non perfect world, the market reverses strongly back up - we have to exit short exposure in the upper 1090s, and then switch to hungry like the bull mood over S&P 1103-1004.   Here around S&P 1090... a white noise area - could go either way; so hedged is the way to go.

Short TNA, long SPY Puts in fund; no personal position

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