Snap Back

As we expected the market rebounded sharply from an oversold position this last week. With such a sharp rebound from the recent low of 1343, we feel a revisit to test this low is a distinct possibility. The news from Europe was less than encouraging last week, and a disappointment from the Greek situation could well be the catalyst for such a reversal this coming week. This week we will increase our short position by 2 contracts at any price above 1405, placing a stop for the full 5 contracts at 1423. Our target price is the first daily close below 1360 where we will cash in the full position. Should the market continue down to the recent low of 1343, we will buy 3 contracts at this level.

Market Extremes

We were stopped out again this week, in a not dis-similar fashion to the second week in September. Both these events were due to a misinterpretation of the market's extremes, overbought in September and oversold here in November. Adjustments have been made to accommodate such extremes in future, where by the markets very nature, moves can be more volatile. Speculating on the these extreme pivots accurately is where the opportunity lies for dramatically increased profitability. We are maintaining our oversold interpretation this week and will place an order to buy 5 contracts at the market open of 1364. Should the market fall we would buy a further 3 contracts at 1345 (or the full 8 if our initial order is not filled) We will set a stop at 1333 and a target price of 1393 where we will sell all contracts and short (sell) 3 contracts at a price above that level, reversing a portion of our position.

4 More Years of Same

With Obama re-elected, the market began to grasp the concept that nothing is going to change. There will be more fence sitting, more dis-agreements and in all likelihood more downgrades that are inevitable with unsustainable debt limits. The market swooned accordingly and entered into oversold territory on Thursday with a drop below the 1380 level. Friday bounced off an intra-day low of  1367 partially confirming our thoughts, with Apple being the main protagonist. We expect a knee-jerk bounce this week, as many market commentators are turning bearish. We bought 3 contracts this week at 1387, and will place an order to buy a further 5 contracts on the market open at 1380. We will set a stop-loss at 1363 and a target price of above 1410 where we will take profits.

Election Week

Events this last week did indeed swing the market up and down, however the resulting net effect was a barely changed week, that yet again does not present any clear trading signal for this week. With the presidential election taking place on Tuesday, this is not an unhappy position to be in. We may be tempted to buy a small position of 3 contracts on a fall below 1390, similarly to sell 3 contracts on a rally above 1440. Ideally we need the forthcoming week to finish at either of the above scale before we would commit a full position.The presidential result could indeed provide such impetus.