I-Day

Bloomberg reports on Bernanke: “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so,” Bernanke said today in remarks to a Boston Fed conference in Massachusetts. “The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations.”

The comments served to lend credence to expectations that the Fed would begin raising rates at the end of the year. But that seems a long way off now given the current market turbulence. Nothing in the charts today demonstrated much strength after last Friday’s collapse. The S&P 500 was fairly flat for the day, closing at 1361, despite reaching a low of 1350 intra-day and a high of 1370.

Perhaps of greater interest is the Russell 2000, which successfully tested the low-end of its rising channel that began in March. For those holding the bear call we initiated some weeks back with a strike 780 short call, this would be a prime time to close out the position if you were nervous last Thursday! We plan on holding our position through to expiration, though it could still prove a close race if the RUT races back to the high end of the channel with the same conviction with which it dropped in the past two days.

The NASDAQ dropped perfectly to its 50-day MA today before bouncing substantially from an intra-day low of 2429 to close at 2459. With technology names holding up so well of late, it was noteworthy that the NASDAQ stayed in the red all day despite the Dow staying green.

Indeed, the Dow closed up 70 points today, which ordinarily may be a positive, but following a near 400-point down day, it doesn’t inspire much confidence at all that this correction phase is over.

We have our eyes on the FXY given the test of its lower Bollinger Band and general support in the 92-93 region. Our currency plays are holding up reasonably well and while there is increasing speculation and rhetoric that the dollar will strengthen, we have been quite successful in sticking with the trend so far. Our philosophy is simple – if our dollars become increasingly worthless day by day, we might as well attempt to increase our supply of dollars by profiting from its demise!

I-Day has now come and gone! Apple’s price was as volatile as a bag of jumping beans. The stock treaded water until the 1pm (EDT) hour, when the man in black began to speak. The stock dropped as many expected during that hour to an intraday low of $175 (Kudos to optrader for another great call!). During the 2pm hour, the stock quickly bounced above $184. Within minutes, the stock quickly turned down to finish at $177. Then, during the final hour, the stock made its last charge to the finish line by bursting higher nearly $5 to finish at $181.61. With another high price target slapped on Apple today ($248), shorting the stock is the domain of nimble traders only!

The NYX failed to hold the $60 level again today and has now dropped 13 of the last 16 days. Again the reward to risk ratio for the stock appears to favor the bulls over the long-term. While there is no reason to catch the proverbial falling knife in the short-term through a stock purchase, the stock does have a habit of whipsawing traders almost once every quarter. So, if you can handle short-term pain, patience is generally rewarded!