Tuesday, June 16, 2009

Only the Beginning!

Second and Third Derivatives Rock!!

Green shoots and second and third derivative concepts have been motivating the market to a dizzying 30%+ rally. If you believe in second derivatives, here's one that might rock your world. This is the moving average of the standard deviation level for the weekly S&P price. It might not mean anything, but then again, it might mean everything!

Usually markets move in cycles and that's why all of us believe we can trade them. If they didn't go up and down, the whole world would just be piling on to the sky! But nope, stocks go up and stocks go down. The fundamentals don't always mean anything. There are always more important issues other than whether a company will make money or not.

It hasn't been very often that this indicator begins to reverse and doesn't fall significantly.

Here is the weekly chart with today's closing SP price. You can see that we are clearly at the crossroads. Which route will we take? All of my cycle indicators show DOWN. No reason that Bears can't also have green shoots. Or are green shoots and second deriviatives only for Bulls?

As fair notice: we are long DXD (ultra short Dow) and SDS (ultra short SP) in various portfolios. Also we went short July SP 900 call at the SP 940 level receiving 56 premium for the option. Looking for 900 or less on SP by month end.

No comments:

Post a Comment