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| | | Stuffed Bear? | | | The bear headed back to hibernation, as it was off to the races for most all stocks on Monday with the biggest rally in a longtime. What could possibly be the cause for Monday’s snapback rally? Things were looking awfully bleak last week. For starters, the bear will be moving out of his lair into a new four bedroom single family home along with seemingly every other American. We learned Monday morning that the NAHB index reached levels not seen since May 2006, completing its sixth beat out of the last seven. It was the biggest jump since July, driven by a huge 8 point jump in 'present' sales and an improved outlook for the Midwest. Second, it looks like the pilgrims and Indians in the White House and Congress have put down their rhetorical bows and arrows for the moment, and are trying to remain conciliatory about the fiscal cliff as we head into the Thanksgiving holiday. Markets may in fact remain benign in the absence of political (not familial) shouting for the rest of the week. They will just shrug off Greece’s implosion, the threat of war in the Gaza strip, and a Wall Street journal report released Monday that half of the nation’s 40 biggest public companies has announced plans to curtail capital expenditures this year or next. It is in fact the turkey’s time to shine, not the bears, so he may be shooed away by the gobble-gobble of unsubstantiated rallies. | | Trade well and follow the trend, not the so-called “experts.” | | Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | | | | | | | | | |  | | | | is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. | | | | | |  | | | | Congratulations to Jeff Lynch Results: [02:28 pm] Jeff Lynch: i'm +$1550 today | | | | NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial. | | | |  | | |  | | | | Volatility Commentary | | | Strangle Swaps Strangle Swap is an options strategy where one really tries to hone in on the relative implied volatility differences between two expiration months. Going in to an earnings announcement, the front month implied volatility levels rise, sometimes to a level where we deem it "overvalued" relative to further out month implied volatility levels. In such cases, we look to sell the front month strangle and buy the further out month strangle (or in effect, buying both the out-of-money calendar call & put spreads).
The choices of strike prices, however, is determined by possible support & resistance levels. Unlike buying of an at-the-money Calendar Spread, a strangle swap allows us to have a bigger cushion (or even anticipate) a big price movement after the earnings announcement, regardless of the direction of the price move. Today in class, we analyzed two strangle swap spreads on URBN & CRM ahead of their earnings announcements.
Strangle Swaps are not only effective in relative volatility plays. The positive Vega component of buying a Strangle Swap would allow us to benefit should overall volatility increase. For example, we also analyzed a Strangle Swap in HOG today because implied volatility levels were deemed "undervalued".
| | |  | | | | Currency Spotlight | | | | Concerns are growing that France may be the domino that finally destroys the euro. Most of the headlines focus on Greece, Spain, Italy, Ireland, and Portugal, but France will soon require structural reforms that may cripple its economy and eventually cause a peak in the European debt crisis. As the second largest economy in Europe, France is slowing and will need to take on big reforms. A high tax rate of 75.0% for the top income-producers and rising taxes for business is not going to help French GDP. Industrial production is falling for everyone in Europe and especially France, 2.7% m/m. France is also facing an uphill battle as Germany already pushed through reforms last decade and continues to remain more competitive and flexible. France statistics will take this 3-year old crisis to a new level and another year. While the euro climbs higher as expectations grow that Greece will receive its latest payment of aid and Spain has enough capital and can hold off on requesting its bailout, euro gains may be small and short-lived.
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|  | | | | Watch List | | | Today was a big snooze fest in the market after the first initial hour of trading. It was a "ramp and camp" type of day. Meaning the market made a sharp move up and essentially traded sideways for the entire trading day. If you moved the big move then you missed out on everything, or so we thought! Of course the market will wait all day until the close to make ANOTHER "ramp and camp" move and if you missed out on these moves, then you missed out on everything.
The big movers today were Google(GOOG) and Apple(AAPL) as far as point gainers, but a big surprise is GMCR. Now from a fundamental standpoint this stock should not be going up, but from a technical standpoint it makes sense. It looks to be making a very similar move it had just made back in early September when it made a quick 3 day move up. Not only can it follow suit to that pattern, but it can also break that level of resistance and keep trudging higher for weeks, if not for the next few months.
Now with the market is a fast rally, I had stated that if we trade above 1375.00 on the S&P and close above that price it can be the start of the "rally" into the next year. Of course the rally has to sustain and grow some legs, but it is something to watch going into the end of this wee. It will be interesting to see if we can sustain that price point and how the market reacts from a technical standpoint at that 1375.00 mark. Open positions: CHKP Stocks to Watch: AAPL AMZN IBM GOOG PCLN BAC C NFLX GMCR
| | |  | | | | Futures Data | | | ES 1381.75 / 1376.25 POC… 1377.75 YM 12731 / 12689 NQ 2587.00 / 2565.00
Notes from the Pit
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| | | | | |  | | |  | | |  | | | | Patrick Assalone - Best and Worst Time to Trade | | |  | | | | | | | | IMPORTANT NOTICE: Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results. | | | | DAYTRADING involves high risks and YOU can LOSE a lot of money. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those talked about in our site. | | | | | |
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