Wow, what a day!! We made money on both sides (short and long)!!
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We started off with PCU and X puts, purchased yesterday. Right off the bat, those PCU puts doubled overnight!! We sold them way too early, as both PCU and X continued to drop. But, as the market bounced, we got into RIMM, PCP, SPWR calls, and made money on the long side. This is also why I’ve been staying mostly in cash, so I have the “power” to react when I need to. Still not the time to jump in “head-first”, yet. Please read on.
SPX bounced back to close “UP” by +4.57 points; Nasdaq was off by almost 8 points; and the Dow lost 15.69 points.
The 2 weak sectors that have been causing most of the problems on the market were actually among the strongest today. Housing (HGX) went up +1.18% and the financials (XLF) went up +3.01%!! VIX went as high as 37.5, but closed flat at almost 31! Semiconductors (SOX) and the biotechs (BTK) hung on well!
Yesterday, I said, “…taking the respective Feb-Mar range for SPX, we’d get 1400-1440. But, if things break down fast, as there’s definitely some panic on the market, we may have to look at 1380 for support!” Sure enough, after big losses in the Asian markets, people panicked and quickly pulled things down further. SPX 1400 wasn’t enough to make a stop!
SPX (15 minute, 5 days)
I don’t normally show an intraday chart, let alone a 15-minute chart. But, I thought this is very valuable to demonstrate. As you can see, the intraday MAs have very sharp down slopes, indicating that the downward momentum is high. This is why I didn’t think 1400 was enough to get the initial stop. SPX quickly penetrated 1380, but, bounced back (Point #1). At Point #2, SPX tested 1380 again. And, it held up. Notice how on the initial bounce from Point #1, it got held down by the 30-minute MA (black line). Once SPX cleared the intraday MAs, there was little intraday resistance, and it jumped all the way to close in the green!
SPX (daily chart, 6 months)
On the daily time frame, we see that SPX now is within the 1400-1440 support range. We need to see some follow-throughs with higher highs and higher lows to confirm this bottom.
Nasdaq
Although it didn’t make all the way to green today, Nasdaq did close within its support range, 2400-2475!
CFC today announced that it is drawing from its entire $11.5 billion bank credit line to help facilitate its operations. Its shares fell as low as $15/share! It later bounced back with the market, and continued to gain after the market, trading at nearly 20. HPQ is trading marginally high in AH, as it beats the market estimates on its earnings. Dell is restating its earnings, going back as far as 2003. Surprisingly, its shares are trading +2% higher after the market.
In Asia, Japan is presently down more than 300 points. Hong Kong is down more than 200 points. China is down just 10. They are opening in a similar fashion as the U.S. market; let’s see if they can get a closing bounce in a comparable way.
I’m still being patient, and staying mostly in cash. Let’s see if the market can confirm this bottom.
Good night and HappyTrading! ™
