Hot Shots: July 1 SPY'ing a Wild Bore
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July 1, 2009
By more than a few vocal and well-televised accounts, Tuesday marked the best quarter for the market since 1998. Of course to have been invested prior to the fall of last year and chances are the price action has proved less gratifying than the simple-minded bull served up by the media.
Closer to the money trail, it might be remembered, "There's always a bear market somewhere." The darkest days associated with financial Armageddon may very well have passed. But the "priced for perfection" green shoots discounting that's driven the rally from a historic correction, has made the market prone to less than terrific returns going forward.
As much, a downside bias is favored due to a well-documented and continually updated laundry list of factors in the bi-weekly Growth Stock Option and Weekly Outlook columns. However, interpreted rangy conditions combined with a seasonally slow time of year, doesn't help confirm the need to be overly grizzly either.
Checking the pulse at ProfitSource and its 200 plus W4 buy count and a rather hefty 100 plus W5 "The top is in" and the idea of embracing a softer directional stance is appreciated all the more.
Additionally, there seems to be a few too many bears and bulls pounding the table for rapidly moving prices towards unachievable objectives. Further, with premiums still priced for stronger-than-normal volatility in many instruments, this strategist doesn't mind continuing to embrace a coined and softer "Wild Bore" market.
Figure 1: S&P500 (SPY) Daily Bear Edge
Looking above to the chart of the S&P500 (SPY) and it's easy to see both bullish and bearish overtures as existing. For the bovine-inclined, the existing series of higher lows and highs brings to mind good times and a likely, "Why fight the trend?" type reasoning.
On the other hand and as discussed the past two days in the fore-mentioned columns, a Head & Shoulder topping pattern now appears to have developed a pivot high within its right shoulder. For those traders that "Sell the rips" as they're occurring, it's likely that time again.
Figure 2: Slightly Bearish Iron Condor S&P500 (SPY)
With the potential high developing in the upper portion of a resistance zone and funny money window dressing out of the picture-being a bear is made all the more appealing as risk attached to a technical line in the sand, umm clouds, is enjoyed.
And for those that also find the pulse of the option pricing available these days still a bit too bent on making this past year's historic volatility the new reality, perhaps an easier-to-handle fade of both hard delta camps is more appropriate. Shown above, is an illustrated three lot slightly biased (negative delta lean) iron condor that looks to take advantage of Tuesday's less-than-successful attempt at further green shoots.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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