Post-Steve Jobs

Well, I overestimated the market reaction towards Steve Jobs ill health. I expected more negative reaction but the market was more sympathetic. I also overestimated the market reaction towards Obama Inauguration. I had expected a rally towards the end of the day.

That said, I still make some money from AAPL since the stock had been going south the last few days. Furthermore, towards the expiry day last Friday, three of the four credits spreads (AAPL, SPY, RTH) that I played made money. The last one was TGT - loss some here.

Last Friday, I played two fresh trades. Bought SPY Put and played credit spreads on SPY (apart from an existing AAPL Put). The plays were made based on the off-chance that the market would not be kind to Obama. It IS NOT kind to him ending significantly negative yesterday.

The market is oversold at the moment. It might want to test the Nov 2008 low. However, it may not have enough energy to test the Low soon. I have liquidated all my short positions for now - waiting to short again at the right moment.

Cheers !

PersianCat (Millionaire-in-progress)

Steve Jobs and Obama Rally ?

Breaking News !!!

CNBC reported after market close that Apple CEO Steve Jobs is taking medical leave till Jun 2009. The stock is expected to take a beating tommorrow.

In my 23 Dec 2008 posting, I mentioned about Steve Jobs's health. I still have AAPL April 80 Put as well as a Bear Call Spread (Jan 90/95 Call). My April Put is slightly negative while my credit spread is doing well. By tommorrow, my April Put should be doing well while my buy limit order of $0.05 on my credit spread is likely to be filled. One analyst already mentioned that AAPL is likely to be in the $75 region tommorrow. I think it could be more than that. A knee jerk reaction could force the stock to be down by more than $20 in the pre-market before settling higher. We shall see what happens next.

Obama Inauguration Rally

Prior to the breaking news on Steve Jobs, I am expecting a Obama Inauguration rally on Thursday and Friday. It is partly due to a feel good factor prior to a great event on 20 January. However, the market might be greatly affected by AAPL performance tommorrow. A rally is less likely on Thursday.

Martin Luther King Holiday

This holiday falls on 19 January. Last year, the day after Martin Luther King holiday, the DOW drops more than 600 points in pre-market. This year, the day after the holiday happens to be the day Obama will be inaugurated. While I hope things goes well for Obama, there is a small probability that the Inauguration will be marred with nasty incidents. I am contemplating of buying Puts on SPY or playing Bear Call Spreads (Feb expiry) on SPY by the end of Friday in case the market reacted negatively on 20th January. Whatever happens, I will close these positions on Tuesday if I played them.

PersianCat (Millionaire-in-progress)

Start of the New Year

Today is the first day of the year where the majority of traders will be back from holidays. Though the market was trying to put a brave front by being bullish over the last few trading days, the trading movements were based on low volume. What matters now is whether the market ends bullish today. If it does, then it is likely that the market will continue its retracement perhaps until Obama's inauguration. If it does not, then the fight between the Bulls and the Bears continues.

Stay tune !

Cheers !

PersianCat (Millionaire-in-progress)

2009 U.S. Trading Holidays

January 1 - New Year's Day
January 19 - Martin Luther King, Jr. Day
February 16 - Washington's Birthday/Presidents' Day (3rd Fri of Feb)
April 10 - Good Friday
May 25 - Memorial Day
July 3 - Independence Day (observed)
September 7 - Labor Day
November 26 - Thanksgiving Day
November 27* - Half Day due to Thanksgiving Day on Nov 26
December 24 - Half Day on Christmas eve
December 25 - Christmas

- extracted from www.nyse.com

Cheers !

PersianCat (Millionaire-in-progress)

Will There Be A Christmas Rally?

The market had been consolidating for the last few weeks. Initially, the market ignored bad economics data (e.g. worse ever Non-Farm payroll (NFP)- negative 533k jobs lost). Lately, the bulls had been losing steam.

We could expect this week and the next to be low-volume weeks. It is partly because of the Christmas extended holidays as well as a Jewsih holiday. As such, any movement in the market would be skewed. (Anyway, we have a 3.5 days of trading this week) Typically, we could expect a bullish run before Christmas and an extended bullish run immediately after Christmas - giving us the Christmas Rally. This is partly due to a "feel good factor" by traders not wanting to dampen the holiday mood.

