Monday, September 26, 2011

Divergence becoming undone? And indices about to fill a gap.

Home sales were beneath expectations, but influence on the market seemed minor since we were already travelling down and hit the morning low just little after numbers came out.

While tech was clearly leading the market the last few weeks, that picture changed somewhat today. The Dow was leading Nasdaq with 1.5%. So big caps are outperforming tech, thanks to the financials among others.

Metals were getting killed again overnight, but they bounced hard and made good effort to erase most of the losses. Volatility is enormous right now (see the wild swings on the chart below, and pre-market was even worse) and the market seems to trade from rumor to rumor. No real edge here, every new rumor can send the market in opposite direction. Only short-term (day-)traders can make money in these type of markets. For longer-term traders it's best to wait for more clarity about the Euro-situation.

SPY 5m-chart for the last 2 trading days:

Daily charts for DIA and QQQ. For DIA, a backtest of the broken trendline (and a gapfill) seems quite likely, we're almost there. Same gapfill expected for other indices, including tech.

With market putting in higher lows and higher highs in pre-market, I anticipated on a possible retest of the premarket high of 1150. So I shorted 1100 futures puts and went long the same amount of 1180 futures calls for a credit of $200 per pair. Expiration of the options, this week. And since I'm still short ES-futures, the only 'danger' is when futures fall below 1100 (this is the point where my profits will be limited). Per 1148, I took profit.

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