Sell in May and Go Away?
April 28, 2006
I guess we should revisit the question I posed yesterday; Could this be the final stages of the 2006 bull rally? Or is it the beginning of a sustainable move to historic highs? Well, the “sell in May and go away” theory doesn’t really start until the fourth trading day of the month. The first three trading days of May have been historically bullish. If the seasonal pattern holds true again this year, and that is a big IF, then we could be in store for another nice setup. Currently the SPY and DIA are overbought and a few more days to the upside could push them into ”very overbought” territory, which is usually a good time to start looking at in-the-money puts for a short-term play. I would much rather see a “very oversold” condition as it is much more reliable, but with all the technical and seasonal patterns lining up I really like the possiblities if the indices advance. But, as I said, everything has to go as planned. I hope it does because I absolutely love to see extremes in the major indices and I am hoping to see this situation occur next week. I hope you have a wonderful weekend.
Daily Articles of Interest
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Retirement Accounts
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Equal Weight Index ETF
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Meet the Automatic Millionaires
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- SPY – 72.2 (overbought)
- DIA – 74.2 (overbought)
- QQQQ – 40.8 (neutral)
Bernanke Rally
April 27, 2006
The day started lower on news of a rate hike in China, however, Bernanke saved the day by stating, “there’s always the possibility that, if there’s sufficient uncertainty that we may choose to pause simply to gain more information, to learn better what the true risks are and how the economy’s actually evolving.” This led to a sharp rally in the major indices, especially the S&P 500. The rally led the S&P into overbought territory intraday and as expected it was unable to hold at those levels. Could this be the final stages of the 2006 bull rally? Or is it the beginning of a sustainable move to historic highs. I tend to side with the Bears, at least for the short-term. With the summers months right around the corner and lots of noise to overcome in the market, I still think we are due for a correction in the coming months. But this does not mean that I think we are in for a catastrophic collapse. Yes, there are some valid economic concerns out there right now, but that is always going to be the case.
RSI Wilder (5) for April 27, 2006
- SPY – 65.4 (Neutral)
- DIA – 72.6 (Overbought)
- QQQQ – 59.0 (Neutral
Moving ever so closer
April 26, 2006
Not much to say tonight. I am still looking for a decent decline to move a few of the major indices back into oversold territory. With DIA moving higher and nearing overbought and the QQQQ moving closer to oversold we could see QQQQ and possibly SPY reach oversold tomorrow. If this occurs a high-odds setup could be in the making. As I have stated before patience, patience patience. I am not in a hurry, the market isn’t going anywhere, but if I jump in without a substantial reason to trade my losses could. Until tomorrow.
RSI Wilder (5) for April 26, 2006
- DIA – 66.5 (neutral)
- SPY – 49.5 (neutral)
- QQQQ – 37.2 (neutral)
Post Expiration Blues
April 25, 2006
The price action during post expiration week has been weak to say the least. While declines in the major market indices have been limited, there seems to be a few fundamental and technical indicators that are flashing bearish signals for the short-term. Given these signals, I would not be surpised to see DIA, QQQQ, and SPY move into oversold territory. The bulls are certainly not going to give up without a fight, but it seems, at least for the short-term, they are somewhat tentative. If all three happen to move into oversold territory I think we could be in store for another high-odds trading opportunity. The next few days should be interesting to say the least.
Daily Articles of Interest
RSI Wilder (5) for April 25, 2006
- DIA – 55.6 (neutral)
- SPY – 48.6 (neutral)
- QQQQ – 37.6 (neutral)
The Day After
April 24, 2006
As I have stated repeatedly over the past few days, the Monday following option expiration is historically bearish. Today lived up to the billing although the decline was minimal. The day began with a sharp sell-off , but the bears could not sustain the trend lower. This was surprising given the current price of crude and the sharp decline in the Japanese markets. The Nikkei experienced a 2.8% decline , the largest one-day decline in two years. Events like this usually have an effect on the US markets, which is why I am surprised the decline was so limited.
