Tuesday, December 01, 2009

Where are we on the SPY trendline--Fear or Greed?

If you were quick on the trigger last Friday or yesterday you could have jumped into SPY as it crossed the low bound of the trendline at 108.  However, I'm not convinced we have really gone through a typical down cycle.  The Dubai meltdown was a random event that triggered the decline, but it seems to have been discounted fairly quickly--I guess a 80 or 90 billion dollar default seems like small change right now...   And even though there were pretty big drops in the market for those two days, things closed higher than they opened, not typical for a fear cycle.

I've stayed pretty conservative the last two weeks--about 2/3rds in cash.  My current positions:  covered calls on Oil with USO, a pseudo covered call on VIX, a dividend capture play on AGG, and a so far uninspired covered short bet on Gold.  Click to enlarge.

Bottom line, my guess is that we will head for the bottom line of the trend "channel"  in the next couple of days--but I will be totally unsurprised if I am wrong.

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