Tuesday, August 24, 2010

Bookkeeping: S&P 1056 Recaptured, Covered Another Round of Index Shorts & A Bit Long

As expected, it was widely thought today's housing figures would be very bad.  What was surprising was how bad they were - but even then, after the initial knee jerk reaction it was a "sell the rumor, buy the news" moment as we are short term oversold.  When everyone is expecting something it is hard to 'react to it' - just as this Friday we are all expecting a bad GDP revision.  That doesn't mean the economy is good or the news is benign - it just means the market already has reacted.

Just as we had about a week and a half ago we now have an upside gap to fill... as I said then, these typically fill fast unlike downside gaps.  That one took 3 days to 'fill'.

I am moving fast here, but I covered much of my index shorts - 1 batch this morning first thing as I said in premarket I would if it looks like we'd open near S&P 1056-1058, and another on this break over 1056 - both quite profitable (13-14 S&P points) and a good hedge that was only held for a few hours to create some gains to offset losses on the long side of the book.   This trade took a few attempts for it to finally come to fruition but finally the payoff.

I am going to keep very small positions on my book of short TNA/BGU unless S&P 1070 is recaptured at which point I'll blow them out.  But for now I am hoping for a recapture of this morning's gap in the next day or three, to rebuild the short index positions nearer to 1070.

In the meantime, I actually am long these 2 ETFs (for a trade) as long as we hold 1056 on S&P 500. (modest positions)  I'll stop out on a break of 1055ish.

We have some clearly defined levels now on the S&P 500, versus being in a lot of white noise areas that we've been stuck in for many weeks so the trade set ups are much more distinct and clear here.  Going to try to take advantage.

If you are confused
Below 1056 = press short
Above 1070 = long (for a trade)
Between 1056 and 1070 = trading... longish on the low end of that range, then sell and go short at the top end of that range - for now my target is the gap created this morning @ 1067.

Intermediate term remains bearish, but nothing in a straight line.

Perfect world ---> we bounce to 1067, I dump the index longs, and reverse immediately going short the instruments.  With a stop loss over 1070.

I am also fine with being stopped out below 1056 on my temporary long index players and going short (again) on a break of that level.

EDIT 1:50 PM - I am selling the TNA/BGU positions (long) for losses here as the market is flopping around with no clear direction.  I was hoping for more of a sustained bounce.  Might still come later in the day but I have little conviction in direction. 

Long/short TNA, BGU in fund; no personal position


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