What's Next?

So after my last post, that Friday I took a position for a snap back rally as a day trade buying calls on the SPY. I was looking for a move up to about 92.30. I sat in the position as it flucuated between a gain and loss for a while. It moved up looking to break out but got rejected at the 91.70 level all the way back down to 91.50 fairly hard. This once again moved me from a profit to a loss and it looked like it was breaking down, so I exited not wanting to take more losses after yesterday's loss. Of course, literally 2 mins later it reverses higher and breaks out just like I was expecting and runs the entire move I wanted in probably 10 mins. I would have made up my entire days loss yesterday with that trade. After that happened I decided to not look at my computer anymore because I would have broken it. That is the most frustrating thing, It was good to not take a loss but my emotion from losing yesterday made me cut the loss too fast and not allow it time to work out.

Moving on to this week, I avoided the large down day on Monday being flat. Many stocks broke their trends on monday and we finished below 900 on the S&P. Only a couple finished at their support levels but I was not brave enough to go long as it seems like this could be a turning point in the markets with some further downside. I don't think we retest the lows by any means, but I can't say for sure obviously. I think We likely get to 875 and possibly 850, hopefully stabilize and then move higher from there. Many stocks have already taken 30% haircuts from their highs so they have to look decently attractive to the Bulls.

I only have one position and it is short OTM calls on PALM. Not that I dislike palm, I just feel that there is an edge to selling calls ahead of earnings vs. owning them or doing nothing. The expected volatility was 119% 2 days ago, now it is 110%. I am currently break even on the position. The stock has run from 3 dollars to 15 dollars at it's high. Obviously people can stay irrational longer than I can hold a loss but that seems excessive and I feel favors a sell the news type event. Analysts are still expecting a loss of .74 next year which is good in terms of growth being less negative but still not a "healthy" company. We will see what happens after they report on the 25th, I chose my positions so that if they become in the money it will signal a new high which would point to more upside and an exit for me. Again, after such a huge run another 20-40% move is possible but seems less likely especially if sentiment is turning.

Durable goods just came in better than expected by quite a bit which has sent futures up to the 900 level. I think this is a time where shorting could be difficult because of the constant expectation of recovery at some point and we may not get consistent bearish data enough to really knock the market down. I would prefer a pull back to 850 then get long for an intermediate term basis. The only thing that may help bring things back to reasonable levels is if earnings are not as good as expected so people won't pay as high of mulitples as before. We shall see though.

Total Return for 2009: 148%