Tuesday, August 17, 2010

Started a new Short in SPY at 110

Today the markets are getting a nice bounce and I want to be short. The SPY is currently trading at 110.06 as I write this post. I purchased 1 Sep $110 put for $3 and will look to add to my short via 113/114 bear call spreads if we get up there. I think that this market is in the process of putting in yet another lower high, see chart below:

Series of Lower highs:

1) The high for the year is set at 122.12 made in April.
2) Late April we sa a lower high put in at 121.05
3) We then sold off during the first half of May and put yet another lower high after rallying off of the May lows at 117.5
4) After reaching 117.50 in May the selloff making new lows from the prior selloff which followed by another attempt to rally in June to a new lower high of 113.20.
5) The rally in June was followed by yet another selloff to new lows into July, which July saw yet another impressive rally that continued into August only to test the 113 level several times before selling off again.
6) TBD, I think that the market is in the proces of putting in yet another lower high around the 110-111 area on the SPY.

These techicals coupled with the move in bond prices I think are lining up for a nice selloff. We are seeing rates near lows during the worst of the finacial crisis, yet the major indexes are far from the same lows that coisided with current rate levels. Although I do think bond prices are a bit overdone so does the rest of wall street so they will probably continue to higher prices before falling back down to earth.

Are treasuries the next bublle to pop? How much lower can rates go? How long can they stay at these levels? These are all questions that I keep in my mind, because I want to be ready to expoit the TLT for some profits on either side.


Like I said I bought 1 Sep $110 put at $3 and will look to add to my short position via 2 bear call spreads near 113 if we get there.

Learning to keep my position size very small.

Also keeping my eye on TLT for possible bullish play in short term and bearish play further out in time.

That is all for now!

1 comment:

  1. So we got a nice downmove today into support level of around 1075 on the /ES. I think this be a good place to take profits.

    I sold the 110 put for $4, I pais $3 so that is a nice 33% gain. I will take it!