Traders Corner   23 comments

The S&P 500’s move up yesterday pushed the weekly technicals back into overbought territory. Other than that, everything is neutral. S&P 500 futures are lightly negative this morning, so I would expect a fairly quiet day until 2 pm EST, when the FOMC minutes from December’s meeting are released. Even then, I would be surprised to see any kind of lasting moves, especially with the U.S. Employment report still pending on Friday. However, if the FOMC minutes contain some kind of surprise, the markets could see a longer movement based on that.

The S&P 500 levels to watch today:

UPSIDE: 1840 (January 7th’s high), 1845 (January 2nd’s high), 1849 (December’s high and the all-time high), and 1863 (top of the Bollinger Bands).
LAST CLOSE: 1837, inside the 1837-1838 (2 data points) range.
DOWNSIDE: 1827-1829 (3 data points), 1823 (January 6th’s low), 1815 (20 day moving average), 1813 (November’s high), 1795 (50 day moving average), 1775 (October’s high), and 1767 (December’s low and the bottom of the Bollinger Bands).

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23 responses to “Traders Corner

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  1. I am adding a limit sell order for SPXU at $15.56. I may sell it for less before 2 pm EST today.

  2. Even though I do not trade on fundamentals, I try to pay attention to all aspects of the market. Seems to me after the run we have had, the market is fully valued or close to it. Without some growth in the economy and increase in top line and profits, it’s hard to see how the markets can move substantially higher from here. Unless there is some shock one way or the other, it would seem we are in for a stale market. Might be a good time to take a look at using those covered calls to generate income, if in fact stock prices do not move much. That’s the way I’ll play it until I see something different. Thoughts anyone?

    • Trader, what you say makes sense. I think you have talked me into trying my first covered call ever. I have quite a bit of cash, and am fearful to do anything risky given the market seems extended fundamentally. Could you please give me one or two specific recommendations? I know you are mentioning UCO.

      Thanks!

      • That is one of the things that worries my about the markets. What makes sense ends up not making sense. If you are looking to add something new I would recommend UCO/SCO. Those have worked well for me. Other than that, I would suggest you look at your long term holdings and run the numbers on out of the money calls on different time periods and strike prices Look for numbers that you are comfortable with.. If your positions are large enough you could consider only selling calls on part of your position. If you like what you are holding, I see now reason to go shopping for something else at the moment. Simply look to get additional income with what you have. If you get called out so be it. More profit in the bank and ultimately that is all that counts.

      • Thanks. I guess I will look at CSCO and INTC. I have owned both for a long time and they should be stable and liquid.

      • Stocks with low volatility are great candidates for covered calls.

      • So if I have a covered call on INTC at $27 in October 2014 and INTC is at $28 then, do I have to sell my INTC shares at the 27 and I will no longer own them? Sorry if this is a naive question.

        M

      • Yes, unless you have bought back the options you sold prior to the expiration dale. Another thing to keep in mind, you will also collect any dividends until you are called out. If Intel was a 28 you won’t have to do anything. The computers will sell your shares with no action on your part.

      • Thanks Trader. So this would all then potentially have tax implications as well? So I would have to pay some sort of tax on the gain from the calls I sold, plus if I get called out on the underlying stock (INTC) in my example, I would be subject to capital gains taxes there? Again, sorry for naive questions, but I need to understand all the angles as it is real money.

    • Trader (and everyone else), you guy should really check out the Option Addict at: http://ibankcoin.com/ The way he is consistently able to pick stocks that make big moves is incredible (I’ve been watching and following on several trades since last June).
      JMB

    • Trader I agree with Marshall. I also have never done covered calls in the past but based on your recommendations and past results, I may have to learn some new tricks. I also would appreciate your thoughts.

  3. Thanks Trader and others.
    Just one thought: can this leveraged financial cope with a 10% pullback? Many banks are so much leveraged that they might can get into trouble on a slight pullback – think European banks. Especially the already troubled Banca Monte dei Paschi. What will happen on a pullback with those banks? And can it be contained? Can the German banks handle it? To me it seems the American banks are pretty well positioned, but I doubt the European banks. Thoughts?

    • plas,
      In those circumstances, I would expect to see the ECB rollout some form of QE program or bailout for the banks. The ECB is already starting to show a tendency towards “Bernanke-ism”.

  4. sold gtat 9.41, up 15%. thanks Marshall!!!

  5. Nice gain Lynn. I am still holding all my shares. But it will likely be bumpy, so those that want to play the channels should have opportunities.

    • Hello Marshall,
      A couple of very naive questions from a beginner, please. What do “play the channels” and R3K gain mean? Please be kind. ETS is a ‘school’ for me; I started as a pre-schooler; I would say I am now a kindergartner.
      Thanks so much!

      • George,
        In case Marshall didn’t see your post…

        “Playing the channels” is done when you see a stock trading within a specific range. You buy the stock at the bottom of the range and sell it at the top.

        R3K is the Russell 3000 Index, which includes most investable stocks.

      • Thanks for responding Ed. I was in transit to NYC.

  6. I sold SPXU at $15.41 for a 0.20% profit. The market doesn’t really seem like it wants to go anywhere right now.

  7. What a difference a day makes. Yesterday all my Dividend Wish list (20) Stocks were all Green (Except PM) and today they are all Red and All 22 Commodity/Metal Stocks are Red too. Not enough for me to Buy any thing, But looking better. Still trying to read my Christmas Books on Technical Analysis, Fundamental Analysis and Dividend Stocks for DUMMIES.. ha ha But that stuff is better than a Colorado Brownie for putting me to sleep (IF you know what I mean). Looking for a few more days like today to bring the prices back in line so I can scoop up some bargains.

    ED,
    I did like that Oil Company in Colombia but don’t trust it, and No China Stocks for me either.

    • Steve,
      No problem. I don’t expect everyone to love everything I pick. 😉

      But seriously, I don’t trust Colombia either, which is why I only view EC as a short-to mid-term play. As for the China stocks, same deal, which is why I only added a small position of NTE.

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