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Is the Correction Is Over?<\/strong><\/p>\n On an intra-day basis, the S&P500 has declined 3.6% from the high reached Friday of 930.17. Similar declines for the Russell2000, the Nasdaq Composite and the Nasdaq100 stand at 4.73%, 4.36% and 5.15% respectively. These numbers are right in line with the earlier pullbacks seen in this rally and with the nice round bottom put in today, it is likely this correction is over. <\/p>\n <\/p>\n Another key factor to observe is that the VIX closed down today showing growing risk appetite. Even when the SPX went below 900, the VIX did not see any big spike, indicating that investors are increasingly confident that a major price collapse is unlikely. <\/p>\n <\/p>\n Opex Week: The 200 Day Moving Average<\/strong> term trends. <\/p>\n A market trading above an upward sloping 200 Day Moving average is considered Bullish; one trading below a downward sloping it considered bearish. During bear markets, this average often represents a line in the sand, <\/p>\n where rally often reverse; in a bull market it is often the last line of defense where a pull-back stops and reverses. <\/p>\n <\/p>\n The 200DMA for the SPX is at 951.12 (4.7% away); for the Russell2000 it is at 523.56 (5.7% away). The Nasdaq Composite and the Nasdaq100 have already reached this mark and have been straddling it for the past week. Since this is the week of Options Expiration, which is typically bullish, we are likely to see the S&P500 and the Russell2000 make an assault towards their respective levels. <\/p>\n <\/p>\n <\/p>\n It is very likely that this level is going to form a formidable resistance for the equity markets and likely setting the stage for a stronger pull-back.<\/p>\n My Portfolio: The Capital One Price Action <\/strong> I have been using puts and puts spread to trade COF on the bearish side with some success. <\/p>\n <\/p>\n <\/p>\n <\/p>\n Last week the price of COF moved up 80% as a result of a massive short squeeze following the news that the stress test results for COF were positive. There were murmurs on chat boards that both Goldman Sachs and Merrill-Lynch (Bank of America) were supporting the stock. This is typically a sign of an upcoming secondary offering. <\/p>\n My Portfolio: Stays in Cash but Preparing For Options<\/strong><\/p>\n In spite of my belief that we are ready to run to the 200 Day Simple Moving Average, I did not initiated any new long positions today. <\/p>\n I sold some out of the money May calls on my TLT holdings, and day-traded Apple on the long side, and the Russell2000 derived instruments (IWM Options, TF Futures) on the short side. I did not go short under SPX 900, and escaped the bear-hunt; but I was too chicken to go long.<\/p>\n I will start day-trading options rest of the week. <\/p>\n During the options expiry week, the time premium associated with the options declines rapidly, allowing you to build up a larger amount of leverage for the same amount of cash commitment. Due to the rapid time-decay of option this strategy is useful only for quick day-trading moves, and not for overnight positioning. <\/p>\n However the positive g amm <\/p>\n a of options allows you to make large profits if you can catch a big move while keeping your total capital at risk low.<\/p>\n","protected":false},"excerpt":{"rendered":" The equity markets continued where they left yesterday, continuing the sell-off which started after Meredith Whitney\u2019s bearish interview Unlike yesterday the selling was across the board with no divergence between exchanges or between the market breadth and advance\/decline statistics. The … Continue reading
\nThe 200 Day Moving Average is a very important market indicator used to determine long <\/p>\n
\nThe price action in Capital One (COF) is a great example of how Big Money is helping support the market to allow banks to raise additional capital. <\/p>\n
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\nOver the weekend, COF filed for a secondary offering with Barclays as the sole underwriter. The secondary was sold on Monday at a price of $27.75. This seems to have triggered a sell-off on Monday with a gap down-open. However throughout the day the stock traded in a very narrow channel with $27.75 as the line in the sand. In the last five minutes there were a few trades below that level. On Tuesday the stock sold off right at the open, presumably after Barclays withdraw their support at the conclusion of the offering, spending most of the day around $25.
\n![\"\"](\"http:\/\/content.screencast.com\/users\/aviat72\/folders\/Jing\/media\/ebf2a561-5f11-405f-8693-1532cd4c520b\/COFPriceAction.png\" "\\"COF")
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\nI have closed out most of my puts on COF but do feel sorry for some of the investors who would have bought this stock above $30, not realizing how the system works.<\/p>\n