Over, Over, Over-bought

Despite being over-bought for the last two weeks, this week the market also went over-bought on a monthly basis. Unfortunately, in so doing, we were stopped out @ 1498. At the risk of ignoring the market action, we still see a sharp set-back at any time and so are placing a sell order for 5 contracts at 1500 on the market open, we will then sell a further 3 if the market hits 1509. We will set a very tight stop @ 1512.5 for all the 8 contracts and run the position until 1450, where we will take profits.

Weight of Money

This week did indeed see volume pick-up as money flowed into the market, threatening a sharp break-out. We still view this event as unlikely at this particular time. The market is currently on trend for an approx 30%+ appreciation for the full calender year, even with the vast money printing, we find it hard to believe the market could break into a steeper rate of growth. However, we cannot ignore the market action that relentlessly presses up every day. Our position now amounts to 13 contracts on the short side. If the market does indeed rally above 1488 we will reduce by 5 contracts and then place a final stop at 1498. We are also   altering our target price to any price below 1440, where we will take full profits.

Earnings in Earnest

Despite the market's overbought situation, it managed a small gain that does nothing to change our view point from last week. Indeed, it allowed us to fill our advised sell order from last week. This upcoming week the earnings season comes into full effect, we expect a lacklustre picture with guarded guidance going forward. With the last two weeks gains we see profit-taking as a slow growth picture emerges. We are maintaining our down position, and will add a further 3 'sell' contracts if the market hits 1483. We will also adjust the stop-loss to 1487, but maintain our profit-taking level @ 1422-30.

Mind the Gap

Fiscal Cliff averted !! We think not. If the US were a family household they would have an income of $22,000, they would be spending annually $38,000 and have a credit card balance of $143,000. The measures put in place in this latest deal will pay off $100 of the debt ! Hardly averted !! The market rallied strongly on reports of a wall of money moving from the bond market into the stock market, a tad fanciful, as volume for this last week was the fifth lowest for the past year ! By rallying so strongly the market has left a 'gap' down to 1431 and also moved sharply into overbought territory. We will therefore put an order in to sell 7 contracts at the open @ 1463. Should the market rally above 1475, we will sell a further 3 contracts and then place a stop for all contracts @ 1485. The target price where we will take profits on all contracts is @1422-1430.