Can We Continue?

After a huge 3% rally across the board today we find ourselves finishing right at resistance near the 930 level. The question becomes is this as far as we go or will we keep going? As usual the market will show us what it wants to do and it may show us by the end of the week with JPM results coming as well as GOOG. In addition to these earnings we have an added uncertainty of option expiration on friday. With options expiration it is not unusual to get some decent volatility as the market makers attempt to milk as much as possible out of their positions. One of the interesting things to note today is that with a 3% move the $VIX should have collapsed, however it was actually UP on the day. This is a peculiar divergence and could point to some pull back or could indicate some hedging of new long positions.

Apparently it was pretty foolish to get out of my UYM positions. Obviously at the time it didn't seem foolish but it has since ripped higher without me. I am long term bullish on metals and commodities but it seemed like we were going to face short term head winds(and still might). China GDP tomorrow could also lend a bid to these stocks tomorrow if it comes in better than expected. AA ripped higher to my dismay today finishing above 10 dollars and making my short calls ITM. I still have a profit but it was significantly reduced today as it shot up 6%. I think there is a fair amount of open interest at the 10 strike so hopefully that will help the stock gravitate to that level for expiration and assist my position. If it moves up much more I will have to exit the position.

Overall luckily my longs outpaced my shorts and I had a gain although it was less than the index which is always annoying. AA is the main reason I didn't have a better day and my UYM hedge is no longer on. USO had a great move as the buying in equities cause some short covering and possibly new long positions in oil. This is exactly the move I was looking for, I will look to take profits near the 35 level. MFE broke out today above the 42.50 level I had previously talked about on good volume. Hopefully this move can continue as the strength in tech continues. My concern is that tech is becoming increasingly overbought so it may be hard to sustain the rally. I think the logical and reasonable short term target on MFE is now 45.00. It is entirely possible it will eventually make it to $50 however I'll look to get back in on a pullback.

We may face some resistanace at the 930 level but if the earnings and guidance keep coming in better than expected the party will continue. IYR has finished right at 32.50 which is my line in the sand. If it continues to strengthen I will have to cut that position and look to re-enter at a later time. For now I am sitting on my hands and waiting to see how the week finishes out. Once we get into next week after expiration I will see how things are looking.

Total Return for 2009: 153%