Thursday, September 9, 2010

Bookkeeping: Selling Index Longs this Morning

The jobless claims data - while still recessionary at >450K - are being celebrated by a gap at the open.  I just read on that due to Labor Day holiday 9 states did not submit their data, hence 2 states estimated (including California), and the other 7 states were guessed by the federal government.  Anytime government statisticians guess, we know there will be an upside surprise.  Either way, the fact we are again celebrating levels we were at 8 weeks ago is bemusing but understandable.

The S&P 500 is fast approaching the top end of the range... the only 2 resistance levels left are S&P 1115 (which is the 200 day simple moving average) and 1130 which has been the wall for 5 months.  One would assume we stay in this mega range (1040 to 1130) until proven otherwise so as the upside is condensed I'll be looking to begin to hedge more aggressively (other than 1 equity position and 2 tiny index shorts I have nothing but cash as a hedge) the higher we go.   In that vein I am not ready to really begin to short things too aggressively as the S&P 500 is not fully overbought yet but I do plan on letting go of the index ETF long exposure I put on late last week in this morning's joy and lock in profits.  Upside potential is 5 points to S&P 1115 and 20 points to the extreme end of our range at 1130.   Meanwhile, downside is now 70 points if we retrench to S&P 1040 eventually.  Of course this assumes we remain in the mega range.

While the indexes are not overbought the high beta 'generals' of the market are strenuously so... many parabolic charts with Relative Strength indexes screaming overbought, so it will be interesting to see how it plays out.  Definitely some performance chasing going on in a group of 35-40 stocks.

No positions


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