Saturday, August 16, 2008

What is this market?

Can it still be called Bear market? Not just based on -20% common definition of bear market, but based on volatile personality specific to first few phases common to the bear market? Panicky selloffs and vicious retracement rallies seams to be subsided some, amplitude of powerful swings getting smaller and smaller, "last man standing" (commodities/energy related) has fallen, sectors rotation getting more and more short lived and totally unpredictable ( not fundamentals, nor technical analysis capable of helping ) - markets are in the process of looking for new leaders.

As a last resort market is hanging onto gains in BioTechnology Sector, but based on multiple failed breakouts from current consolidation areas ( GENZ, CELG, OSIP, GILD) I think BioTech is about to be sold off as hard as Pete Najarian's "Real story" Coal.

What sector will assume leadership? Some like to think - Technology, but ( I might be wrong - I've been wrong before) Captain Gadgets stocks like AAPL and RIMM or Wireless Chip[o] QCOM - they don't look to convinced in its own power now as well.
Questions, questions...

One thing I do know - as long as market stays "bear","bull" or just plain "traders' market" - I am happy, there will be trading opportunities to be found, as long as it is not a "STAGNANT MARKET" ( my biggest fear - I am an action junkie and I am not so good with recordkeeping for selling options, plus concept of unlimited risk does not appeal to me ), but it is highly unlikely to happen in election year - market does not like unknown ( Although - what is "unknown" in ongoing campaign? Both candidates are equally incompetent, clueless, experience-less or worse, "I will change something I have no clue what no idea how, but I will have great learning experience at your expense" or "I am totally unaware what I was doing in politics for such a long time, even if I learned something I forgot it long time ago, but you will pay to my economic advisers none ever heard about and I will ask their opinion - if I ever find Post-It with their names", some say it cannot be worse than our current Fearless Leader in the office [great find of Tim Knight] - trust me - it CAN )

Back to markets...
I still think Energy sector is poised for upside move, it made an attempt this Wednesday ( I was really "surprised" by timing - right after Tuesday's post Energy/related ready for some prime time again? - presented wonderful day trading opportunity ), I do think it will move higher within next few weeks (since biggest open interest on XLE puts was at $71 strike - it made perfect sense that XLE stayed "pinned" right under 71, as well as QQQQ right above 48 due to biggest calls open interest at $48 )
For September options congestion area for XLE is, so far, $72 on call side and $70 on puts side with puts/calls ration of 3/2 - it might be viewed, on one hand as bearish, but on another hand it might just be hedging ( I am betting on "hedging" - too many buy signals on various timescales in energy related stocks )

I turned bearish to neutral on NASDAQ100 due to bearishly looking BioTech components ( as well as big tech names).

As of now (all positions opened during last 3 days, all options)
I am long XLE, DIG, OIH, EWZ, multiple solar names,
long "metals basket" ( ATI, STLD, TIE, KALU, ACH - in order of positions sizes - totaling to 5% of trading portfolio),
slightly "suicidal long" gold miners, some silver via PAAS, OIL via USO and ... UNG ( yes, again, I am afraid it is becoming "revenge" trade for me ), BTU (hedging it with ANR puts) and CHK
short NASDAQ100
tempted to go short XLV into October.

And - I am watching like a hawk R2K ($RUT/IWM) - it failed to hold "new" highs - I have my finger on "short/puts" button.

All of the above are not positions built based on expectation of any prolonged meaningful trend, they are purely "trading" short term positions, all are relatively "small sized" ( as compared to "July 15th long financials" or smaller "first week of August long QQQQ/SMH" trades (those of you who will remind me of bailing out of latter for no reason other than "Trading not to lose" - will be banned from this site :-), we will have to wait 1-2 weeks for possible "trending trade" in Energy going into Fall season. And...volatility (VIX and VIX/Q) is in upper teens - time to buy options.