did you cover a short too early too or was this just a random comment? btw does anyone have any color commentary on msft? they have lost 75 billion in market cap since the oil spill . but seriously, this drop is pretty amazing since they have nearly drop 15% in 8 trading sessions. for the sake of fun you can do a 1x2 ratio put spread with the jan 2011 20 and 22.5 strikes for a credit of 40 cents which gives you a breakeven range of 17.10 to 22.90. for perspective's sake the panic low in march '09 was like 15.30 and the stock quickly recovered to the 17 area. so a pretty low risk trade unless microsoft turns out to be a ponzi scheme. xom too is another strange one. i know people have their doubts about the xto deal, but this is getting pretty steep too. same sort of trade except you can use the jan 2011 47.50 and 55 strikes for about a nickel credit and a breakeven of around 40 to 55. xom hasn't been below 40 since jan '04. point being....skew in the stocks to the downside is getting pretty big.
Some think that the various derivative and futures related such as ES are driving the moves in the major large caps like MSFT and XOM. AAPL is still roughly in the area of its Mid April earnings and product releases. XOM, AAPL, MSFT, PG, JNJ, IBM and GE are the largest SPX - ES Market Caps and since AAPL has been hanging tough (for the moment), the others have to bleed more than necessary to move SPX Down as much as it has been SPX - ES Capitalization Analysis Notice the difference between the 50 day SMA vs 200 SMA on the SPX Equal Weight and the same on SPX.
I have another question(s) or can you confirm my thoughts. How do you play the market ad a whole? Do you buy something like a proshare fund? Are some proshare funds more like a short eve though you are buying into a fund?
LOL at JPM upping AAPL's price target to $400. I guess now we know who's stuck in their longs. Congrats to those who listened and shorted 1120-30. Be patient, the market will have its shakes and bounces, but the target remains at 940-50, short-term. For those who are long, I suggest seeking protection. For those looking to buy a dip because so and so has lost so and so market cap... god bless you. And good luck.
Great call CXbby! What do you think will happen longer term? Like in a year or two? Will it continue to trade in a range (950-1130)? Is there much of a chance for a double dip or way too early to tell?
Is there a chance for the 940 target to be voided? I mean, is it possible for your analysis to yield a new target before the 940 (or anywhere close)? For example, a week from now you look at the charts again and see something different. Or is it that you won't look at anything until it gets close to your 940 target.
etfs spy, dia, qqqq proshares and direxion have most of the levered and inverse etfs. just go to etfconnect.com to check it out.
First off, yes it is way too early to tell. With that said, very preliminarily, I am looking for a weak, grinding rally off of 940. Target of around 1000-50. Time frame of around 2 months. Then a end of year crash, no target as of this time, but I would imagine at least the 666 low. Just speculating. When the time comes I will trade it according to how things play out. Nothing is guaranteed. I don't know for certain how REALITY will play out, but I can 100% plan out my trades. With a current stop of 1130, I am basically breakeven if I am wrong, and a huge trade if I am right. Something very drastic has to happen for me to change the plan itself. For instance, if we rally 30 points tomorrow, I will be 100% more likely to add than to get out of my shorts. On the other hand, I won't hesitate to take some profit at 960 or 980 just because we haven't hit 940 exactly.
Follow up question to this. For this preliminary prediction, did you come up with it based entirely on technicals? Or is that more just a general idea based on your perception of the economy? If it's the former, this is where I've always run into problems in my head with technical trading. Obviously, you're not making a trade based on that, so this isn't an issue for your prediction, but I've seen talking-head technical traders talk about long-term moves like that. For that, I just don't understand making a projection 6 months out (or even 2 months out) ignoring fundamentals. It seems like the market should move very differently in 6 months if the global economy double-dips vs gets back on track. But it feels like some technical traders just think that's completely irrelevant.
It is not guaranteed, but it is a solid effort to go with the strongest probabilities. One has to allow for alternate scenarios to control losses and being able to recognize and take advantage of new opportunities. <hr> <i>The expectation (highest probability) is that "X" will happen and one will go with that unless "Y" happens. If "Y" occurs, then that can either delay or completely rule out that "X' will occur.</i> <hr> <i>Rigidity</i> can be costly. <hr> <hr> You are still looking at the <i>Fundamentals</i> as being the key for Market direction and global economy well being. Both Copper and the BDI (Baltic Dry Index) aren't looking to happy at the moment. China has counted on the U.S. consumer to buy its exports and the stagnation in the U.S. hurts them. Germany grouses about the <i>Club Med </i> countries not being thrifty enough and carrying too much debt, yet Germany needs markets to send its exports to. With a recession likely in Europe and possibly a Depression for some countries, Germany will be forced to look elsewhere to send exports to. Until at least some of this debt is reduced, world economic growth is going to be slow. The ZIRP (or near ZIRP) hasn't been able to boost the U.S. housing market much because so many homebuyers are still substantially <i>Underwater</i>. The flip side of the ZIRP (or near ZIRP) is that those who <i>Save</i> feel pinched because their assets in CDs, Money Market funds, Bonds and similar aren't giving them much in the way of returns. Since their expected Cash Flow has been diminished, they are hesitant to spend.
The last lines sound like Japan's lost decade. Japan's government debt's worse than ours. Their only consolation is that it's domestically held.
I know of at least one Blogger that has suggested a <i>Japan scenario</i> as being the <i>Destiny</i> for the U.S. <hr> July 1 A Day the Intermarket Relationships Fell Apart Temporarily The comments are interesting because there is the possibility that some (retail, institutional, hedge funds, etc) in the Markets have not adjusted their positions to account for increased volatility and are going to be forced out. Hedge funds that are on a 2% + 20% Plan might be pressing harder than they should in the second half of 2010. Sitting in bonds and similar might enable them to cover the 2, but doesn't help much on the 20.
Question. If I want to short the Market (S&P) as a whole, I would buy something like Proshares SH fund where they are looking at 100% of the Inverse of SPX. So, if the S&P 500 goes down 5%, the fund should increase by 5%?
No, Absolutely not. Unless for daytrading purposes or holding for a few days, stay far far away from ANY Inverse, or leveraged ETF/funds. This is due to a purely mathematical "time decay" that depreciates every one of these instruments in the long run. This is ESPECIALLY true for Short, and leveraged Short funds, as the effects on them are amplified. For those who don't understand what a time decay is, simply look at these funds' past performance. SH compared with SPX the past 3 years: SPX's May high of 1220 was about 33% off its 2007 all time high of almost 1600. Meanwhile SH's May low was BELOW its 2007 low. QQQQ compared with QLD: The QQQQ rallied about 2x from its November 09 lows to May 10 high. Meanwhile, QLD, supposedly a "double long", is only up roughly 3.5x in the same timeframe. The .5x was lost in the time decay. And worse yet, from its 2007 high the QQQQ was down from 55 to a 2008 low of 25. In the same period the QLD went from 120 to 20! So in other words it did not perform up to par on the upside, and when going down, it was much much worse. In theory, mathematically these inverse and leveraged funds will all eventually, and inevitably go to 0. A few of the leveraged Financial ETFs just recently had to reverse split because they were down so much(FAS, FAZ). They are only useful for daytrading purposes. So to answer your question, if you want to short the S&P, just SHORT the S&P. Either the SPY, or ES futures. Or better yet, short one of these Ultra long ETFs if you can borrow them. SSO for S&P and QLD for NQ.
