If I Had a Hammer
22nd February 2009
I’d tell you the SP 500 hit bottom on Fridy and it is now headed for a recovery.
Unfortunately, this candlestick signal does not always indicate the end of a down trend. All we can do right now is wait for confirmation. While the SP 500 is showing some promise by stoping short of this bear market low, the DJIA set a new one on Thursday and kept heading south on Friday. If the market moves up on Monday, I will begin looking for some long term bullish plays. If it fails to improve, all bets are off on the bullish side.
For the sake of showing a little optimism, here are some ETF’s that I am looking at that have been showing some good relative strength : AGG, GLD, IBB, IEF, IWF, IWP, LSC, PBP, QQQQ, SHY, TIP, XLK, XLP, XLV. The MNX index option on the Nasdaq has been the strongest in 2009, so it would be the first I would consider for an option play.
It did not surprise me that the Bear Call Spread side of the Iron Condor trade for February expired worthless, allowing you to keep the credit no matter how you placed that side of the trade. On the other hand, the Bull Put Spread leg may have caused a problem for some of you. but not if you exited the position on Tuesday when the SP 500 finally closed below 800. You should have been in that position long enough for the decline in time value to allow you to break even on that leg of the trade.
We will wait until at least the end of the day on Monday before even thinking about reaching any conclusions on this market.
JD
