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.

Storm Watch

Further falls ensued this last week as we expected. Unfortunately, with the release of a good US GDP number on Friday, the market rallied off the lows moving the market out of the 'oversold' territory that would have provided a full buying opportunity. As it appears this may be a blessing in disguise as a number of factors come into play this week with the potential for sharp swings one way or another. The huge storm off the east coast may turn out to be of the teacup variety, alternatively, if it combines with other weather fronts, large scale damage could follow. We also have the month end on Wednesday, which may influence movements in the latter part of the week. Company results continue to show weakness and election jitters will also be restraining factors. Levels where we would initiate a small trade are below 1396 where we would buy 3 contracts and above 1445, where we would sell 3 contracts.  

The Top Line

Volatility returned to the market this last week, and with a bang ! The catalyst was a premature release of earnings results from Google on Thursday, the real story of course is the severely slowing top-line growth in line with a global economic slowdown. This, despite the huge QE undertaken by central banks demonstrating the ultimate futility of such efforts. Fortunately, the market rallied to just above 1460 on Wednesday and allowed us to initiate a small short position as reported on the Portfolio blog. Much of the indexes damage on Friday was done after the other world markets had closed and so we expect a degree of follow through first thing on Monday. Although not oversold on any particular time frame, we will take profits as soon as possible this coming week, with resistance seen at 1420 and 1413. 

China Update

With this last weeks falls, our initial price target was hit and profits duly taken. We will take profits first thing this upcoming week on the remaining 3 contracts. There is a raft of economic figures this week, notably from China, where they will be closely watched to see any effects of recent stimulus measures. Also this week the earnings season will be in full effect coupled with a European Central Bank meeting for good measure. With so much going on and the potential for surprises up or down we will watch from the sidelines, unless the market rallies above 1460 where will re-enter our short position as per last week, again with a stop 3 pts above previous top set within the last 4 years. 

Earnings Watch

It took an average unemployment report at the end of last week, to push the market above our sell target. We duly took advantage of these prices to sell the market between 1460 - 1470. As we stated last week we do not expect any great shakes from company earnings starting this week, and indeed to set a weak tone for the month as a whole. To counter this we are aware that with an election shortly, the powers that be will not want a weak market, evidenced by a convenient employment rate of 7.8% that even brought comment from Jack Welch. With this in mind we are revising our target price to 1435 where we will take profits on 4 contracts.