SecurityGuy's Blog

We finally got the bounce we were looking for. Unfortunately for me I messed up on my RVBD trade.  The accounts where I traded stock  rather than  a call spread got closed.    Very upset by my bad order entry.  This happens occasionally, sometimes for my benefit and sometimes against me. 

Volume today was still anemic.  Thinly traded markets  tend to be volatile.  Up days with low volume are not encouraging to this trader.  This  market is getting harder to trade so I will  be reducing my number of positions and position size.  SPY and  IWM traded up just like the DIA.  SPY did not break its current downtrend  today and volume was anemic.  I will still be looking for additional bearish plays.  IWM does not look any stronger.  There is some additional potential for a bit more bullishness before horizontal resistance is found on all of the symbols discussed.

I am in more of a wait and see mode right now than actively trading.

Today was another down  day but is not convincing.  Volume dried up in comparison to the  selling  seen at the end of last week.  I  saw an interesting stock with an upward bias and opted to purchase it to take advantage of my perception of a potential upward push at least at the beginning of this week. I also closed my bearish DIA spread as well this week as there was more risk than benefit in leaving the trade open.

The SPY today did close down and I expect to see some potential  upward push so that we can take advantage of the current bearish trend.  The IWM was down most  of  the day today but the analysis and price action is very similar to the SPY.

My bullish dollar  trade UUP was positive today and appears to be consolidating.  The EURO is still under pressure and is still presenting a bullish scenario for the dollar. Price stop is still in play from last week.

The PETS trade will be closed tomorrow morning as it closed below my "line in the sand".  I will take another small loss.  This is indicative of  the general change in trend of the market.

TEVA is still going sideways and is consolidating moving into earnings.

The bullish trade taken today was in RVBD.  The trade broke out of a bull flag pattern on Friday.  The price  target for this is 28-29.  Because of the nature of the market now, I will close around 27.50.  I will take a percentage of the  projected target rather than hold out for the full target.  I traded this by buying stock at the open and by establishing a bull put spread in my smaller accounts.

My bearish trades are summarized here:

The DIA bearish spread was closed for a nice  profit.

The CAT trade is still  in play and I still expect the stock to surge.  I will close if the surge exceeds 53.50.

I  am looking  for an  opportunity to increase my bearish exposure. Basically I am generally waiting for the market to make  my expected move and  will not be doing much trading until this occurs.

We did not see real follow through on Friday to the downside and the price  action is providing indications that the current short term selling is over for  now.  This does not mean that it won't resume only that it may slow down for a time.  The dollar has had an extended move and needs to do something to consolidate those gains to have a long term future uptrend be in place.  I think we will get some upward momentum in the early part of the week but overall we should expect some more follow through to the downside.

Looking at the index exchange traded funds I use as market proxies, the SPY is looking like it may take a break from  its downtrend.  I don't expect this  to last long.  The move up should  not exceed the high of  Thursday.  I would expect something to about the mid-way point of  that day around 107.50 or 108. 

The IWM should not go much above 60 - 60.50 before it resumes.  This does not mean that it will.  I am expecting a fall to the 55 - 57 area in the near term.  I am looking for the push up to take advantage of more shorts.  At this point in time I am much more bearish in my market view based on trend analysis.  This does not mean that we won't change direction but for now this is my persepctive.

My sector analysis follows:

SECTOR ANALYSIS:

XLY - Consumer Discretionary - No change from what was discussed last week.  "This sector is  sitting at a support level on both the daily and weekly timeframe. Additonal downside could come but it is not significant.  I found this very interesting considering the downside experienced during the course of this week.  Bullish trades can certainly be taken and offer a very low risk to reward ratio."

XLP - Consumer Staples - We closed below 26.25 and is now generally bearish.  We could get  some move up from here so that  bearish trades can be taken from a low risk perspective.

XLE - Energy - We closed below 54.50 and I am now looking for some moves up to be able to take some additional bearish trades.  Watching for around  56 before I  will feel really comfortable going bearish.

XLV - Healthcare - Healthcare has now formed a lower high and a lower low.  I will be looking for a move up to the 31.50 area to find some viable shorts in the sector.

XLB - Materials -  I am now looking for a move up to around 31 to initiate some bearish trades.  Few trades will be taken in that direction as I am still long the dollar and the trades are highly correlated.

XLF - Financials - We closed below 14 so I am awaiting the move up to initiate bearish trades in this sector as well.

XLI - Industrials - This sector still has some potential bullish potential as we have not violated critical rising long term diagnonal trends.  We touched it this last week but did not break.  We can fall futher but the bullish trend of this sector has not broken.  The sector is not in a short term bullish trend at this time as we have formed lower highs and lower lows howerver.  Not much to do in this sector for right now.

XLK - Technology - Very much the same as the other sectors.  Expecting an increase to the 21.25 level before beginning to intiate bearish trades in the sector.

XLU - Utilities - This sector very much has broken.  Any sign of bullishness and trades to the downside will be taken in this sector.  29.50 is the next level of support/resistance.  That is  what I wrote last week and we ended at 29.53.  We can still fall to 29.25 and be within the support/resistance window.  I am still looking for some bullishness to initiate bearish trades.  Based on the weekly charts we should be expecting a fall closer to 28.  This is based on Fibonacci retracement analysis.   We are forming something of a bull flag on the weekly chart so this  should be kept in mind if trades are initiated.

Today was very hard on the bulls.  Glad that I have been getting progressively more bearish in my portfolio.  I have had  changes in the bullish portfolio and I know that the market really appears to be changing trend.  The SPY and the IWM definitely had negative days and we have officially changed trends in the SPY as  we now have a lower low and  a  lower high.  105 is the next support with 102.50 poPtentially being closer.  Based on the Bear Flag pattern that completed  today 102.50 is much more likely.  The IWM is also showing the same trend as the SPY.  IWM  is at support now. If 59 breaks 57 is the most likely stopping point right now.

