September Peak?

Last Wednesday, I shared in my handholding class that I have placed (on Tues, 22 Sep) a Mar 2010 107 Put on SPY when SPY was around 107.30. At that point of time, the highest point since March low was 17 Sep 2009 (at around 107.55). My hypothesis is that the market is likely to have reached its Top in Sep. Then a retracement will follow. The market will then try to test its September High and fail. An October big drop might then follow.

At the point of entry, the risk is minimal while the reward is huge. Whether I am right or wrong, it does not matter. What matters most is whether the decision was correct at that point of time. Refer to my presentation slides to the Options Traders Club Meeting at http://persiancat04.blogspot.com/2009/09/v-shaped-or-w-shaped-recovery.html for some of the reasons.

My decision was reinforced by the price actions that took place after the FOMC meeting on 23 Sep.


The price tested and break the 17 September high but the price could not hold. It then broke the session low and went much lower. It represented the beginning of the recent slide. My intraday trades for both the SPY options and Forex were great on that day. My swing trade for the SPY Mar 2010 107 Put was of course doing well. My losing credit spread on SPY is also now back in the black.

The question is now, would SPY repeat the pattern of having a short retracement as in circle A, B and C in the chart below.


Or would it break the Low in Circle C and B to mark the break of the recent uptrend. We shall see. While some others would ride on the bigger trend until proven otherwise (it is the right strategy most of the time), for now, I am testing my hypothesis and it is raking $$$ for now. I might lock-in my profits if proven wrong.

Cheers !

PersianCat (Millionaire-in-progress)