01/03/11 Market Update

01/03/11 Market Update

 

 

The bulls busted the gates open today pushing markets to new highs.  Goldman and a consortium announced an investment in Facebook using a current valuation of $50 billion today (see the link at bottom how much Goldman could make off of the deal). Oil was up about +0.4% and gold was down by about the same amount.

 

This is typical action for early January.  In fact, this will probably last for a week or 2.  There was a lot of good news last week with not much reaction.  This week has a good amount of data to be released as well.  The data is anticipated to be good and is baked in for the most part.  However, by “baked in” I am still expecting that we could see S&P 1285-1300 before we see any pullback.

 

Markets are excited for the New Year and still guzzling the government kool-aid (QE2, POMO Operations, etc.).  There is very much a Goldilocks feeling out there and volatility will be reappearing in the market now that the holidays are over.  This is not a time to get long, unless it is for a very short term trade, as cheaper prices will be seen in the next month or so.  I am not a bear, just looking for a healthy digestion of December's gains which will allow us to work off this overbought condition existing right now

 

Areas of support exist at S&P 1250, 1225ish, and ultimately at 1175.  Resistance remains at S&P 1280 and 1300. 

 

I want to know what YOU think about the market?  Post your comments below and let's get a good discussion going!

 

 

 

The trading plan at this juncture is pretty simple and straight forward:  With the market very overbought and in a seasonally strong time on the calendar, I will let this market run just a little more and then start layering some credit call spreads above the market.  This is not a market I want to be short put credit spreads in until we take a little off.  At the same time, I don't want to be long close to the money credit spreads either as overbought conditions can last “longer than one can stay solvent”.  Once some volatility enters the market, I will deploy the credit put spreads as I can receive a better credit and open the spreads further out of the money; best of both worlds.

 

A “shooting star doji” appeared on the ORCL chart today; some may also call it a “gravestone doji”.  The stock continues to churn in the range established since the earnings gap in early December.  My short January call spread is staying open and some near the money Jan or Feb puts may be purchased to reap some rewards of the volatility the stock is experiencing while still in the trading range. 

 

These puts will be very strong delta and will allow for the sale of puts against them if desired to reduce their cost.  As well, if the stock only floats back down to the earnings gap, which it did last week, the puts will increase in value substantially.  I am considering this put purchase as the stock is having a real trouble getting over $32.00.  I am letting the current strength of the stock run as it will reduce the cost of the puts when it is time to purchase them.            

 

Please post YOUR COMMENTS about the market below so we can get a good discussion going!

 

 

- Money Pit? Maria Bartiromo Loses 40% Of Demo Viewers In 2010

- US Closes 2010 With $14,025,215,218,708 And 52 Cents In Debt, A $154 Billion Increase Overnight

- Michael Hudson: Average Stock Held for 22 Seconds and Average Foreign Currency Position Held for 30 Seconds

- Here's What Goldman Sachs Could Make From The Facebook IPO (GS)

 

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