Wednesday, September 1, 2010

No Place for Bears as ISM Comes in Bullish; Covered Toll Brothers (TOL) Among Other Things

ISM Manufacturing came in well, ahead of expectations by a good amount and even over July's figures - so the market is adding another leg upward.  That darn S&P 500 gap at 1067 that would not fill last week or earlier this week (frustrating me) filled today of course.  Within the pantheon of 1010,1040,1057,1070 we have passed the upper end of those technical levels on today's news.  So now we have to look at the 200 day simple moving average as the last of the resistance lines. (currently in the 1081ish area)

What has been remarkable is 1040 held so rock solid, and both Friday and today it led to 25+ rallies within 1-2 sessions.  What I did wrong this past week is assume that level would break, and instead those who bought the 1040 level were rewarded.  Bummer.  Just a very strange thing to see it tested every other day for 5 sessions and yet hold. That said, I remain amazed how people's entire perception of an economy can change on 1 or 2 data points.  Days where data creates bipolar reactions are always difficult in my view - today is a great example.

So it's time to make some adjustments for the near term since I am being scalded on some trades. (on a % basis, in real dollars its not life or death)

First, I have covered the short on Toll Brothers (TOL) - this was a limit order so not to lose more than 3% and that has hit on it's own this morning.  The stock has cleared its 50 day moving average for the first time in many months.  No big deal there.

Second, I had cut back some of the TNA/BGU short I put on yesterday first thing this morning - took losses but the positions I had put on yesterday were modest since I'm sticking to small ball until the market acts more normal.

I bought a SPY put for October for "insurance" yesterday, assuming 1040 would break "soon" - thinking 3 retests of a level would lead to a breakdown.  Now my thesis is not looking so great so I sold this for a substantial loss (only a 1% exposure).  I did call an audible on this as I was going to hold this for the next 7 weeks but changed my mind.  I don't have any high falutin (sp?) great reasoning to offer why I changed my mind - there is a reason I don't hold option positions long term and I am reminded why this morning.

To help offset that SPY put I bought some SPY calls (107s) for September, which I might be out of in hours just to offset the loss and try to make a quick gain. (edit: this is/was a 3% exposure - again could be gone by end of day; just a quick trade off the ISM print to try to make some hay)

Thus far the only real positive on the day for me is I was not short Burger King!

Now we face a mountain of resistance ahead, and in a snap have gone from the bottom of a range to the top. With the potential for the same reaction (or completely opposite) Friday morning - hard to do anything more here.  So for now, readjust and catch breath.  It's been a long while since I had my finger burned so have to have it happen every so often to remember.

Long SPY calls, short TNA/BGU in fund; no personal positions


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