Just to be clear, I am not saying to always trade against fundamentals. What I am saying is that stock prices in the near term often do not follow fundamentals. But they also often do follow fundamentals. Basically what I’m saying is that fundamentals are nearly completely worthless when you are trading short term. In fact, I believe it is better for traders to purposely ignore fundamentals so that they do not affect your emotions and psychology.
Would you have done better with a strangle than just going with a call?
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I think that whenever you purchase a plain call and experience significant negative profits, then you would have done “better” with a strangle. Now, whether or not I would have profited or just been less negative is a harder question to answer. I suppose I could do some research on the historical option prices but not right now…
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It seems there is some higher volatility than usual with the SPY and the market in general. Puts were the way to go with the SPY hindsight being 20 20. I was following your rationale and watching to see if you were correct. I feel like once things settle that there will be a pop to the upside so calls are now on my radar…doc
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Yes, Doc, I am also looking for an upside pop. As I’ve said many times, some of the most powerful upside moves occur during bear markets. That’s one of the reasons that I am in a META call right now because META has been stronger than the overall market, but of course I’m always hoping for an overall pop because big cap techs like META usually move in the same direction but with varying velocity.
IBD has a watchlist of breakout stocks that are trading near breakout levels. Any stock on this list has been performing better than the overall market which has been down the last couple months.
https://www.investors.com/ibd-indexes/ibd-breakout-stocks-index/
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The Buffett Indicator suggests that we are on the verge of a significant pullback. Add to that interest rates, the tech bubble and the inverse yield of bonds and its strong evidence for a downside risk. Puts might be stronger way to go vs calls…doc
I agree generally speaking. However, in the short term (few days) I’m looking for a little bear market rally, then in the longer term (few weeks) I’m looking for a continuation of the down trend that I originally called in early August (top of this thread).
Of course, “looking” is probably more accurately said to be “hoping”. 
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Give Powell a chance to speak publicly again and he’ll make sure you’re correct!
Lakedog,
Armed and waiting for capitulation…
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Currently, futures are saying that we could gap down Monday maybe similar to what happened Friday morning. The question is do we do a repeat of Friday or do we go the other way downward. I was sure that we would have at least a little bear market rally that perhaps goes high enough to challenge and fill the 9/21 gap, but the market just doesn’t seem to want to do this for me. It could still happen and maybe Friday is the start, but I’m pretty pessimistic right now.
This AM move today makes me think now is the time to think about a call, but the volatility has me watching…doc
I guess I shouldn’t have been pessimistic. We are inside that gap right now, but appears to be topping (12:00).
I hope those calls turned green for you…doc
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Naah, I wasn’t in any SPY calls this time. I tried to catch the up wave via my META calls, thinking that META has been more positive than the market as a whole so if the market catches a rally, META should do even better. I did profit nicely from the META call, but would have done much better had I stuck to it longer rather than bail on what looked like a reversal point. I was looking to do the same with another ticker that was doing very well relative to the market (MSFT), but I missed an entry because I was too busy with META and today MSFT looked a LOT weaker than SPY so I may look for something else.
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Okay, so the midday “top” on 10/10 was nearly the top, we got fractionally higher today, but then went down sharply. So we got to basically the middle of the 9/21 gap which proves to be pretty strong resistance, and the action in SPY seems now to be a double-top. As we all know, anything can happen, however, at this point looking at the action and more importantly the intraday volume over the last few days, the impression I get is that sellers currently have a lot more energy than buyers and I would look for us to set new October lows to continue the overall downtrend from early August.
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At the close of the week, I still think we are going to continue down. I played a put trade today on TSLA because they were looking weaker than the market as a whole and they went down about 2x as much as SPY. When I look at the Magnificent 7 they all look horrible like they are all about to break downward. These are the 7 biggest market caps in the S&P 500, so I don’t think this bodes well for SPY next week. October is supposed to be a seasonally positive month, generally much better than September. We’re half way though and while we are positive so far, I’m not so sure that we will end positive…
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SPY is up nicely today, but we are back up into the 9/21 gap which proved to be strong resistance on 10/10 and 10/12. If we break those highs, then it is possible that we may try to finish filling that gap.
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This post has my most recent chart and prediction on where SPY may go from here:
As I said, I recognize that it can actually go either way from here which is why I’m in an options strangle, I don’t really care which way it goes so long as it goes there. I lose if it goes basically nowhere this week.
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Monthly options expire Friday so this week may be a little more volatile…doc
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After gapping down sharply, we had a pretty strong rally past recent highs, however, SPY was stopped basically at the top of the 9/21 gap as you can see on the following chart:
I see the action today as more volatility that does not change my bearish outlook at all. I definitely believe that we will take out the 10/13 low and likely also set new October lows. Unless I’m totally wrong.
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Assuming about 50% consolidation, this is my current near-term projection of where SPY is going:
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