I am expecting a brief respite  from the selling but we should see some more later.  The QID  trade  closed today with the sell signal. That makes 2  for 2 and roughly a 2.5% gain on average from the 2 trades with each trade averaging 2 days.  I will be continuing to trade this system for the time being. 

HSP closed today by hitting my stop.  Counting the covered  call this trade made about 3% in 3 months.  I was hoping for  this to work better and would like to have  retained more of my paper profits but trading the trend that is in front of you and what the chart says is the way it must be. 

MGM will be closed tomorrow morning as the stock price violated support. 

VPRT  was closed as well as it reached  my stop.

PETS is close to being shut down but has not violated the line in the sand. 

XRT is also close to being shut down as well.

TEVA is  still in play and was up on this very bearish day.  The covered call is still in play.

UUP is still very bullish. If there is a close below the low of the day today I will be closing the trade.  As long as UUP stays bullish the markets do not stand much chance of rallying.  I am expecting this to stop between here and 24.  It may trend sideways  some before  continuing this upward push.  I actually would like it to do so as that will allow the  trend to last longer.

I entered a bearish trade in CAT yesterday.  This trade is looking very strong and I used a March Call spread to trade this symbol.  Almost 50% of the max credit received already.

The DIA call spread is looking very strong  right now.  I  am expecting to be able to close this next week for nearly a maximum credit, not my normal 80% of the max credit. This will allow my net trade on the DIA this month to show a reasonable profit.

QID was closed and I am looking for things to settle down so that another trade can be taken.

All in all I am still very profitable and I am keeping my losses within reason or usually smaller than my gains.  Would just like to see more successful trades right now.  There has been  more failed  trades than I like but this happens to trend followers when the market is changing  directions.

One  final note, should the Dow break 10000 I am expecting the short term move to go to 9500 but  a much more  significant downtrend is likely to develop.  The government debt issues in Europe and China's current moves are beginning to change the tone of the market.  The government debt issues are significant and I don't believe this is over until the balance sheets of the majority of the world's governments,  including the US are corrected.  This will take years. This does not mean that the market will only go down but sideways can also occur.

We got a nice bullish day today.  The SPY and the IWM both had very nice bullish moves today.  Volume was more pronounced today than yesterday in both exchange traded funds.  These moves have certainly helped our bullish portion of our  portfolio. A very strong day today in that regard.  The trend has not really changed yet, but sideways could still occur.  We still need to see some additional breakdown to fully identify a bear market.

I still have the bearish call spread on the DIA right now that is doing fine.  I also re-entered QID this afternoon as the buy signal re-appeared.  Remember this trade is generally very short term in nature.  We shall see how it goes.  If it works out we are more likely to see a bear market than a bull market as we would form a lower high and we already have our lower low.  DIA rose on a very low amount of volume.

My bullish trades have not signaled a close yet so they are still open.  This week should prove to be  interesting in determing future price movement.

I still question the ability of this market to continue its upward trend right now. I am expecting a downward push to occur but until it does the trend has not changed and  the trend is our  friend.  I especially call this into question as the dollar as represented by UUP has not  weakened substantially this last week.  We should  see some additional upward mobility in this sector which will have a general negative correlation to upward mobility in the general market direction.

We have all heard the adage that so goes January, so goes the rest of the year.  There are myriads of permutations of this phrase but the expectation is that if January is up, the remainder of the year will aslo be up, or vice-versa.  I have come to not put much stock in the adages because it says absolutely nothing of all of the movement that will occur in between.  We never go up or down in a straight line.

As mentioned in Friday's wrap-up we do not have a definitive downtrending market yet.  We do have some technical damage being done on a daily period basis. Because of this I thought I would also look at some longer term charts as well as my normal daily charts.  This is to keep perspective in terms of markets trend.  This can give us an idea when bounces or continuations can occur.

The IWM and SPY can certainly have some additional downward movements.  We should see substantial moves down of 5-8% in the SPY over the next couple of months.  I still expect another 1 - 2% drop in the IWM.  Small caps started to drop earlier and should be watched for market turns.  I believe that we could see some movement up in the first part of the week due to the oversold conditions but downward direction is the most probable direction over the next couple of months.  Market turns are dangerous trading times so position size should generally be kept small until the full trend has identified itself.

On to some sector analysis. Here we go.

SECTOR ANALYSIS:

XLY - Consumer Discretionary - This sector is  sitting at a support level on both the daily and weekly timeframe. Additonal downside could come but it is not significant.  I found this very interesting considering the downside experienced during the course of this week.  Bullish trades can certainly be taken and offer a very low risk to reward ratio.

XLP - Consumer Staples - This sector is trending sideways and we have not broken out of the sideways channel yet.  A close below 26.25 is worth watching.  Another level worth paying attention to is 26. This is the 78.6% retracement for the closing highs in Sep/Oct of 2008 to the lows in March in 2009.  This sector certainly has not broken down to confirm an overall downtrend yet.

XLE - Energy - The sector traded to the price target and  has pulled back  to support.  The quick pull back may be questionable to the long term health of the sector.  Last week we discussed taking bullish trades in the sector if the  sector started to trend up. This did not occur.  We are now sitting on top of a much more critical support level as this is the former resistance becoming new support.  Push up from  here can be bullish in nature or at least sideways.  Closes below 54.50 should indicate bearish trades being taken.

