That Was Close
7th August 2008
Yesterday the DJIA and the SP 500 tried to breakout of their trading ranges, but their July highs and falling 50 day MA stopped them dead in their tracks. That failure, a poor jobs report, and the first day of rising oil prices in a week (now how strange is that to read given the historic rise over the last year), combined to knock the stock market back into the middle of its range of the past month. Every time the market has a triple digit up day, it seems to be followed in a day or two with a triple digit fall. No different this week.
If you tried the Iron Condor we suggested about 10 days ago, yesterday’s move may have sent you scrambling to look into how to get out of it without getting into too much trouble. As it turned out, the DJX once again did not break through resistance. A better idea may have been to use that opportunity to take some profits off the table by buying back the Put half of the spread for very little money.
Eventually, this market will breakout in one direction or the other. I just do not think it will happen until everyone gets back from summer vacation.
JD