S&P is up 50+ points today. We gapped up at the open, stayed in a
trading range for the day, then slowly rose up in the last hour, but
only to lose a small chunk and settled at 850, again. The volume has
been low throughout the day and the internals didn't look too good.
That's what prompted me to unload about half my positions in the last 45
minutes. The recent beating in my account certainly is making me being
very cautious now. I'd rather save my ammo to enter higher later when
we get confirmation for a rally than wait for one with bloated bullish
Looking at the S&P 500, TICK, and Advance-Decline line. Aside from the
open gap up peak, both the TICK and A-D line failed to impress
throughout the day. Actually, it was lack of strength in the numerous
840 tests and the weak 850 breakout about 3:20 that worried me. Notice
the lower lows in both the TICK and A-D line at the 840 and 850
breakouts in the chart below.
[caption id="attachment_886" align="aligncenter" width="500"
caption="S&P 500 internals"][/caption]
The first to go was -90 DELL @ 9.90 at 3:25pm for about a 50% loss. I
bought DELL at the beginning of October for \$16.49 and it has been
underperforming throughout the two months. There's been little volume
since I bought, up or down. Even with the exuberant buying on the market
today, DELL failed to break above \$10 (it did close at \$10.14). Most
important reason for me selling this long term holding now is that
there's very little volume even on this up day when everyone's expecting
a real bear rally.
[caption id="attachment_887" align="aligncenter" width="500"
Next up, I sold my C calls from the strangle placed Friday. As I
said earlier in the day, the news that the FED is bailing out
Citigroup has rocketed its share price from \$3.17 at my time of
purchase to \$6.50 on the morning rush. However, C share price eased
down throughout the day and failed to break \$6 with high volume. I sold
at about \$6.05. I purchased the +2 Dec 5 calls for \$0.79 and sold them for \$1.77. This was a
speculative play and I didn't want to be greedy. So I sold when C share
price showed it's lacking steam to continue to move up ahead.
[caption id="attachment_888" align="aligncenter" width="500"
Lastly, I sold my +2 ABB Dec 10 calls purchased at \$1.55 for
\$1.70. A breakeven trade after commission. The drawdown was humongous
in this trade since I have missed some previous stops. The ABB share
price action is a lot like DELL today, a lot of fireworks but no real
substance. Yes, the price is up a lot today, but there's no volume from
it. In particular, in the last 15 minute, ABB dived back down to its
major pivot point of \$11.10. I quickly unloaded my calls then.
[caption id="attachment_889" align="aligncenter" width="500"
Like everyone else, I am really hoping for a good bear rally. It would
do everyone, both bears and bulls, some good at this point. The thinking
is, after so many fake rallies lately, this one has to be it, right?
However, having learned my lesson in bottom picking in this bear market,
I'm putting my hope/logic aside and interpret what I see in front of me.
From today's price and volume movement, this rally doesn't seem like it
will follow through.
I do hope I'm wrong though, if we can hold the 845/840 level on the
S&P500 tomorrow. Then I would be looking to add to my already 60% long