XLV - Healthcare - Healthcare is one of the single most bullish sectors in the market right now.  Bullish trades in this sector should still be taken and this is a good spot to do it due to reward and risk.  Closing below 30-31 should be viewed as a spot to initiate bearish trades or close open positions in this sector.

XLB - Materials -  I wrote last week "This sector has moved through a short term support/resistance level.  On a weak up tick bearish trades should be taken to the 30 price level."  We are at 30.  This level is essential.  This level is the 50% retracement level for the same time frame of highs and lows and fib retracements mentioned in XLP. On a weekly chart we are in a much stronger position.  Bullish trades in this sector should be entertained based on the reward to risk ratio.

XLF - Financials - The bull flag discussed last week failed but critical support has not been violated yet.  Any close below 14 is reason to take bearish trades.  No bearish trades yet.  We are still forming a sideways pattern on both the weekly and daily charts.  Moves up from here could result in bullish trades and vice versa.

XLI - Industrials - The bull flag failed but the sector is sitting at a support level.  A break below 27.50/27 would be construed as bearish.  This is still true. If we fall lower 26.75 should be the expected support point.  This is true on both the weekly and  daily charts.  Weekly charts are looking much stronger than the daily charts.

XLK - Technology - We discussed this sector being very weak last week and this theory was certainly confirmed.  We fell about 5% over the course of last week.  Volume accelerated significantly during the fall.  I am still looking for this sector to bounce some so that bearish trades can be initiated.

XLU - Utilities - This sector very much has broken.  Any sign of bullishness and trades to the downside will be taken in this sector.  29.50 is the next level of support/resistance.  That is  what I wrote last week and we ended at 29.53.  We can still fall to 29.25 and be within the support/resistance window.  I am still looking for some bullishness to initiate bearish trades.  Based on the weekly charts we should be expecting a fall closer to 28.  This is based on Fibonacci retracement analysis.   We are forming something of a bull flag on the weekly chart so this  should be kept in mind if trades are initiated.

In summary, most of the sectors have fallen to critical support/resistance and the charts are very oversold in the daily time frame.  My initial analysis expected the  sectors to move up before continuing downward momentum.  This may be true on the daily charts but we are at a very critical juncture in most timeframes.  Bullish trades are most likely to be successful in XLY and XLP but mostly in XLY if going bullish.  XLF could prove interesting if bullish action on significant volume occurs.

I am going to forego analysis of my current trades but I am expecting UUP to experience some weakness over this week before resuming its uptrend.  This is not bullish for the  overall market.  I expect the 24-24.50 area to be the price target.  Instead I thought I would look at my performance for the month.  Based on closed  trades my portfolio is up .06% for the month but I only used about 1/4 of my available dollars on trades.  This means that I am closer to a 2.5% return on invested dollars for the  month.  I can certainly accept those kinds of gains.  I will be donating 10% of my closed earnings especially considering the needs of so many charitable institutions.

Wow. What a down day.  My view now is much more bearish.  The SPY and the IWM are both down significantly today.  We should expect more of  the same in the future.  I am now forecasting a drop  to the 102.50 area in the SPY.  I am expecting a drop to the 57.50 area on the IWM.  A move up is being patiently awaited.

I did make some changes to the portfolio today.  I was able to close the DIA Bull Put Spread near the highs of the day and I initiated a new Feb Bear Call Spread on the DIA 107/105.  The net Iron Condor is  now fully money ahead where I had a very small loss as of yesterday. The Iron Condor is no longer  in play but is rather a pure Bearish play.

We really need to pay attention to the changing sentiment.  The market did not pay any respect to the big GDP number this morning.  The news was sold and sold in a big way.  This keeps occurring on good news.  The selling is broad based and not focused in any single sector.  The single sector that I am really paying attention to now is  the XLF as 14 has held.  This  could call into question that we will enter a full blown bear market. 

One other critical piece that must be noticed is the strength in the dollar.  This exchange traded fund does not make big moves and it has been MOVING.  The EUR/USD pair broke critical support today so my bearish ideas are still supported.  XLF has not been playing along with the rising market since October of last year and has  instead been going sideways. It may be because of  the sideways actiion over such an extended period that the XLF did nothave far to fall yet.  14 is still essential if the bullish  trend is going to resume.

I will be doing more detailed analysis over  the weekend to establish my trades for the week.  My bullish trades that are still in play are very close to being closed.  We will see what the future holds but additional downside is the most probable course of action over the next few weeks.

We have broken critical support in the SPY!  We  will not officially be bearish until a lower high has been formed but we now have indications that a new down trend is developing.  This for me means  that bullish trades will become fewer and bearish trades will become the staple if the lower high develops.  Trading from the right side of the chart leads us to make some assumptions but that is all that we can do. cure I am very glad that I have been making bearish trades as bullish losses have been limited.  Many that were all in on the bullish side of the market have been hurt by the current bearishness.  Unfortunately I don't believe that we are finished with the move down yet.  Tomorrow will likely be flat to weak again and then I think  we will get an anemic bounce.

IWM did not confirm the bullish engulfing pattern formed yesterday.  That is not inidcative of significant bullishness in the near  future.  The bear trend will probably reach the 60-61 range before a bounce may occur.  These types of price movements usually result in trend changes; the probabilities are favoring the downside now.  I am patiently awaiting a bounce to add bearish trades.

Todays trade activity saw me close a bullish and a bearish trade.  The AENY trade and the QID trade closed today.  Lost about $40 on the AENY trade and about $80 on the QID trade.  I am waiting for the next re-entry signal on the QID. 

AENY closed  below the forming pennant nullifying the reason for taking the trade.  QID reached the sell signal using the proprietary signal today so the trade was closed.  We may very well see more movement to the downside tomorrow but the signal is the signal.  I w ill be watching for the next  entry in QID based on this signal.  Things are more clear now so full position size will be used.

