Tuesday, October 5, 2010

On the Road to S&P 1170

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With my lack of long exposure the fund needed a nice win to finish up this period (which ends Friday).  Today was the day, barring a 2% drop in the closing minutes.  (I know, I know - just speaking in theory, of course the market cannot selloff into the close)  Earlier today I put on a 3% SPY index long position and about 4.2% TNA long position on, around S&P 1151.  So despite missing the first 1% in the premarket and opening 30 minutes, it's still a nice win.  Today has been a trend day, of which we saw more of in the first two quarters of the year - they make for excellent intraday trading to help goose returns with little risk, as you can have tight stops (my original mental stop was about 2 S&P points), and can be out by end of day and back into cash if you wish.  Or take partial profits by end of day and let the rest ride.

As of this moment, the SPY calls are up 43% and the TNA ETF about 6% due to the surge to S&P 1162.  Despite not being a huge amount of the portfolio, they are doing the trick - especially considering their shelf life has been 5-6 hours.  I still believe 1170 is in the cards, for no good reason other than my Fibonacci reverse engineering analysis (linked to earlier today).  If the market does not stall at 1170 and go back to fill the gaps in the chart, than Fibonacci retracement will be a failure this time around, and I will not have an idea of where the ultimate top of this move will be.   But on the other hand, it was not a failure because that number of 1170 kept me from trying to bet against the market as I mistakingly did in spring 2009 when Bernanke QE1 smashed me to itty bitty pieces for 2 months.  (long time readers will remember me betting against REITs, and casinos, and credit card companies, ho ho ho - what a chump).  Like a silicon algorithm I too can adapt... just slowly and with chagrin.  But with a tad more humor.

I'd love to see these poor pathetic unAmerican sad shorts squeezed into the bell here and a close over S&P 1165 at which point I'd take a good portion of these long index positions off.  While the probability of a gap down any morning nowadays is only 1 in 18ish, it would surely happen the day I have fat profits to protect.  I'll update this piece with decision making in the next 15-20 minutes.

EDIT 3:59 PM: no squeeze into the close so I kept all TNA ETF and sold 1/3rd of the SPY calls to lock in about 40% profit, riding the other 2/3rds.   Short of a 10 point S&P gap down tomorrow morning will exit with some form or profit.

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