Thursday, October 23, 2008
Don't Stop Believin'
Well that was a roller coaster if I've ever seen one. SPX started the day near 900, rallied in the first few hours up to 920, then fell off a cliff to 860 and by the last hour of the day staged an unreal rally that ended around the 910 level. Seemed like the last hour rally was massive short covering off an oversold condition. It was almost as if the Plunge Protection Team themselves was in the pits buying the SnP's on the offer, so don't stop believin' that we can rally I guess, lol.
I took off my SSO puts yesterday at the close for a handsome profit since Tuesday's inside day pattern. This was part of a strangle I initiated by going long both the Nov 35 calls and 32 puts. The puts doubled and then some in one day! The value of the puts that I sold surpassed the total cost of the strangle I started with originally so essentially I am now holding "free" calls that have 4 weeks to make money and my worst case senario is I break even on the entire strangle. Now that's what I call a good risk/reward.
Overall the close was positive and strong enough for me to start to develop a new bullish bias going into Friday. However, if we can't get over that 920-940 level with volume tomorrow then todays buying into the close means nothing. We need a continuation Friday to confirm what we saw today. Then, maybe we can look for more upside next week. But honestly I hate to think of next week when its still 4-5 days away lol. This market can do so much by then to change things.
Bottom line, the trend is still down on the daily, 60min, and 30min charts so dont fall in love with the upside traders, I dont care how magical CNBC makes it out to be. Trade safe.