The remaining bullish trades will remain in play for the appointed exits.  Weakening strength will have me pare these trades back.  Not much else right now but  this has been a lot of fun watching the market identify its trend.

Today was a fed day and these days always cause weird price action.  Up, down, sideways and finally up some.  The price action did allow for at least one trade to close.  The SPY today maintained the uptrending support line. This index has not broken the trendline yet by closing below it.  The trendline is still in play.  We will see what happens tomorrow. The longer the index stays along this trendline the more likely it is  to fail. 

The IWM just created a bullish engulfing pattern.  If we close higher tomorrow this short term signal will be confirmed.  Based on the volume activity today it is likely to confirm.  I am still net bullish in my portfolio with very limited hedging activity.  We shall see what happens.

The only trade that closed today was the bearish portion of the unbalanced Iron Condor on the DIA.  This trade closed today for .12 per contract.  This trade right now is  still okay as the short strike on the bullish side is still okay.  The trade is still working okay.  The trade will be closed in the 103-104 price range as this will eliminate the risk  from additional downside while the market decides direction.

The dollar continues to show strength.  This is not generally bullish for the market as it indicates money is leaving the risk trade and moving to something viewed as more stable.  The view of stability can be debated but some believe this.  The current debt issues in Europe are also demonstrably damaging the Euro currency.  The benefit of this is it allows a little bullishness in our market to continue while strengthening our currency.  This trend change has also modified the Materials sector.  We may have reached an area where some consolidation can occur, and the bullish trade may be able to continue.  That is not bullish for the dollar trade currently in play.

Net, net today.  No real change.  I expect the POTUS speech tonight will cause some sort of bullish trade for now but I don't expect a significant move up, but more of a move to resistance while a sideways pattern is established.

Tomorrow is another trading day and I am looking forward to learning a new lesson that the market will teach me.  I have been re-reading Reminiscences of a Stock Operator over the last few days.  Based on the change in my trading to a much more active style over the last couple of years, the book means significantly more to me now, than it did when I read it ten years ago.  Today was one of those aha moments and honestly I don't remember this quote from my first reading but I think it is appropriate based on the market teaching us something new.  Here is the quote:

"There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win.  Did you get that?  You begin to learn!"

As I read this book today I noticed that he learned more from his losses and believed that he would have moved on to more success much sooner if he had lost more in the beginning.  I think this lesson applies to more than trading and we all need to pay attention to it in life in general.  It certainly affirmed my belief in some of what I have learned through my mistakes in the short term trading game over the last year or so.

I did not have time to post on the days movement yesterday but not much has changed from Friday or the analysis done on Sunday.  The SPY is still trying to stay above critical trendline support but has not yet broken it.  Based on prior movement in the short term we are forming a bear flag pattern.  If we break below 109 it will be time to short the SPY with a price target of  103.

The IWM is sitting at one of many support levels between here and the 60 area.  Falling to 60 is not out of the question at this time.  Still looking for a move up so that effective shorts can be entered, unless there is significant volume accompanying the move up.  Still in a wait and see mode.  The DIA did break a critical support trendline and almost reached the underside of the trendline.  That would be an ideal place to short the index.  We could also be forming a bear flag here on the DIA as well.  The inverted hammer on all 3 index exchange traded funds could result in a bottoming pattern here.  We will need a higher close tomorrow to confirm the short term pattern.

I occasionally use a proprietary indicator to make very short term trades.  The trades very rarely last  more than 5 trading days.  I received a signal towards the end of the day to enter and I bought a half position in QID, the ultrashort leveraged Nasdaq exchange traded fund.  The symbol has broken out over the last couple of  weeks from a long term downtrend.  The symbol is forming a bull flag  pattern now.  The entry allowed me a purchase price of 19.73.  I did not do a full position because it is not clear what the trend will be.  This signal has a high rate of success, but has been known to throw false signals in areas where trends are changing and not clearly defined.  We shall see.  Nothing risked, nothing gained. Reward:Risk is about 2:1 based on the way the signal normally trades. Entries and exits are not 100% defined so estimates have to be used when entering.  It will act as a nice hedge against long positions.  Should we get another purchase signal before the exit  is received I will buy the 2nd half.  I have attached a  chart but  this charting package does not have the indicator.  Notice that price is sitting at a resistance level.  Lots of reasons to not take on a full measure  of risk.

There have not been any other changes in my positions.  Starting to see more evidence of this being a trend change. We will  have confirmation of the trend change if  we get a lower high on the broad indices.  This has not occurred yet but with the dollar still showing strength we are more likely to trend down than up.

The end of  the week was painful to bullish portfolios.  The massive sell-offs in some issues actually prompted me to close some trades.  We needed a sell-off but I think the tone of the market has now changed.  We are at best sideways for the coming months right now.  I believe the general tenor of the market has changed now based on the heavy selling the last 3 days.  We have not changed trends yet but have called the bull trend into question.  We are at some critical trendline supports in many indices.  Without a bounce the longer term bull market will definitely be in question.

This week the SPY closed lower than it started and it is sitting on trendline support starting in August and September of last year. Should this line break the SPY will indeed be fully changing trends.  I wrote last week that I expected a move  to 117-120 this expectation is still in force as long as the trendline stays in play.

The last week the IWM pulled back as well.  I am expecting this symbol to continue falling to the 60-61 price range.  We briefly touched the 61 range on Friday, but I am expecting the fall nonetheless.  We should  see a  brief move  up the first part of this week, but I am expecting a pull back later in the week.  A close below 60 would call the overall bullish trend changing.

