The collision of global markets and social mood

Thursday, May 9, 2013

New Moon, Solar Eclipse

I still think the market is set up to extend into tomorrow's solar eclipse where it could then meet with some profit taking, but there is also new moon today. The combination of the two could bring a trend reversal at any time. Somehow I don't think it will have occurred in the overnight session.

Initial jobless claims just fell to the lowest since 2008 and the futures spiked lower. Overnight there was another new futures high that was erased, however, so far the move looks choppy, and the spike on the claims number is being reversed. As long as 1622.70 holds I'll be looking for higher levels.

Seeing the reaction to the claims number tells me that uneasiness is increasing about the Fed continuing stimulus measures.

Playing the same game from last week: long SPY 163 calls hedged with SPXU. I start with an unhedged call buy, scale some at a profit level, then hedge 50% of the remaining delta with SPXU. If the market continues higher, a guaranteed profit is locked in that will increase as the delta of the calls expands against the fixed fractional delta of the SPXU position.

Suppose yesterday's high close was the near-term top for a while: just a mild 38% retracement of the November lows could target 1522. Plenty of time to increase SPXU, buy VIX calls, and load up on OEX and SPY puts.

To the upside, I still see the potential for the 1665 area where a confluence of Fibonacci extension targets reside.

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