Index Option Trader

A Case For The Bulls?

March 17, 2008 – 9:51 am
For all of you contrarians out there, check out this 1.50 CBOE Equity Put/Call Ration intraday! Reversal anyone?SHARETHIS.addEntry({ title: "A Case For The Bulls?", url: "http://www.indexoptiontrader.com/blog/2008/03/17/a-case-for-the-bulls/" });

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Double Bottom SPY - Possible Bounce?

March 13, 2008 – 9:49 pm
With the recent lift, albeit possibly temporary, there is no doubt that the SPY is in fact forming a classic double bottom pattern. According to technical analysis, a double bottom is usually indicative of a lift, with the target price being at the distance between the top and bottom of the swing high and the double bottom, to the upside. The chart below shows the setup: While we know that this setup seems unlikely to play out as problems with "insert favorite economic doomsday scenario here" are still on investors minds. BUT.. but we may get some type of lift in the coming weeks, as the Fed will be making big moves at the monster truck rally on the 18th. Whether or not these cuts have been priced in, as I stated before, is still unclear. S&P came out saying today that the "END IS IN SIGHT!" in terms of the ...

Posted in Equities, General Commentary, Indices | 1 Comment »

Here We Go Again.. Retest

March 10, 2008 – 10:05 pm
As many of you know, the major indices are at a pivotal, well...pivot. The SPY, IWM and others are in a position to retest the swing lows set in January 08. The SPY is set to retest the 127.50 levels, and the IWM at the 64.50 levels. We may see a slight bounce here to the upside if support holds, as the 2-period RSI reading for both the SPY and IWM ETFs are very oversold on a short-term basis. Variables such as a surprise Fed rate cut, the high Equity Put/Call ratio, and Q1 earnings projection may provide some basis for a lift across the broad markets. Then again, we have $107 oil, the dominant credit problems, and a slew of other unfavorable macroeconomic conditions, so breaking through support may ensue in the coming days.  While Fed funds futures point towards a 98% chance of a 50 BP cut, whether ...

Posted in Equities, General Commentary | 1 Comment »

Get Long? Yes, You Read That Right.

March 4, 2008 – 7:25 pm
I may not be the first to say it, but I certainly won't be the last... it may be time to get long. Reference the image below: While at first glance this chart looks intimidating, its not. The red and black area indicator is the NYSE Summation Index (A popular (or not so much?) market breadth indicator that is ultimately derived from the number of advancing and declining stocks in a given market. Many people regard it as an excellent indicator of the overall "health" of the market and the market's current trend). Above we have a weekly chart displaying the index of choice, the SPY. On top, we have a weekly VIX measurement. Moving on... A cross of the Summation Index into positive territory is usually indicative of the beginning of a bullish trend, while a dip into the negative is usually indicative of a bearish trend to come. As ...

Posted in Equities, General Commentary, Indices | 1 Comment »

Get Shorty

February 25, 2008 – 11:18 am
It looks like we have reached an all time short interest level in the NYSE as of February 15. 14.4 Billion shares is the number of shares short on the NYSE, or 3.8% of the total shares outstanding. For those of you contrarian investors out there, this news should be revving up your bullish sentiments. This news isn't really a surprise given all of the credit/energy/housing problems of late. In terms of the previously mentioned SPY triangle setup, this may bode well for an upside breakout, but we shall see. SHARETHIS.addEntry({ title: "Get Shorty", url: "http://www.indexoptiontrader.com/blog/2008/02/25/get-shorty/" });

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SPY Symmetrical Triangle Part 3

February 24, 2008 – 10:35 am
Part 3 in the SPY Symmetrical Triangle series. It looked like the market was going to close down fairly substantially on Friday, until the news of a possible bond insurer bailout resulted in a rip roaring rally into the close. As a result, SPY is STILL trading inside of the triangle range. As many investors/bloggers are speculating on its future direction, here is a variable that makes a case for the bulls: The VIX. As you can see in the chart above, the VIX has been forming a descending triangle pattern lately, which generally means that the VIX should be heading lower pending a violation of the base trend line (around 24). If it does indeed breakdown into the lower 20's/high teens, the market should break the upper triangle trend line sure enough and head a bit higher. Just as the SPY has major upside resistance, so does the VIX at ...

Posted in General Commentary, Indices | 1 Comment »

SPY Symmetrical Triangle Part 2

February 21, 2008 – 7:59 am
This is part of my previous post, commenting on the SPY symmetrical triangle setup. As one commenter duly noted, there hasn't been any really significant volume to confirm the direction going one way or another.  As you can see in the chart above (as of yesterdays close) SPY temporarily breached the upper trend line of the triangle. Some traders take this trend line violation as a signal and get long, which I believe is jumping the gun a bit. On the other hand, other traders usually wait for a candle to close (we're talking dailies here) above or below the trend line before committing to a long or short position. Options traders may try to get in before the break as well, picking up cheap OTM calls if there convinced SPY is breaking out to the upside, or visa versa picking up cheap OTM Puts if they think were headed south. ...

Posted in General Commentary, Indices | 1 Comment »

$100 Oil - Here We Go… Again

February 20, 2008 – 1:55 pm
From TheOilDrum.com The price for West Texas Intermediate (WTI) oil closed above $100 for the first time on February 19, 2008. "Rising oil prices have been giving a clear signal of pending shortages for over five years now," according to TheOilDrum.com. By ignoring this signal, world leaders are steering the world toward an energy disaster characterized by shortages, high energy prices, inflation, civil unrest and famine. The $100 a barrel closing price is a sign that times will never be the same again. "The world is entering a new era. In this new era, the supply of energy will dominate the political landscape in a way that is not being recognized by any of the presidential candidates," according to TheOilDrum.com. I still have a hard time imagining why investors are shocked that oil has traded north of $100/barrel. Sure the idea of $100 a barrel isn't too settling when you consider how ...

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Global Agriculture Inflation – A Brief Overview

February 20, 2008 – 11:24 am
Excerpt from “Waves of 2008″ written by our Chief Research Strategist Anthony Tsung. Feed Grains--Corn: • Ample supplies together with a continued lack of competition and firm demand overall, have boosted U.S. corn export prospects to a record 62.0 million. The record was reached in 1979/80 with 61.8 million. • In China, strong demand for feed grains coupled with persistent food price inflation will keep exports to the lowest level in over a decade, despite good production in the last 2 years. • Argentina exported at a record low pace for the first half of its marketing year, but a cap on both old and new-crop export registrations leave 2007/08 shipments uncertain at this time. • The EU is facing a shortage of feed grains; while much of the corn is most likely to be outsourced from Brazil, this will allow the United States to backfill in certain markets or to increase share in others. ...

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Credit Problems Continue to Sweep the Street

February 19, 2008 – 4:32 pm
Who would have thought, more writedowns? Who knew! This shouldn't come as a surprise to those familiar with the credit situation of late. Looks like the Big Boys on the Street may be ready for Round 2 this quarter, writing down north of $200 Billion in losses within the commercial mortgage-backed securities and other debt instrument markets. From the New York Times: Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets. In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled. The breadth and scale of the declines mean more pain for major banks, which have already written off more ...

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