SECTOR ANALYSIS:

XLY - Consumer Discretionary - This sector is  sitting at a support level.  I decided to futher evaluate this sector this week.  A trendline that started in the August/September timeframe has not been reached yet.  Price would need to fall to the 28.50 level for this to occur.  Some additional downside in this symbol is still possible.

XLP - Consumer Staples - This sector is trending sideways and we have not broken out of the sideways channel yet.  A close below 26.25 is worth watching.  Right now the symbol has formed a candle pattern that if it closes higher would indicate that  the sector will continue up to the 27 level.

XLE - Energy - The sector traded to the price target and  has pulled back  to support.  The quick pull back may be questionable to the long term health of the sector.  If the up trend resumes, bullish entries can be taken.

XLV - Healthcare - Healthcare is one of the single most bullish sectors in the market right now.  Bullish trades in this sector should still be taken.

XLB - Materials -  This sector has moved through a short term support/resistance level.  On a weak up tick bearish trades should be taken to the 30 price level.

XLF - Financials - The bull flag discussed last week failed but critical support has not been violated yet.  Any close below 14 is reason to take bearish trades.  No bearish trades yet.

XLI - Industrials - The bull flag failed but the sector is sitting at a support level.  A break below 27.50/27 would be construed as bearish.

XLK - Technology - Bullish support gave way to very bearish inclinations.  It touched 21.50 a support area but should the symbol bounce at all this week I will be looking for bearish trades in the sector.  It is also very important to remember that the technology sector tends to lead the rest of  the market so we may be seeing an intermediate top right now and bearish trades will become the staple trade.

XLU - Utilities - This sector very much has broken.  Any sign of bullishness and trades to the downside will be taken in this sector.  29.50 is the next level of support/resistance.

BULLISH:

My bullish trades were hit and hit hard.  Some were closed and I did open a new one amidst bullishness on Friday during the market weakness.

BULLISH CLOSED:

JOYG - Trade  closed for a small loss as it started pulled back further than expected.  Loss of $80 per contract.  Still keeping my roughly 2:1 reward to risk ratio.

LTC - Trade closed for a small gain.  $9 per 100 Shares.  The exit saved me from a $150 loss per 100 shares.

BEARISH CLOSED:

My net loss in the bullish sector based on closed trades is $71 overall based on single contracts or 100 lots.  This is not indicative of actual dollars made or lossed.

BULLISH HOLDINGS:

HSP - Still holding onto this trade.  Still a covered call.  Close below 51 and I would be inclined to close the position with earnings coming  up in a few weeks.

DIA - This bullish unbalanced iron condor is still doing okay.  The symbol is threatening the bullish portion of the iron condor but the trade is still profitable.  Will reduce the bullish leg this week on strength to take some of the risk off the table based on the recent  change in market behavior.

UUP - As discussed last week the dollar rallied.  This trade did well.  New close below 23 and I will close the position otherwise I am planning on letting this run for a while.

XRT - The reatail ETF is still trading sideways.  Looking to initiate another covered call to take advantage of this price action and provide a limited cushion should it turn negative.

TEVA - Looking to  initiate a new covered call on  this trade.  Weakness from here and  the trade will be closed.  Looking at$58 as a critical  area right now.  On some  strength I will initiate a new covered call trade.

AENY - Entered this trade expecting a triangle/pennant breakout.  Entered about 4.41.  Close above $4.55 and this  give us a price target of about 5.55  to close the trade.  Close on close below 4 ish.

BEARISH HOLDINGS:

XHB - The homebuilders have reached  their price target of 15 and will be closed on Monday for about an 80% gain in 2 weeks.  Order is already in to close it.  May reenter on siginificant bullishness to downtrending trendlines used as exit point earlier.

The long weekend prompted me to not do much in the way of analysis but the time has come to get ready for the next week.  This last week finally saw some selling and interestingly the bears started to come out of the woodwork indicating that the downtrend may have finally started.  We have not seen a break in the trend yet, however.  Interestingly the weak days have had higher volume than the up days.  Does this mean that the new downtrend has started?  No, but reducing our exposure at this point in time is probably the wisest course of action.  There are some interesting set-ups coming and those will be mostly to the upside.

This week the SPY closed lower than it started.  An additional pull back to the 112.50 level would be  beneficial especially if the volume dropped  moving into that level.  Movement like that would be more indicative of additional upside and less risk of a deeper pullback occurring. I am watching the 112.50 level very closely this week. Any moves up above 115.00 are a continuation of the current bullish trend.  I am expecting some bullishness in the early part of the week and some additional downside later in the week.  I am actually expecting this overall bullish move to end around the 117.00 to 120.00 levels.

The last week the IWM pulled back as well.  It closed lower this week versus last week.  63 is  the critical level to watch this week.  A close below 63 would indicate a deeper pullback is developing and I would expect it to run to the 62 level as the next level of support.  A close below the low of the close on Friday would indicate that the bullish engulfing pattern has been confirmed.  We shall see what actually occurs.  The identification of support and resistance and the constant change in the markets is exactly why I love this buisness.

Based on the broad market analysis, we should know more about the market status after the close on Tuesday.  The overall market is still bullish so the majority of trades should be taken in this direction but we may need to provide more leeway on exits and only enter half position sizes if the key support levels are violated.  We can enter the other half at lower levels this way moves up from here or at a lower level will be beneficial to our accounts.  We never really know where the market is going, we can only trade based on proababilities.

SECTOR ANALYSIS:

XLY - Consumer Discretionary - This sector is  sitting at a support level.  Can move  a little bit lower from here and still be within the support structure.  A close below 29.50 and trades to the downside in this sector will need to be evaluated.