I am now looking for signs for a Christmas Rally. It did not seem to have. If any, it would have been an early Christmas Rally when the market rallied when the bad NFP data was released weeks ago.

President-Elect Obama is now on 2 weeks holiday. Unless the situation warrant it, I do not expect him to make a news conference. His appearance on TV has created a claming effect on the market. With him out of the picture, the market would have to fend for themselves. More bad news can be expected. Despite the Black Friday sales, it was reported that the retailers still have large inventories to clear by Christmas.

I have placed a January 2009 Bear Call Spread on RTH (retail holders) and a few others, taking advantage of the longer holidays during Christmas and the New Year.

Take note too - AAPL. It had been reported that Steve Jobs would not address the MacWorld in January 2009. MacWorld is an important event for AAPL and APPLE die-hards. As much as AAPL tried to downplay Jobs absence, I think the decision is more because of his health than anything else. It is likely that he himself is uncertain about his health in January (though he may look healthy now despite his loss of weight). AAPL would be obliged to inform SEC if Jobs' health is confirmed significantly detiorating. However, if his health is not "consistently healthy", I believe AAPL would side on the part of caution - Not informing the SEC and not participating in MacWorld (and come out with a "Good" excuse). Any confirmation of Jobs negative health status would tanked the stock to historic low. I also expect AAPL to have less than expected sales/revenue this quarter. I have placed an April 2009 PUT on AAPL.

PerianCat (Millionaire-in-progress)

Comics Strips

Liquidity

Bad Risk

Wall Street Titanic?

Black Friday Sales Data - Aftermath

Well, well, the market did reverse - and what a reversal !

The major indices drops significantly:

• Dow = -680 points
• S&P 500 = -80 points
• Nasdaq Composite = -137 points

Sometime yesterday, when the market keeps dropping, my naughty thoughts tell me that I should have bought Puts on Friday instead of just playing the Bear Call Spreads (less profit and risks). I have to remind myself that I should be thankful and not greedy.

The next target for my short positions is last month's (Nov) Low.

Cheers !

PersianCat (Millionaire-in-progress)

Black Friday Sales Data

In my previous postings, I mentioned that the market would be remained positive this week. Well, it was practically positive for all four days this week for the Dow and S&P 500 indices. The Nadaq Composite Index was also positive by the end of the week. The major indices are now at or above the 23.6% Fibonacci Level as well as SMA 30. How the market move next week would probably depends on the Black Friday Sales data. It would ideal if the market have retraced to the 38.2% Fibonacci Level. Then it would be ripe for a reversal. But at the current level, it is still a good level for reversal though not as good.

The day after the Thanksgiving holiday marks the beginning of the Christmas Shopping. The sales data on that day, also called Black Friday and its immediate weekend could move the market significantly in the following week.

Based on news reports, most retailers were expecting weak Christmas sales this year. To clear their current inventory, they offered deep discounts (even APPLE is giving discounts!) at the expense of profit margin. As such, it may not be surprising that the sales data may be good. However, profit margin would be eroded and retailers might still lose money. The question is, how would the media spin the sales data - would they play on the gross sales or on the profit margin?

This week, I have been playing intraday playing long positions. My last intraday play this week was on SPY Call options. Made a small profit of $45 for every Call options contract. Since I am expecting bad reports on the Black Friday sales data, I have placed Bear Call Spreads positions on SPY, COF, RTH and TGT during the last 10 minutes on Friday. If I am wrong I am cushion somewhat by the time decay of the options. If I am right and see that the market is reversing its Bear rally, I would then increase my positions by buying Puts options.

Cheers !

PersianCat (Millionaire-in-progress)

Citigroup Dec 2.5 Put

Bought back my Citigroup Dec 2.5 Put between $0.18 to $0.19 when Citigroup shares jumped to about $6. I was not willing to wait another month for the $0.18/$0.19 to expire worthless. In one month, anything can happen. I might as well lock-in my profits now. The profit is about 73%-75% (played on last Friday and kept over the weekend).

