Thursday, June 26, 2014

Is now the time for some protection?

What I see right now in the market is a volume deprived trading environment with a whole lot of large caps including the ones I am holding treading lower while the indices are all pushing higher. This to me is a sign of a market top, atleast for the short term. When markets are pushing ever higher with low volumes it is a sign that buyers have dried up but the sellers are not coming in either. So all we are really waiting for is a catalyst to set off the sellers. I believe the trigger are the following:

1. With GDP shrinking 2.5% some companies are bound to miss earnings. So bad headline numbers for some big names would possibly trigger some selling
2. Inflation is showing signs in multiple reports and so the chatter of FED raising rates is going to get louder. This is again headline news that might trigger a sell off.
3. The market is at all time highs with no significant correction for over 2 years now.
4. Last few days the market is opening significantly lower than its closing.

So I am thinking about getting some protection to the downside. The trade on my mind is the S&P index put options for the oct-dec timeframe. The options have been getting costlier last few days - a sign of market sentiment turning.

But as my previous post suggests, playing the short side of a trade is hard as hell. I am keeping my eyes open and my fingers quite, but one of these days I think I am going to get me some protection from this rather precarious looking market.

Saturday, June 7, 2014

The week gone by

The markets surged higher last week and hit all time highs on the S&P and Dow. But the rally seems exhausted, dragging its feet as it is unwilling to go down. Admittedly the news on the economy is getting better and that is probably why the market is not willing to give up any of the gains. But I am not sure if the next quarter will have any surprises. I expect most of my holdings to report inline with maybe a couple of surprises to the upside and I think most of it is already priced into my stocks. But I do have a few notable things that happened last week that I would like to highlight.

1. Good sense prevailed and BRCM finally gave up its cellular ambitions. Like when they gave up on Disk controllers, this is a watershed moment for BRCM as profitability and RoI will appreciably improve and the stock showed it this week. Come 40$ I think I will start trimming those holdings. I think it will have legs till 45-50$.

2. Financials seem to be finally getting some legs. I am all invested in with XLF. Nothing much to do there except go on the ride for the next few years. Maybe I will add a little more if XLF breaks 23$

3. GE finally broke out of its range and got some legs last week. I think their backlog and shift to industrials is really gaining momentum. Again nothing much more to do there - as I am mostly fully invested.

4. INTC also broke out of range. I am looking for a 30$ handle to get out of INTC. Too much technology in my portfolio.

5. MT went below 15$ and I added. Lets see how long I will have to wait for this to turn appreciably.

6. Finally AAPL showed some legs. But hard to tell whats coming with the stock split. Hopefully, in the near term some momentum from retail investors and maybe news of addition to an index or two with the lower price. (DOW?)