Asian Markets is down - So Will The U.S. ?

The U.S. markets (so are the world markets) had been having a very good run since 6 March 2009. The expected continuation of downtrend failed to materialise after 20 Mar when the Obama Administration announced its plans to buy over toxic assets. Since then, the market is looking for an excuse to continue its downtrend.

Technically, the 3 major indices showed signs of overbought positions. Divergence can also be seen in the RSI and Stochastics.

Today, the Asian markets closed significantly lower on reports that "the Obama administration has forced the departure of General Motors Corp.'s chief executive and suggested a "quick and surgical" bankruptcy for struggling U.S. car makers".

This could be the excuse the market is looking for to continue with its downtrend. As to whether the market will test its March Lows is yet to be seen. At the moment, the immediate target is the March Lows.

At some point today, the DOW futures was negative 200 points. I still have my SPY credit spread which expires tommorrow. I would just need the SPY to drop below $78 upon expiry to fully keep the premium.

The Chinese solar companies unexpectedly jumped last Thursday when it was reported that the Chinese government would subsidise and jump start the solar industries.

I had been playing the covered call on STP (a Chinese Solar Energy play). Such strategy is good for bullish stocks (not very bullish stocks). When the market jumped on Thursday, I closed the April 7.5 Call at a loss. I sold back the April 10 Call after the stock climb much higher. Overall, I still make $$$ as the underlying stock (which I owned) makes much more $$$ than the loss through the April 7.5 Call.

I expect the Chinese Solar stocks to retrace and consolidate its next move. It is likely to move lower with the general market. I would be shorting a naked Put on STP when the time is right.

Cheers !

PersianCat (Millionaire-in-progress)