XLP - Consumer Staples - This sector is sitting at the top of a trading range between 26.25 and 27.  Watching for changes beyond either price range.

XLE - Energy - The Energy sector has pulled back some.  This sector still has a price target of about 63 so bullish trades can be taken.  We are currently forming a bull flag.  A close below 59 will lead to the viability of  the 63 price  target.

XLV - Healthcare - Healthcare is one of the single most bullish sectors in the market right now.  The sector has moved significantly so a pullback to 31.50/32 could still occur.  Bullish trades in this sector should still be taken.

XLB - Materials -  This sector still has some movement to the downside to reach a support level.  I am watching the 33 level to take more  bullish trades.  A bounce from here is possible but preference would be for a deeper pullback.

XLF - Financials - Sector is forming a bull flag and currently has a price target of 16.  Looking for a close above 15 to initiate any bullish trades.

XLI - Industrials - This is another of the most bullish sectors and is currently forming a bull flag.  Close above 29.50 would equate to a price target of 31.50.

XLK - Technology - This sector has had a very significant pullback into support.  This is a sector to really watch this week for bullish trades as  it is ahead of the other sectors in terms of pullbacks.  Biggest concern is the significant volume that has hit this  sector since the start of January.  Close below 22.50 would indicate bearish trades are the way to go.  One interesting component of the technology sector showing extensive weakness are the Semiconductors.  The XSD is sitting at a support level now.  Additional weakness would call the overall bull market into question.

XLU - Utilities - The utilities sector recently has pulled back significantly and is forming a base.  A move below  30.50 would indicate that it  is time to short the Utility sector.  A move up from this congestion area would indicate bullish trades should be initiated.  I will be watching this sector this week.

BULLISH:

My bullish trades this week did well and some were closed.  I will cover the closed trades first and then discuss the current open trades.

BULLISH CLOSED:

CERN - Trade  closed for a small loss as it started pulled back further than expected.  Loss of $68 per contract.  Still keeping my roughly 2:1 reward to risk ratio.

CMTL - Trade closed for a small gain.  $67 per contract.  I was able to exit on Friday successfully.  Stock had a significant pullback on Friday.  If the stock  price reaches the 36 level and volume is decreasing Iwill reinitiate the trade.

HPJ - Trade closed  as price had been reached and price movement had stalled, $154 per 100 shares. 

GGB - Stock trade closed for a small loss, $53 per 100 shares. 

XRT - Closed the short call for a $22 gain over 2 weeks.  Dividend plus short call equals a $50 gain per 100 shares thus far. Will be looking for another opportunity to sell another call against the position.

TEVA - Close the short call on Friday. Got lucky.  The pullback on Friday in the prices of TEVA allowed me the opportunity to buy back the call for a $20 profit.  I will be looking for an opportunity to sell another call against the stock position. Will probably be a $60 strike.

BEARISH CLOSED:

TAP - Closed for a small loss.  $9 per contract.

My net gain in the bullish sector based on closed trades is net gain of $142 overall based on single contracts or 100 lots.  This is not indicative of actual dollars made.

BULLISH HOLDINGS:

HSP - Still holding onto this trade.  Still a covered call.  Close below 51 and I would be inclined to close the position with earnings coming  up in a few weeks.

DIA - This bullish unbalanced iron condor is doing well.  The symbol hit resistance and dropped.  Further moves up will induce a change in posture of the bearish leg of the trade as the short strike is 107.

JOYG - The symbol is performing well.  Expecting a full profit on this trade.  Should close sometime this week on any reasonable strength.

LTC - Weakness from here and the trade will be closed.  Hoping for a breakout to the 31 level  but I am trading this as if it is going to fail right now.  Slight weakness this weak and I will close. I have a very slight gain right now but  weakness would indicate that the trade is going nowhere and Iwould rather use my dollars on something else.

UUP - The dollar etf is still forming a flag.  Dollar strength with the current dollar policy of the US Federal Reserve  is not bullish.  I would fully expect if the dollar really gains strength the recent bullish trend will be ended.

XRT - The reatail ETF is still trading sideways.  Looking to initiate another covered call to take advantage of this price action and provide a limited cushion should it turn negative.

TEVA - Looking to  initiate a new covered call on  this trade.  Weakness from here and  the trade will be closed.  Looking at$58 as a critical  area right now.  On some  strength I will initiate a new covered call trade.

BEARISH HOLDINGS:

XHB - The homebuilders are still showing some  weakness.  Looking for this to drop to about 15 to close.  Have about a 15% gain on the trade right now.  Close above 16.25 and I will look to close this trade.

Work has been driving me absolutely crazy and I have had limited time to do real analysis in the evenings.  Generally speaking analysis has been rather terse and focused almost exclusively on my current trades.  I value this work as it helps me to focus and keep my trades honest.

What happened today?  IWM and SPY moved up.  IWM is still bouncing along previous resistance that is now support.  The bad part of  today's trade in the IWM  is that the support bounce did not have siginificant volume.  We will see what happens.  Expectation is that we are in a bullish trend so it should go/continue in that direction. We may still get something of an  additional  pullback.  Break through the 63.60 level and I  will start to add significantly to bearish trades.

The SPY moved up on better volume.  While we still have strength in the SPY the differences in the current moves in the two symbols is of concern.  We will likely get  some additional  sideways movement if this  bullish trend  is to continue in the overall market should the weaker action in the small-caps continue.  A nice pullback or an extended amount of sideways movement will help keep the longer term trend  bullish.  The large  volume in the SPY the last two days is more indicative of a sideways market in the short term.

My trades did much better today than they did yesterday but I also had to make some changes and they are noted below.

