Good evening. Unfortunately none of the three new plays released from this past weekend hit our triggers to initiate positions. We are waiting for OXY to break support prior to entering short positions. Aggressive traders may consider entering our long play in VIX (a bearish trade on the market) at current levels but tomorrow's FOMC announcement is a huge wildcard to be aware of. Finally, our short play in PG came within 17 cents of reaching our higher trigger to enter at $61.00 but the stock sold off late in the day. I would like to lower the higher trigger to enter $60.69 which is equal to PG's morning high and just below the today's high. I have not provided official updates on these as they have not been opened.
Tomorrow afternoon is the FOMC announcement on interest rate policy and the Fed's general view of the economy. This has the chance to be a big market mover and may allow us the opportunity to exit or enter positions. The Fed's statement and/or actions could very well set the tone for market direction for the remainder of the summer. Staying nimble is paramount. Please feel free to email me with any questions.
CALL Play Updates
ProShares UltraShort 20 YR Treasury - TBT - close 36.01 change +0.23 stop 35.55
Target(s): 36.90 (hit), 37.50 (hit), 38.00, 39.25, 40.50
Key Support/Resistance Areas: 42.00, 41,00, 39.70, 38.25, 37.55, 34.65
Current Gain/Loss: -35%
Time Frame: Several Weeks
New Positions: Yes
8/9: We are hanging in here with TBT and any breakout in equities should get this ETF moving in our direction in earnest. I believe bond prices are close to or at a top and could experience a steep decline in the near term (bullish for TBT). Regardless of whether or not that happens I suggest being prepared to exit positions or tighten stops at the any of the above targets as they approach. All are still valid.
8/7: The disappointing jobs data shocked the market and investors rushed money into the safety of the bond market again. Rising bonds are negative for this short bond ETF and the TBT gapped open lower and hit $35.70 on Friday afternoon. If this trend continues the TBT will hit our stop loss (35.55) on Monday. If we do get stopped out I would keep the TBT on your watch list. Firms like Goldman Sachs are expecting the bond market rally to continue until the yields on the 10-year note hit the 2.25% region. That would be bearish for the TBT.
Current Position: Long September $37.00 CALL, entry was at $1.23
Entry on July 26, 2010
Earnings N/A (unconfirmed)
Average Daily Volume: 3.8 million
Listed on July 24, 2010
PUT Play Updates
SPDR DJIA ETF - DIA - close 107.12 change +0.43 stop 108.75
Target(s): 106.25 (hit), 105.40, 104.75, 103.65
Key Support/Resistance Areas: 108.00, 107.00, 105.90, 104.75, 104.20, 103.50
Current Gain/Loss: -19%
Time Frame: 1 week
New Positions: Yes
8/9: On Friday DIA came within 6 cents of hitting our 2nd target so I have raised it by 15 cents. Friday's late day rally looked like classic short covering to me but, nonetheless, it is a support level to be aware of for potential exits or an area to tighten stops to protect capital. If DIA breaks Friday's low it should continue lower to our more aggressive targets. Now we await tomorrow's reaction to the FOMC announcement. This most likely means a volatile afternoon session and may present some opportunities to exit positions. It could happen fast just like Friday but this time it might keep going.
8/7: The bearish jobs number would have been the perfect catalyst for stocks to breakdown but they did not. Traders actually covered their shorts into the closing bell ahead of the weekend. What are bears afraid of? I suspect they are worried about the FOMC meeting this Tuesday. What will the Fed say and what will they do. Many are expecting some form of quantitative easing to help spur the economy again. I would still consider new bearish positions on the DIA but I would look for a decline under Friday's low. Use a trigger at $104.90 as your entry point. I suspect this ETF will trade down toward its 50-dma or lower.
Current Position: Long September $106.00 PUTS, entry was at $2.70
Entry on August 3, 2010
Earnings: N/A (unconfirmed)
Average Daily Volume: 14 million
Listed on August 2, 2010