Tuesday, September 8, 2009

did you buy last week's pull back?

The VIX spiked to 29 last week -- a huge move in percentage terms given a shallow pull back of only 3-4% for the market. That told you we weren't going much lower -- too many people were positioned for a big drop paying big premiums for puts -- when everyone realizes they might need insurance, that is when it will be most expensive. Are we just going to spurt to new highs? that is an interesting question. Its harder from here given the drop in the VIX (today's jump is holiday distortion) and options expiration approaching. Last month I was sure we wouldn't break to new highs and then what happened? new highs on expiration friday. Guess everyone else had the same thought.

So the question will be are we going past 1040 before next friday? I am somewhat skeptical again given that this area is around one of those fibonacci numbers -- we paused for 2 months at the last one near 950. So the market rallies another 8% and we pause for a shorter time period? that seems too aggressive. on the other hand the demand for stocks is huge -- unrelenting -- so why not assume further gains? tough call. For a trader the key is to have the most exposure when the odds are in your favor and to reduce exposure as it gets harder.

One thing that is undeniable? have you seen what the commodity tech players are doing? wow. semi's, disk drives, EMS, distributors like AVT, etc. economy has to be getting better unless you assume that all of these industries have removed so much supply that even weak demand can drive an upcycle -- is that even possible for these managements to do? history says no.

Stocks:

One fly in the ointment is CY -- they are supposed to be perfectly positioned given their programmable system on a chip business but the stock has been weak of late -- granted after a huge move off the bottom. watching this one. as far as I know there is nothing wrong but I don't have enough good info to know for sure. this could be a great opportunity to pick up a name on a pullback. I'll try to do some more work on it.


that's it for now

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