PersianCat (Millionaire-in-progress)

The Bulls Are Back - For Now

It feels good to be correct about the market direction. It feels better to make money from it.

In my last posting in this blog, I mentioned that the market is grossly oversold and need a rest (and have a short rally). Well, it did have a rally on Friday. The excuse the market is giving now is that the U.S. President Elect is nominating his Treasury Secretary who is rather acceptable by the market. He is also expected to name his Economic Team on Monday.

Since this week will be a short week due to Thanksgiving holidays, it is likely that the market will remain positive over the week.

Next week will be a crucial week for the retailers. Typically, consumers start buying for Christmas, the day after Thanksgiving. As such, the weekend sales data would provide a leading indicator whether retailers would be having good sales till the end of the year. At the moment, I think the profit would be bad (even if sales are good the profit margins would be grossly eroded.). The market would need an excuse to continue its downtrend. The retail Thanksgiving data could provide that excuse.

Position Updates:

• I closed all my short positions during the first half of the Friday's session with profits ;).
• My AIG Nov 2.5 Put will be assigned as it is in-the-money. My previous AIG shares which was also assigned the previous month had been sold sometime back with small profits.
• I also sold Citigroup (C) Dec 2.5 Put for an average price of $0.71. It means that if Citigroup remains above $2.5 on expiry Friday, I will get to keep the $0.71. If C is below $2.5 on expiry Friday, I will get assigned and the cost of the shares that I pay for would be $1.79. Citigroup is a bank that is "too big to fail". So it is likely that the government will do something that would help them survive This strategy is similar to the one I played for AIG - refer to: http://persiancat04.blogspot.com/2008/10/how-to-play-aig.html). (Latest update today, the Feds will be backing up Citigroup for a stake in the bank).

PersianCat (Millionaire-in-progress)

Be Prepared To Take Your Profits !

The three major indices broke its Oct/Nov Low again. However, the market is grossly oversold at the moment. It needs to rest (and have a small rally) before continuing it downtrend journey. So be prepared to take profits if you are shorting the market.

Next week will be a short trading week due to the Thanksgiving holidays.

The next pit stop (support level):

Dow Jones Index = 6975 (1997 Low, also around 61.8% Fibonacci level)
S&P 500 = 606 (1996 Low, also around 78.6% Fibonacci level)
Nasdaq Composite Index = 1108 (2003 Low)

PersianCat (Millionaire-in-progress)

A good bounce it is

At the handholding session last Tuesday, I mentioned to the group that unless the market is on steroids, there is a high probability that the market will bounce off its October Lows. It did that yesterday.

The big question is whether the bounce is sustainable. I do not believe so. It is likely that the Lows would be broken again and stay broken for some time.

PersianCat (Millionaire-in-progress)

The Bear Are Back !!!

The Bears are back in action since the last 2 days after giving way to the Bulls for more than a week. The funny part is that the media blame it on Obama winning the U.S. Presidential Elections. Actually, the market was already in overbought position. It just need an excuse to continue with the major trend (which is the downtrend). The market might want to test the Oct lows again. I will address this issue when we are nearer the Oct Lows.

Today, there will be a non-farm payrolls result. The market is expecting -200k change in the number of people employed (excluding the farming industries) during the previous month. Anything worse than -200k, would likely to negatively impact the market.

Today too, President Elect Obama would make his first Press Conference. It might calm the market somewhat (for a while though).

I have been asked about which stock to short. My advice is if we do not know which stock to play, we can just play the ETF stocks of the major indices, e.g. DIA, SPY, QQQQ. Then just play the major trend. My favourite is still SPY because it has good liquidity. I have already bought Puts on SPY, AAPL, IBM and COF. COF have been a tough cookie for me. But I believe the next bubble to explode would be the credit card market. Already Citibank reported that its credit card payment deliquency rate is critically high.

PersianCat (Millionaire-in-progress)

The Market Having a Breather

The market have been experiencing a short rally for the past four days. It seems that it will remain so for a while. The major trend is still down. Will abandon new short plays until the short-term trend is clearer.

PersianCat (Millionsulasaire-in-progress)

Market was on Steroids

The market was on steroids yesterday and kept moving up sometime mid-day onwards.

With such a big rise in price almost without a rest, the market is likely to open negative.

