Market Update 5-27-16

There is a reason people say the trend is your friend.  When the market is moving in a certain direction it has momentum and you have to respect that energy and let it tire itself out.  Don’t get in the way of a Mack truck as it’s barreling down the road.  Let it run out of gas and then you can watch it go back downhill. Today may be a big day because of the holiday and the Fed.  If someone opened an ETF on volume then I would be bullish on that because that’s the only thing I’m sure of right now.  

Market Update 5-25-16

Got out of my SPY bear call spread at 50% max loss.  The market conditions completely shifted and I was completely wrong about my short term prediction.  Housing data and strong earnings went against me.  I'm still overall bearish until wages rise, unemployment numbers come down and banks start giving mortgages to people with credit lower than 730.  However, I am short term bullish.  We might see the pullback at the end of the week when people start to go away for the Memorial Day weekend.

Market Update 5-24-16

We had some good numbers in the housing market data that helped to drive the S&P and other indexes higher today.  If you had the guts to be bullish at the end of yesterday's trading you did great today.  I thought about it but held back because of my bias to the downside. 

I sold some calls in the SPY this morning because of my overall bearish position.  We'll see what happens tomorrow but I think we are very overbought at these levels and I'm looking for the S&P to go back to at least 205.

Volatility is Great For Profits

I've been paper trading over the past few days just to keep active (I was stacking my investing funds into the preferred stock PFF for safe keeping while I figured out a plan).

Here are my results:

Granted if I was using real money I would have used spreads instead of naked transactions and made about half, but over the past few days I've made over $5,000 in paper money trading the volatility in the market.

I stuck to trading the SPY exchange traded fund because it's what the market is beta-weighted to anyway.  If the S&P goes up most stocks with solid balance sheets and good earnings will go up and vice versa.  

My approach was to wait for a pullback to around 204 or a jump in price to around 206. When the price went up I would sell call options and if I was in my position too early (meaning the stock continued to rise) I would buy put options to increase my bias to the downside (negative Deltas).

When the price would go down I would liquidate my positions when I made 50% profit or more and begin selling put options.  Again, if I was too early I would buy call options to increase my bias to the upside (positive Deltas).

Current Trading Plan 5-21-16

There's a fight going on right now between the bulls and the bears.  No one is going to win in the short term because there is not enough market data or any world events to say the market is going to go down.  On the other side, there is not enough data to say that it will go up. 

The middle and lower class are not making enough money to sustain retail earnings and the banks aren't lending like before allowing them to buy things on credit.  The engine of the economy has stalled and the only thing to restart it is to increase wages for all workers and to open lending opportunities for lower income earners.

As for the short-term market direction, after the big drop we had this week we have recovered already and it will probably make it to 206 on the S&P. However because of the tension in the market and the trigger happy bulls and bears when we reach around 206 the market will be smacked back down to around 203. 

As most people know the market climbs slowly but falls down fast.  Generally, I'm bearish because we are overbought at these levels. If there is a big swing to the upside I'll sell calls and buy puts.  Conversely, after a big swing to the downside I'll sell puts and buy calls.