Wednesday, September 17, 2008

09.17.08 - Battle to Hold S1

The SPY is holding at Floor Pivot S1 ($118.40), but adjusted tick is very negative and the AD line is headed south. I don't think it will continue to hold and I'm trying to leg out of my long trades entered at this level. Take a look at the headlines today at financial news aggregator and commentary blog Calculated Risk:

  • TED Spread Blowout

  • Russian Stock Market Crash Continues, Trading Halted Again

  • Single Family Starts: Lowest Since 1991

  • Report: Regulators Looking for a Buyer for WaMu

  • Large Money Market Fund Freezes Redemptions
Talk about global macro. This thing just keeps on getting bigger, and what we've seen so far are not "special cases." Do your best to manage risk today and the weeks ahead (I'll grant it isn't easy), and take a close read of this article at Traderfeed. Breaking News: SEC Short Rule Changes.

Name that Pair

Okay, not a lot of bandwidth for "fun" today, but if you need a break, see if you can "name that pair" below. Leave your answer in comments, and check back at the end of the day for the actual ticker names.

Answer: Black = Dreamworks (DWA)/ Red= US Oil ETF (USO)

8:40AM PST: Testing yesterday's opening lows. May provide brief respite. Look at gold (GLD +7.5%) and the VIX (34+)(See: VIX & More).

9:45AM PST: Tick is seemingly repairing itself/ slowing its downward momentum (edit: scratch that -- just as ugly as ever), and the VIX is looking toppy on the day. However, the VWAP is still downward sloping and we are now retesting the aforementioned S1 level from below, which may now prove technical resistance. Another wide-range day; will the lows hold? [Add: Doesn't look like it.]

10:50AM PST: Did I say VIX looked toppy? Liquidation continues at VIX 35+. Alpha Trends has posted the limit down table. Yikes!

12:05PM PST: "Big W" rally underway. I did not buy it, but did start selling/writing some out of the money [add: vertical spread] puts. As a side note, every commentator on CNBC keeps talking about diversification as the way to go. I agree, but can they tell us where that has helped lately (other than Consumer Staples maybe).

12:40PM PST: Wow, I take back every snide remark I've ever made about CNBC. Maria and Dylan are ripping this rating agency guy (Drew?) a new one and openly laughing in his face. I kid you not.

POST CLOSE: "Big W" got sloppy and fell apart -- New lows again. The "Name that Pair" answer is below the chart above.

The VIX closed 20% higher at 36+ today. Meanwhile, a long standing short signal I've had was finally negated by today's close on an exhaustion breadth indicator that measures capitulation across a broad spectrum of industries. There again, many capitulation indicators are at record levels tonight. So much so that I wonder if we don't have more to go, but it may be time to start looking for places to begin legging in for longer holds. This is not a penultimate capitulation call and an '87-like event may even be plausible ahead, but we are also increasingly due a bounce here. Bottom-line, be on high volatility alert.

P.S. - I felt the Russia Limit Down and Money Market Freeze got short shrift in the news cycle today. Scary, and I'm not being melodramatic.

Never Investment Advice


Anonymous said...

Morning Jeff,,

Not sure of the 'pair',,but the oct. options for gold,,,,well,well,well..



Jeff Pietsch CFA, Esq said...

"Golds biggest daily gain... ever!"

Jeff Pietsch CFA, Esq said...

PS - Hope you were long!