According to analysts, the market have already priced in the 0.5% rate cut by the Feds today. If the Feds failed to cut by at least 0.5%, the market might just be in steroids again but in opposite directions. However, the market might also just sell on news today. Anyway, I do expect a limit down to be in place again - i.e. the exchanges would only allow the market to drop by maximum percentage in a day.

PersianCat (Millionaire-in-progress)

The Next Pit Stop - Year 2002 Low?

Last Friday, the market opened and gapped lower on Friday. It was hit by the Limit Down ruling. As such, the market was cushioned from going down further. I believe this ruling will only prolong the slide further. In a way, it is good for traders as it give others more time to react and perhaps more short plays.

Today, the European and Asian markets are bleeding red again. Nikkei is at its 26-year low. The U.S. stock futures are also in the red. While Nasdaq composite already broke its October Low last Friday, Dow Jones Index and S&P500 Index are already close to its October Low. With the current situation, the market would certainly want to test the October Low again.

The next Pit stop (Support) are the Year 2002 Low:

• Dow Jones Index - 7197
• S&P500 Index - 768
• Nasdaq Composite - 1108

PersianCat (Millionaire-in-progress)

Attempt Fresh Lows ?

The market is testing to break Oct 08 lows for the past 2 days. Technically, it seems that it is highly probable that it could break the Oct lows. The market is not in oversold position yet (in daily chart). I would abandon any long position (if Ihave any), except my AIG shares which I collected by selling Oct 2.5 Put last month. For AIG, I am now waiting for the right time to sell either the 2.5 or 3.0 Call option.

My Dec and Jan Put options are still in position.

Despite analysts' bullish views on IBM (after its earnings result recently), I bought IBM Put options. I do not believe that IBM is immune to the market downslide. So after the initial euphoria, IBM slide downwards. Likewise for AAPL. While AAPL gave a grim forecast for its next quarter, the market seems to believe that AAPL mgt are being careful again and want to under promise but overdeliver. However, I feel that this round would be different. The next earnings could indeed be lower than analysts' expectations. Anyway, we shall see what happens next.

PersianCat (Millionaire-in-progress)

Jewish Holidays

Check out the Jewish holidays at:
http://www.chabad.org/calendar/holidays_cdo/aid/357733/jewish/2008-Holiday-Listing.htm

While I do not celebrate Jewish holidays, as traders we should be aware of them. During the Jewish holidays that do not permit any work, the market volume tends to shrink - sometimes by more than half. The market movement for the day could easily be skewed in low volume market days.

PersianCat (Millionaire-in-progress)

Singapore Stock Market

I am now looking at investing my CPF funds in the Singapore stock market. The Singapore market can go down further and I want it to go down further. Then I will start picking up the blue chips stocks.

Intended holding period for my CPF investments would be 3-7 yrs. Target returns 100% to 300%. Target might be more depending on how low I pick up the stocks. For my CPF funds, I typically invest, as I do not have time to monitor it. For my cash funds, I trade.

While Temasek and GIC targets a single digit returns per annum for their long term investment, I targets more than 20% per annum for my CPF investment. I typically gets more. The trick is to cash out when the market gets too hot (I did cashed out most of my positions before the November dip last year) and buy into the market when most people are fearful.

As Warren Buffet said, " Be fearful when others are greedy, and Be greedy when others are fearful" .

PersianCat (Millionaire-in-progress)

Learn From Black October

Intially, I wanted to take a break from any handholding sessions and Live Trading sessions in the month of October. My reason being that during that month, I would want to concentrate on my trades as October tends to be a very exciting month in a bear market.

But due to requests from the current batch of handholding sessions, I am conducting 4 Live Trading sessions in this month of October. What a month it have been. The market is extremely hot and volatile.

As I mentioned to the participants in my Live Trading sessions, even if we do not trade, we should watch the market. Look out for patterns and learn from it. The market patterns always repeat itself. A similar type of bear market will repeat itself in about 10-12 years again. Great amount of money will change hands again. Even the experience hands can get killed if they are too over-confident. Risk management is key to not only surviving in the market but do well in the market.

PersianCat (Millionaire-in-progress)