Friday, June 07, 2013

Storm watch update and buy XRT

Buy XRT via selling Jul 70 puts
XRT is the retailer ETF. Chart support at 70.

I put the stock market on storm watch on April 24, 2013 (link) when the SPY closed at 157.88. The reasons were two fundamental indicators, Schiller PE10 and Value Line appreciation potential, plus the sentiment indicator of a bull on the pogo stick appearing on the cover of Barrons. 

The SPY intraday top was on May 22 at 169.07. To the correction low, we have seen a 5% pull back. Does that satisfy the need for correction? No one knows for sure. However, I can talk about the Fibonacci retracements. In terms of price, it reached one Fib level. In terms of time, no, there are about four more weeks of downside chop for that. 

When price is uncertain, time is a good thing to look at. So many traders are focused on price points of support, resistance, and Fib retracements, that time analysis is ignored. For option traders, time is as important as price.

It does illustrate the difficulty of market timing using long term indicators. Even at the recent low, SPY was still above the point where I posted the warning. If I had gone all out, would I be going back all in now at a higher level? It is tricky and one reason I don't do that kind of all in, all out trading. I'm not that good, not that nimble.

Net long SPY

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