I posted the market would likely be range bound or boring last time -- dec 2nd is the date stamp but I had been meaning to write that comment for at least a few days prior. looking back it turns out that the SPY has been in a $2 range from 109 to 111 since November 9th. The IWM has been between 58 and 61 since about that time. Dubai Friday is the only time the market has been outside those ranges. great time to have sold premium -- question is how long can it last? can it last through expiration? would be nice. Can it last through the end of the year? possibly. We were oversold recently but couldn't rally -- now we are overbought and can't really fall. Last note I said I thought it was more likely we have a pull back rather than a big rally -- now I'm not so sure.
The SMH getting to $27 or breaking out from the range it had been in since early August either means one or two things -- rotation continues as the energy/basic materials area has gotten whacked while tech/semi's outperformed or it means the range of the market will be resolved to the upside. We are still over bought so its likely we meander longer but I don't think we will see a decline below 1080 -- at least this year.
One reason the upside was capped is because we are hitting the half way point from the lows to the highs (roughly 666 and 1565). The QQQQ's hit that point around $40 -- late July is when the index first got to that level and it took until early-mid sep for the index to really break free of the $40 level. We first got to the 1100 area around mid oct and then had a sharp pull back to the 1025 level. We have been back around 1100 since early November. So in comparison to the QQQQs the SPX has spent about the same time -- break out could happen now if we got the momentum. I'm thinking it will be another week or so before the overbought condition is worked off but next week is expiration week -- lots of folks have sold premium and are sitting on fat profits. that means any movement outside of the range that has been in place will lead to options sellers panicking -- adding fuel to the rally. I think the highest probability is we don't break out of the range but if we do -- expect a pretty good gain.
one reason why I don't expect us to break the range? weakness in financials.
ERII -- the stock popped partly due to an upgrade from Baird and partly due to their buying one of their competitors -- someone with a similar device that works best in smaller plants. The device is lower cost and not as energy efficient but the lower cost is what matters for the smaller desalination plants. this expands ERII's market into an area that is less impacted by financing troubles. Also Pump Engineering already has a business outside of water -- they sell to nat gas processing plants. ERII has talked in the past about taking their ceramic tech and energy recovery ideas to other industries but nothing yet -- this gets them started. a big deal. water is a great place to be but if you can leverage existing tech to get into other markets that's a great growth and margin booster. I'm hoping to get long some more if it can pull back towards $6 -- so far the most it has pulled back is to $6.40 maybe. but the market hasn't had a down day either -- we'll see.