BULLISH:

CERN - This symbol is  doing okay.  Forming another bull flag.  Breaking down from here and I will close.

CMTL - This trade has worked pretty well.  I am closing though.  Why?  The stock has  made a  nice move up.  The move up the last 3 days has  been on  steadily declining volume.  With the mixed signals in the indices  I am going to limit some of my risk by closing this trade for a 15-20% profit in 3 days on the option and about 3.5-4% on the  stock.

DIA - The  Diamonds trade, which is an unbalanced Iron Condor, is  doing okay.  The bearish leg of this trade is getting close to being in danger. The  long side is doing well.

GGB - Back to support.  Getting close to an  exit if it shows weakness from here.

HPJ - This stock is doing well.  Close  below $8.80 and Iwill be looking to book profits.

HSP - This is a covered call.  The covered call is still working.  Earnings are about 3 weeks out so the sideways movement is working to the advantage of this trade.  A significant close below $50 now and I will begin looking to exit.

JOYG - The trade that I am working here is a Feb Bull Put Spread. Just need a little bit more upward movement and the trade will be closed.

LTC -  Bouncing again but  is one of my weakest trades right now.  Close below $27 will indicate the trade needs to be closed at this point. I much prefer small losses than full losses.

UUP - This appears to be forming a new base.  We are sitting right at the $22.75 area indicated as a support area.

XRT - This was a covered call until today.  I closed the short strike today though.  This is forming a large ascending triangle.  I am going to roll to the next month for another covered call.  Between the dividend I received of $30 per 100 shares and this covered call I have better than $50 in additional monies in my pocket.   I will sell another month on some  additional strength.

TEVA - No change. It will be called away tomorrow or early Friday unless there is a big drop in the near future.  This is not likely to happen.

BEARISH:

My bearish trades are getting slim again.

TAP - TAP just does not want to drop.  I closed this trade today and my total loss including commissions are $20.  Could I have held this longer. Sure.  I don't like taking large losses.  My psyche deals with small losses great, but when they start approaching my normal gains I get a little anxiety.  They will still  happen, but my greatest failure last year was taking losses bigger than I should have on spread trades because I waited too long to  close.

XHB - The homebuilders showed a bit of strength today but did not violate my exit point.  Still holding.

Friday's action pushed the market higher yet again.  The one thing that Keynes was correct about was the "market can stay irrational longer than you can stay solvent". Glad that I am generally bullish. The trend is making me money.  The IWM and  the SPY pushed to new highs and volume has increased on this move up.  My premise for the week being a weak one and moving down was obviously incorrect.  This removed most of my hedges and allowed me to profit.  With the SPY and  IWM making new highs the trend is still up even though it might not make a lot of sense.  A healthy pullback will make this  bull market last longer so I hope it does not continue to rise in the short term.

My trades are still doing well:

BULLISH:

CERN - This trade is based on the very bullish price action over the last couple of weeks.  A close below 89 will force me to  close this trade.

DIA - This is now a bullish biased Iron Condor and both sides made me some money today.  We have about 40 days to expiration so it will be a while before this trade is closed.

GGB - This stock is  moving back to former resistance/new support. Should this hold the trade will be a keeper.  If it does not  I will close.  That line right now is at 17ish.

HPJ - Pushed its way to resistance.  Question now is whether we push through. Stop is still in the same place.

HSP - This symbol is doing well and the stock's uptrend is still intact. Will keep holding.  Appears to be forming a bull flag.

JOYG - Like the other oil service sector stocks enjoyed a very strong day. I am .12 on the spread away from closing the trade.  Looks like this trade should close early.

LTC - Still consolidating.

UUP - Still forming that bull flag.  Getting close to my line in the sand at 22.75

XRT - Still trending sideways.  Covered Call should be closed with full credit received this week.

TEVA - This  stock shot up like a rocket today.  TEVA made some big announcements about its business and the stock soared.  Covered call will be closed for me I am sure  this week.   Still a nice trade.  I will be watching for a pullback to take advantage of this symbol again in the future.

BEARISH:

TAP - This symbol  continued the down move from 46 today.  It is now  sitting at an area of  resistance.  Should the symbol close above 45 again this trade will be closed.  Right now the trade is profitable.  Simply tightening the stop.

All in all a good week.  I will be looking for some  additional hedges over the weekend to offset some of  the bullishness in the portfolio.  One last item of note, I have noticed that XLF broke out of its triangle this week meaning that the bullish move in the market is likely to continue so I will be still very bullish in my market posture.

Today was another do-nothing day.  Guess the market is waiting for the Friday's job report.  My trades did well again today.  Looking to begin to reduce some of the directional risk by closing some trades before Friday.  No change in the index analysis from yesterday.

Trades are as follows:

BULLISH:

DIA - No change from yesterday.  Sideways action is good for Bull Put Spreads.  Going to  add a half position to the bearish to hedge changes down but will also benefit from sideways movement.

GGB - Looks like it is breaking out of the triangle now. If the stock moves up some more I will sell a covered call against the position.

HPJ - Another nice move  up today.  Getting close to the previous highs.

HSP - Stock is still consolidating benefitting the covered call.

JOYG - The Bull Put Spread is working  on this trade still. No changes.

LTC - Gone from support bounce to still consolidating.  No change yet but  if this does not start to make a nice move up soon I will close to use the funds in a more  productive endeavor.

BTU - This stock looks like a rocket.  Doing very well.  This is up 50% from my entry and it will be closed tomorrow.  Very close to the exit point now on a stock price basis.

UUP - Showing more weakness. Still moving to the 22.75 area.

XRT  - Moving up....Still holding.

TEVA - Consolidating.

