Friday, August 29, 2014

Weekly: Bulls cross the Rubicon, 51% bulls at AAII

The bulls have crossed over the 50% Rubicon at the Association of Individual Investors (link) 51.9% bulls as of 8/27/2014. Going forward, the high percentage of bulls is a red flag for the stock market. That said, the continued rally has me scrambling. Readers might remember I sold tons of calls during the recent dip, and many of these short calls are deep in the red. The loser list include calls that I sold on AMGN MRK MSFT SPY. During this recent rally from the SPY 190 lows on August 7th, I have made money, but have significantly underperformed a buy-and-hold approach on the 5% up move.

A couple of weeks ago, I wrote about everyone expecting a correction and that a sharp rally might be what frustrates the most people. I did not expect so sharp, so immediate a rally and have paid for it. C'est la vie. Bonds also continue to rally even though the most recent QE program is scheduled to end in October. Thank goodness, I didn't go long TBT (short bonds).

I made a record number of trades during the calendar month of August. Some might say, over trading. We will see how it all comes out in the wash at expiration time. I am posting about a hour before the market close. Have a good three-day weekend. Cheers, to the end of summer. Here are this week's trades:

Fri Sell AMGN Sep 134 puts @138.7. Rebalance short strangles on Amgen by selling puts. As AMGN moves up my short Sep 140 calls are threatened. Even after this move I am net short, but less so.

Sell BRKB Sep 135 puts @137.1. I sell another layer of puts on Berkshire to rebalance, I also cover short BRKB Sep 115 puts .01 to free up a smidgen of buying power.

Tue Sell MRK Sep 58.5 puts @60.2. Rebalance short strangles on Merck by selling puts. Those calls I sold on that -317 Dow day a while back are coming back to bite me. As the rally rolls forward, the pain increases. I keep thinking there has to be a retracement of the move, but so far, it has almost been straight up for the major stock indices.

Mon Sell AMGN Sep 128 puts @134.6. Rebalance short strangles on Amgen as it makes new highs.

Sell SPY Sep 195 puts @200.1. Another day, another layer of index puts sold. The stock market rally rolls on. How much gas does it have left in the tank? How many bears still have money to go short? How many are covering? For those that are still short, what is their cry uncle point?

Sell ASH Sep 105 puts @108.1. Rebalance short strangles on Ashland. A curious case here, where a little while back, ASH gapped lower on earnings, but has climbed steadily since then.

Position Summary:
long GLD
net long ASH DIS IWM SPY

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