These past few months have been extremely difficult to trade.  The swings have been violent, and if you haven’t been on the right side of the moves, the draw downs can be staggering.  I’ve been fortunate and have been able to mitigate a lot of the nasty losses a market like this can bring about.

As you can see from the chart below, we have started to see daily volatility subside a bit and it looks like the indicators are beginning to point to a slight bullish bias. My personal belief, and that of my trading accounts positions, is that we are in for a Christmas rally.  Take a look at the chart…

S&P 500 - December 15 Daily Chart

You can see that the MACD is just about completely positive, and today’s close puts us just above the three DMA’s.  Give that, and the generally light holiday volume, I would not be suprised to see a slight drift up for the next few weeks.

This week in particular is going to be a harsh one.  With the two-day fed meeting, the possiblity of an auto bailout, options experation and a host of new bites… we are in for some serious movement.  That of course is compounded by low volume and the ability of the few big-boys left in town to do some serious market manipulation.  Just look at a daily chart for the /ES today to see what I’m talking about.

Anyhow, the holiday spirit is abounding and I’m thinking we drift higher.  My post a few days ago indicates that I’m heavy into 2x Bullish ETF options right now.  I’ve also hedged the papermoney account with a largish position short China as I firmly belive that we are going to be in for much more bad news come 2009.

I’ve closed my FXP(19.23 +0.00), SDS(38.94 +0.00), and SRS(17.94 +0.00) positions.  I’ve opened an SSO(81.61 +0.00) call position for January as well.

As expected, it appears that President Bush is going to tap the TARP money to bailout the auto industry.  I’ve taken advantage of the low open this morning and scalped a bit of profit.  I set my initial sell orders a bit too high and missed out on some nice profits.  However, a quick 15% overnight scalp is not too shabby.

My portfolio is positioned all using the markets money right now with SSO(81.61 +0.00) and QLD(69.65 +0.00) as my two biggest positions.  I’m banking on a Christmas Rally in the next few days/weeks.

This was a crazy week in the stock markets!  We opened the week with the world markets tanking while the U.S. markets were closed for the Martin Luther King holiday.

On Tuesday morning, Big Ben and Co. cut interest rates a record 75 basis points!  The markets opened down dramatically, then bounced back to recover most of the early morning losses. Wednesday and Thursday proved to be up days in the market and Friday again brought us back down a bit.

It has been a rough, wild ride!  Wednesday brought more than 600 points of movement on the ^DJI – UN-FREAKING-REAL! I don’t expect this sort of action to stop anytime soon – so buckle up and enjoy it.

On Wednesday morning, I called a bottom – at least a temporary one.  I firmly believe that we will see the fed cut rates again at their meeting next week and that will continue to buoy the markets for a few more weeks.

We very well may see some additional movement down over the next quarter or so, but I’m still a firm believer that the markets will be up by the end of 2008.  The global economy has some serious issues right now, however I think we are working through them and that we will be able to come out ahead.

The credit markets are beginning to show some easing, and the government is getting ready to throw money into the hands of the public.  While I think the stimulus package, as it stands now, misses the mark – it will help somewhat.

In my opinion, it is a great time to buy! Financial stocks are very attractively priced, and with the recent crash in the NASDAQ(3498.97 +33.72) techs are looking good as well.  This year should prove to be a great one for MSFT(34.61 +0.00) and other tech companies.  We’ll see how it all goes!

Well, good luck!  Make sure all of your analysis is solid before putting on trades in this marketplace.  Vast sums of money can be won, and lost, in a very short time with these big market moves.  Trade smart!

Well, well, well… That was a pleasant surprise closing in the markets today.

Let me update you on the paper money portfolio.

This morning, right after the opening when things were in the toilet I was filled on all five of my positions. Of course, having a great broker I received price improvement all every last one of these.

Here they are in order of execution:

• Sold 200 Vertical SPY(165.93 +0.00) Feb 2008 122/121 Put @ $0.28
  • Credit $5,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical QQQQ(0.00 +0.00) Feb 08 40/39 Put @ $0.18
  • Credit $3,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical DIA(152.84 +0.00) Feb 08 111/110 Put @ $0.22
  • Credit $4,400
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical IWM(97.78 +0.00) Feb 08 61/60 Put @ $0.21
  • Credit $4,200
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 100 Vertical VIX(13.82 +0.45) Feb4 08 32.5/35 Call @ $0.67
  • Credit $6,700
  • Commissions $(309.95)
  • Margin Hold $25,000

The long and short of it is that I think that fear was at a high this morning, and that the market has hit a short term bottom.

At the close of the market today, I had a paper money unrealized gain of roughly $13,000 on these positions. I plan to keep them around for a while as we hopefully continue up a bit more and then I may exit early to lock in profits in this volatile market.

Please take caution in this market. If you are not comfortable with a trade – do not put it on. It is critical that you understand the risk that you are signing up for, especially in highly volatile markets like this.

Okay… So I think this is the bottom.

Could I be wrong?  Yup… If I am I may blow through about 100K of the paper money account, however I don’t think that is going to happen.  I’m working on a series of positions right now.  They are along a ton of different ‘minis’.

When I get fills on these tomorrow I’ll update the portfolio and describe my thoughts on each of these.  Overall, I think we have hit a temporary bottom and I’m willing to play it.  So here are the tickers:  IWM, DIA, SPY, QQQQ and the VIX.

My orders are as follows:

• Sell 100 VIX Feb 32.5/35 Call Verticals @ $0.45
• Sell 200 DIA Feb 110/100 Put Verticals @ $0.13
• Sell 200 QQQQ Feb 40/39 Put Verticals @ $0.13
• Sell 200 SPY Feb 122/121 Put Verticals @ $0.18
• Sell 200 IWM Feb 61/60 Put Verticals @ $0.14

I’ll post the updates as soon as I get them.  Good luck, hopefully I’m on the right side of this.  If not, it may be quite costly.

Trade smart!

It had to come soon, we were simply way to oversold. Time decay is really on our side now. If the RUT can hold the current levels until Monday then it shouldn’t be too hard to get away with a decent profit.

The major indexes today staged a late day rally that really helped. Tomorrow Big Ben gives a speech that could either move things up dramatically, or push them down like a ton of bricks!

My buy order is still out there for $0.15 for the current RUT position. If I get filled, I’ll let you know, however it appears that the market is going to need to move up quite a bit to get that fill, probably another 15 points or so on the RUT(982.25 -16.52).

So… what is going on. I think we are in for another couple of rally days, and then it’s coming down again. My rational here is that earnings have just started and they look pretty decent, that should help the bulls out for a couple of days, then whenever the first big miss comes the bottom will fall out again.

In a perfect world, the RUT will skyrocket up, I’ll get filled at $0.15 then not have to worry about it any more