Daily Articles of Interest
- Option Greeks
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a Year
RSI Wilder (5) for April 24, 2006
- SPY – 65.3 (neutral)
- DIA – 73.4 (overbought)
- QQQQ – 40.7 (neutral)
Option Expiration
April 21, 2006
The week of option expiration happened to be kind to the bulls. The march upward began Tuesday after Fed minutes were released. Within the report the majority of policymakers stated they “thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy.” The news led to the largest one-day advance for the Dow since April 2005 and helped to push the market higher throughout the week.
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Options Expiration
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is your state?
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RSI Wilder (5) for April 21, 2006
- SPY – 74.4 (Overbought)
- DIA – 77.8 (Overbought)
- QQQQ – 42.0 (Neutral)
- IWM – 64.9 (Neutral)
The Day Before Expiration
April 20, 2006
Over the past year the day before expiration has been, for the most part, directionless. However, the day after expiration is a much different story. The day after expirations has historically been a bearish day and particularly in April. Hopefully, I can capitalize on this seasonal phenomenon tomorrow. If the market manages to hold at current levels the probablity of a bearish Monday are even greater. Given the current overbought situation in DIA and SPY, any move higher will mostly likely be limited and quickly sold off. I have seen stranger things happen but this seems to be the pattern of late.
Daily Articles of Interest
- An excellent primer for the newly initiated.
- Retirement Locales
- Trade Goes Awry
RSI Wilder (5) for April 20, 2006
SPY – 74.0 (Overbought)
DIA – 77.8 (Overbought)
QQQQ – 60.6 (Neutral)
IWM – 69.0 (Neutral)
Typical Consolidation
April 19, 2006
Today was the typical consolidation day immediately following a nice rally. As we all know anything can happen with only two days left until expiration. With oil settling at $72.17 today and a CPI number that was not nearly as good as the market anticipated, the market could have problems holding at current levels for the short-term.
After a late post after an extremely busy day I am going to bypass the “daily articles section” and RSI Wilder (5) information. I promise I will make up for it tomorrow with some interesting articles. Also, I plan on revamping the daily content section of the blog (provide more content) and would love to hear any thoughts or ideas for the blog. Take care.
Largest One-day Advance since April 2005 amid Record High Oil Prices. What next?
April 18, 2006
What a day! The market opened higher on positive inflationary news. The Labor Department reported a modest increase in core prices of 0.1%. The good news continued at 2:00 EST when the FOMC released the minutes of their March 27-28 meeting that stated ”the end of the tightening process was likely to be near, and some members expressed concerns about the dangers of tightening too much, given the lags in the effects of policy.”
As a result of all of the postive news the Dow (DIA) witnessed its biggest one day advance since April 2005. The one bearish aspect of today’s market was the record close of crude oil at $71.35. This could pose (and most likely will) a threat to a sustained rally. There are several other technical indicators that make me wary of a continued advance in the near future. Furthermore, options expiration has a tendency to be quite volatile and the latter part of options expiration has bearish tendencies, especially Friday. I do feel we could see some buyers come in early tomorrow and push the market higher if we receive good inflationary news from the CPI. With the SPY closing near the high of the day we could definitely get a signal in one of our strategies. I can’t wait.
Daily Articles of Interest
RSI Wilder (5) for April 18, 2006
- DIA – 69.7 (Neutral)
- SPY – 69.9 (Neutral)
- QQQQ – 63.1 (Neutral)
Options Expiration Week Begins
April 17, 2006
As I mentioned last week, the Monday Following Good Friday has a seasonally negative bias. Well, once again it looks as though that indicator held true and now the major indices are either back into oversold (SPY) territory or fast approaching (DIA and QQQQ). Another declining day would bring all three into oversold or possibly very oversold territory which could make for a nice short-term trade to the upside. I would prefer to see a decent decline over the next day or two before I attempt to establish any positions. I want to make sure each trade has a high probablity of success. Obviously not every trade will work (that is a ludicrous thought) but if we can increase our odds of success by patiently waiting for nice set-ups then we will manage to remain profitable over long-term. I cannot emphasize this enough. Patience, patience, patience.
Daily Articles of Interest
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Options Trading
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Ruin Your Life
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Options
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RSI Wilder (5) for April 17, 2006
- DIA – 31.7 (Neutral)
- SPY – 29.9 (Oversold)
- QQQQ – 32.4 (Neutral)
