Monday, April 27, 2015


There are two major fears I have for the near future, one is physical, the other mental: it has been a long time since we've had even a minor earthquake in the Bay Area; it is also been years since the stock market has had a meaningful correction. It is likely that the longer it takes, the larger it will be, although the USGS assured us that it would most likely be several small ones - that was before they discovered another "linking" fault between the two in the East Bay!

With the FED manipulative "put" now mostly taken away (QE), anything can happen, as we saw in May of 2010 thanks largely to a rogue trader in London. In this week's Barron's, Steve Sears - the option guy- mentions large Volume in weekly options, especially the VIX and SPY (mostly by hedge funds); if they were to unwind, the butterfly wings might start another cascade  down.

Just as it is wise to take precautions for a quake - bottled water and canned food, battening down shelves- it is prudent to be ready to hedge equity positions if the market starts to fall. All market drops  eventually end in a V-Spike, so they can be a great Buying opportunity, by staging in/ selling put options. There are also Inverse ETFs to hedge with, even triple-strength ones.

This week - Wednesday- the TSAA society is hosting an expert in ETFs from at Golden Gate U. - see for details.

Some markets hit new highs last week, but today's one-day reversal is not healthy. Charts most often do tend to retest breakouts before resuming their uptrends- I hope that is the case here!

Sentiment data was quiescent last week, although commercial traders' shorts on Oil and Gold expanded greatly (see below). CEO Insider Selling jumped, but that is not a very good short term signal. Large traders in the SPX are mostly long, while small traders are still short - a good contrary sign. Here are the numbers:
Sentiment: put/call-CBOE  61 65
VIX>50-alltmlow=8.8 12.3 13.9
Advance/Dec-NYSE.. 2215/1009 1285/1942
Weekly Net: 1206 -657
     Cumulative: 168248 167042
Weekly  NYSE hi/low… 266/42 258/34
New Hi's/Low's Nasdaq h/l 313/112 294/102
McClellan  Oscillator 13 -20
McClellanSum .+750/-1000 568 536
Newsletter Inv.Intel -Bull 52.5 50.5
Surveys-Tues Bear:-5yrs 15.2 13.9
Wed. AAII  -Bull  31.5 32.1
Bear  23.2 22.8
COT:SPX w/w large/small (net)k 11k/(14k) 10k/(8k)
COT:gold  comm.hedg long-short.000 (105k) (104k)
COT:OIL comm.hedg long-short. -325 -280
US$-WSJ 86.4 86.8
CEOinsider selling 49:1 16:1
off.&bd b/s.vs. 10% holder b/s  .160:25 .150:20
3-box rev Bullish%-  74 74
US equity -ICI Fund Flows WeekDelay (5.7B)
MMF flows Change in $B (6.9B) (39B)
MargDebt- top (300M) monthly 
ETF:mthlyEqty/ Int'l/Bond-$B
2-yr Tsy Yield: Inflation 0.51% 0.51%
TIP (ETF) Inflation 115.02 115.49

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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