Prepared by the good people at Random Walk, LLC. (and Scott)
I had a family emergency lasting the last 2-3 days. I was very, very limited in how much I could watch the markets, but I am back now. POT class tonight.
Closing Prices From Yesterday
Yesterday and Today
The market was down 264 points. The market opened down and quickly fell to a net change of down 200 Dow points, or about $24 SPX points. The market than sat there most of the day before drifting even lower on capitulation selling on the close.
As is the case with strong sell-offs, the market closed at its lows. This is why I waited until the last 30 minutes of the day to sell premium for POT and ITALY.
Why Did We Fall?
It certainly wasn’t because of the retirement of Eric Holder. Yes, he did save the government money because he refused to open special investigations on the IRS scandal, Benghazi scandal, or any other scandal his buddy Obama might be involved in.
It wasn’t because of the “sell on Rosh Hashana and buy on Yom Kippour theory”.
It sounds funny, but many of the people who link astrology to the markets have predicted this, but I seriously doubt that is a factor.
Some of it might be because the Yen is climbing due to concerns over Japan’s Government Investment Pension Fund.
Some of it MIGHT be based on terrorist concerns and rumors circulating, especially after Obama stated Wednesday that an offshoot of al Queda in Syria was close to hitting the US. But what does that mean? We have been told dozens of times that the NSA spying has broken up dozens of terrorists attacks before they happened, but no one gave so much as an example for the public to take those comments credibly.
Some of it might be people selling out of stocks to fund their losing commodities positions. Grains, gold, silver, oil, etc. are all down. Bonds were falling as well in the last couple weeks. People needing to meet margin calls or dollar-cost-average might have had to raise capital to move to undervalued commodities positions.
It was NOT Alibaba……stop listening to that rubbish.
A year and 5 months ago I said that the market will get to 17,300 – 17,400. Obviously a year out this is a guess, but it was also somewhat of a mathematical calculation. We in fact got as high as 17,350.64. Now I obviously didn’t give this a ton of credence now as we were making new highs every day because we were still acting to strong and were not getting “whippy”. But we are starting to get whippy/volatile now.
Tuesday we fell 160ish points and Wednesday we bounced the same amount. Yesterday (Thursday) we fell 264 points and fell below the 50-day moving average many traders look at. To me this is not selling yet. It just isn’t. It is Sept 25 and on Sept 12 we were at the same place. We are still 55 points away from 17,000. Chill out for now please.
It is very difficult to listen to the media and not be concerned about the possibility of a devastating an rapid decline. Reporters who are much more articulate than I, and who have an entire day to focus on one paragraph of written word (instead of hundreds of possible option permutations), are financially remunerated for being able to sensationalize everything they write. They are paid for getting a reader’s following.
Given the task of talking about the one inch of rain expected tomorrow they will recant horrific tales of n individual who drowned the last time we ha an inch of rain. They forget to mention that it was not the rain that killed them, rather they died because they were 102 years old and it happened to be raining that day. Had it been sunny they would have died from heat stroke. And they are good, very good, and spinning tales.
So when someone of better than average intelligence is listening/reading their “creation” it is understandable that they get caught up in the hype. I find myself having to fight biting their emotional hook – especially with a market that has run from 7,000 to 17,000 in 5 years. It is hard to not having a healthy concern in the back of your mind about a pull-back.
So when we have an average market swing of 80 points a day and we wake up to see the market down more than 200 or 250 points, it is hard to not get overly nervous when analyst and reporter – one after another – is on talking about 10%, 30% or 30% corrections. Keep in mind that a 10% correction in the Dow is 1,700 points. A 20% correction is 3,400 points.
So what is in store today?
I always want to point out that my opinion is no better than anyone else, and I am sometimes wrong. I am not infallible and all I do is take my (almost) thirty years experience at watching the markets and give what I feel is the path of least resistance.
TODAY, we have 3 big numbers out today. It is hard to say how things will pan out from here. On the one hand the market looks like it is dying and the media is screaming SELL. On the other than we have seen this 13 times in the last 3 years and every time people kicked themselves for not buying (more).
If we get to 17,000 tomorrow (modest climb of 55 points) I will be watching this market carefully. The 50-day moving average was broken, but it was also broken (and a good buy) back on July 13th, April 10th, and Jan 4th.
The 100 day moving average is 1956.05ish. The 200-day is at 1900.02.
If we do not bounce by at least half of what we sold off yesterday I will get concerned. Not until then, or if we go through some more numbers on the downside.
We put on a slightly unbalanced 1 day downside condor yesterday, and then sold a little bit of premium on a 16% vol.
POT is held each Wednesday night at 7:00pm eastern.
Contract the office at 1- 855 – RWT – 0008 for more details.
We had on a long $15 put spread against a short near month $5 spread. When we were down 210 we sold another $5 spread. This leaves us shot 2 $5 spreads and long a $15 spread. We also sold an iron butterfly centered slightly higher at the 1995 strike.
Too True To Be Funny
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