That was one amazingly forced technical correction!
Now that we have our 10% drop off the highs in the Dow, S&P and the Nasdaq, perhaps we can resume our consolidation? This is why you have to respect the technicals, whether or not you buy into them, enough people do that the people who manipulate the markets on a slow day feel it is important to test those levels (technically a flush) before daring to move the market higher.
I was traveling today and, when I left in the morning, the markets looked pretty good but I got off the plane and saw that the whole thing had melted down in the afternoon. I called a trader friend and asked him what happened and he said "nothing." I looked at the headlines where nothing seemed to have happened and, when I got home I watched CNBC and they had nothing to say either.
This was a very broad sell-off with energy taking a big hit but no bigger than financials and retail got hammered as well. Pretty much no sector was spared which IS JUST FANTASTIC as we love a stampede as it gives us a chance to roll and add and BUYBUYBUY! True to form, our virtual portfolios held up very well. The only change made to the $25KP since I left, adding the DIA Jan $129 puts, was the right move for that virtual portfolio but I wish I had been around to sell the Dec $127 puts this afternoon as someone was willing to pay $3.25 for them!
A 10% correction warrants at least a 2% bounce. 2% is 250 Dow points, isn't that something we want to be buying into? If we can't make it back to safer levels, we will be SELLSELLSELLing but, if you want to buy and hold, we have the LTP (still up for the week), our other virtual portfolios are for more active traders and we LOVE this kind of stuff!
We're at a tricky spot now because these "corrections" can turn into trends if they go too far so we'll be watching our levels very closely but, without any fundamental reasons for this sell-off, I have to view it as a BS move on a low volume day until I see some follow-through when the big boys get back from their weekend tomorrow.
Meanwhile, it's one scary looking Big Chart:
| 2-Week | Must | Comfort | Break | Next | ||
| Index | Current | Move | Hold | Zone | Out | Goal |
| Dow | 12,743 | -299 | 13,000 | 13,300 | 13,500 | 14,000 |
| Transports | 2,552 | -209 | 2,800 | 2,900 | 3,000 | 3,250 |
| S&P | 1,407 | -46 | 1,470 | 1,505 | 1,530 | 1,550 |
| NYSE | 9,389 | -344 | 9,400 | 9,800 | 10,000 | 10,250 |
| Nasdaq | 2,540 | -87 | 2,525 | 2,550 | 2,600 | 2,750 |
| SOX | 402 | -34 | 480 | 490 | 500 | 560 |
| Russell | 735 | -37 | 810 | 830 | 850 | 900 |
| Hang Seng | 27,210 | -455 | 20,250 | 20,750 | 21,000 | 22,000 |
| Nikkei | 15,222 | 25 | 17,400 | 17,700 | 18,300 | 18,500 |
| BSE (India) | 19,127 | 390 | 13,500 | 14,100 | 14,725 | 15,000 |
| DAX | 7,539 | -250 | 7,300 | 7,600 | 8,000 | 8,200 |
| CAC 40 | 5,450 | -57 | 5,750 | 6,000 | 6,100 | 6,300 |
| FTSE | 6,171 | -142 | 6,400 | 6,550 | 6,600 | 7,000 |
If we lose the Nasdaq, we will HAVE to bring out a new chart with lower levels. We blew through 4 of our last 5 US green boxes in just 2 weeks. This is why we use the big chart, there has been no clear buy signal in the past 2 weeks and we need to take major levels very seriously when planning our investments.
So no rally monkeys please, as the market makes feeble attempts to get back to our "Must Hold" zone. Must Hold means "Must Hold or Get the Hell Out" NOT, "Must Hold Unless It Doesn't and Then Buy Like a Lemming Anyway." While we are buying and adding and rolling, we are doing so within the context of a well-balanced virtual portfolio, setting up for HOPEFULLY a comeback but, on the whole, our focus has already shifted towards concentrating on selling premiums as we dash the hopes and dreams of our callers while going longer and deeper in our own contracts.
They say fools rush in where angels fear to tread, isn't it nice to make money selling options to those fools rather than being one of them?