BEARISH:

TAP: Moved down  some more  today.    Sitting at a potential support point.  Should we see a new move up from this area the trade will be closed.

All in all another strong day.  Time to pull some risk off the table and lock in some  short term profits.  Love when leveraged trades move quickly and limit the amount of theta paid for holding the option. With the VIX trading down it is time to use more straight options as the volatility risk reduces premiums and hurts the option  seller.  I am doing more straight call/put trades because of this phenomenon.

Today was a do nothing day.  Up a couple down a couple finally closing  with little to no change.  There was pretty significant change in my current holdings based on today's  price action though.  Very satisfied with my perfomance today and yesterday as I will explain.  I traded my plan and planned my trade.  This also means that failed trades are now out of the way and that the losses are half the size of my typical gain.  Since I have a success ratio on my spread trades of about 70% this will yield a net profitable trading system.   I made some changes to my current portfolio based on  yesterday's analysis and  it  proved fruitful.

The IWM closed down slightly today and is now almost right on top of the previous highs.  The IWM trade was closed completely today.  Closed because it had violated my level for closing the trade but did not do it enough to need a close on the short strike.  Loss on the trade was about $35 while my typical gain is about $70.  The bullish up trend in this symbol has not changed.

The SPY closed up slightly adding to yesterdays gains.  No  change in the up trend and my bullish portfolio benefited from this overall trend in the market.

My trades, particularly the bullish ones, are doing well and the analysis follows:

BULLISH:

DIA - The Bull Put Spread is a good fit for a market that does not move.  Was slightly positive today and will benefit for more sideways or moves up.

GGB - This  stock moved up through resistance early in the day but closed right in the range for  staying in  resistance.   We will see what tomorrow brings.

HPJ - Continued the strong move to the upside today. 

HSP - This stock did very well today for not moving.  Made money specifically because the stock did not move much.  Looking like it  is forming a consolidation pattern which works well for my covered call trade.

LTC - This stock was a disappointment today.  Still forming a consolidation pattern with the bounce.  Holding as we have not crossed my line in the sand.

UUP - Closed part of this trade down to take some profits.  Support still  at 22.75. Stock is currently forming a bull flag.

XRT - Stock is consolidating right now.  Will likely close the short call likely this week to bank some profits and allow the stock to continue its uptrend.

TEVA - This stock has done exceptionally well thus far.  This symbol changed direction today and formed a bearish candle pattern.  Will need a close below today's close to confirm that bearish formation.  The short call is out of the money now and is back to break even.  No changes  in  the trade.

BEARISH:

IWM - Closed the trade today.  Mentioned above.

OIH - This trade was also closed. The line was crossed.  It proved very beneficial considering the strength in fund today.  Trading the plan is essential.  Loss was about $45 right in line with the IWM trade leaving me  with a solid potential if my gains on  other trades continue to be consistent.

TAP - This trade had not closed above my "line in the sand".  The stock  reversed direction from yesterday and started the formation of a bearish candle pattern.  Close below today's close will confirm this move.  No real change in the trade.

NEW TRADES:

I did make one new  trade based on the change in OIH.   Yesterday JOYG made a nice move and I entered a Feb Bull Put Spread 48/50.   The trade revolves around the recent change in oil service sector and my buy signal with price above the MA, Stochastics and the MACD confirming the  move.  Will close on a close below $50, if the spread reaches .08 or if the stock moves sideways and reaches the 4-10 day window before expiration.  Expectation is a continuing move higher and a close within the next 2 weeks.  Chart of  the entry follows:

Wow, what an  upmove and I  did not expect to see that.  The SPY today confirmed its bullish trend. Today was not a good day for many of the hedge plays.  For the trading system that I use a buy signal flashed today on the SPY.  My bullish trades did well.  The IWM confirmed its bull flag today so the hedge using the IWM will be changed.  I am  closing the short strike and going to let the long call appreciate potentially.  Need to review the trade a bit to make sure that is the most prudent course of action.  Based on the bull flag break we have a $66 price target.

BULLISH:

GGB - Still sitting at the resistance level.  Hopefully the stock will break out and resume the uptrend.  Should have a price target of  $20.50.

HPJ - Still forming  a bull flag. No change.

HSP - Many healthcare stocks today did not fare very well. HSP was actually profitable for me today because of the short calls.  No  change.

LTC - Still showing a support bounce.  No change.

UUP - The dollar did not do well  today against other  currencies.  I will  be reducing this position size  as the stock closed below the 22.90 level.  Next support level is 22.75.

XRT - The retail sector exchange traded fund created an inside day today.  A move up tomorrow will confirm the move today.

TEVA - Teva Pharmaceuticals has confirmed the bull flag.  I will not be chasing the trade but the stock that I still have is making money.  The covered call is at $57.50 so is now ITM.  I am  not changing  the trade.  If the call is exercised then the stock will exit my hands for about an 8.5% profit in about 30 days.  Not bad for a conservative covered call trade in an IRA.

BEARISH:

TAP - TAP is .08 from my exit point and is sitting at resistance.  We shall see what tomorrow brings.

OIH - Oil has changed direction  with the falling $.  Time to exit this trade with a small loss.

IWM - Mentioned above.

NEW TRADES:

DIA - This  trade is the opposite of the IWM trade and was run to counter some of the changes in the nature of the market.  Futures were up this morning so a bullish trade was necessary to take advantage of the move.

BTU - This was a nice support bounce and I entered today after seeing the bullishness of the energy sector.  This is a straight March call using the 46 strike.   Should we break 48, the  price should be expected to move to about 53 over about a month.  Trade will be closed if the price reaches the $52 price range, lasts longer than mid-February, or closes below $45.