This is a bet that the S&P 500 does not rocket to a new all time high by the May 16, 2014 expiration.
The news flow this morning is giving us an opportunity to re enter the short positions that I covered on Friday. Half of the opening 80-point pop in the Dow came from Citibank (C), which surprised to the upside with its Q1 earnings report.
We also got March retail sales +1.1%, better than expected.
We are down only 4.1% in this pullback, not even matching the 6% January dump, and we have clearly not suffered enough for our IPO sins. An eroding quantitative easing from Janet Yellen?s Federal Reserve is clearly taking a toll.
This rally could continue for a day or two more. But it has been so difficult to get short positions off in this correction that I don?t mind erring on the side of being a little early. The reversals ambush you at openings you can?t trade, and take no prisoners. We will probably get our reward on Friday in the next weekend flight to safety.
It is only because implied volatilities are so elevated that I can get this position so far out of the money off so richly, with only 23 trading days left until the May 16 expiration. The spring swoon has sent put prices through the roof, as panicking institutions rush to buy downside insurance a little too late.
Charts and technical analysis are far more useful and important in falling markets than rising one, as the downside crowd is far more dependent on this dismal science.
The fact that these charts are breaking down across markets on increasing volume is terrible news.
A sector rotation out of aggressive technology (XLK), financial (XLF), and discretionary stocks (XLY) into defensive consumer staples (XLP) and utilities (XLU) is a further complicating factor that is making matters worse.
During economic slowdowns, consumers postpone purchases of new iPhones and cars. They don?t for toilet paper and electricity.
Ten year Treasury yields approaching a five-month low is another nail in the coffin. Banks are falling because of the rocketing bond market, which is flattening the yield curve to the topography of Kansas, hurting profits.
All that is needed is a match to ignite a broader, more vicious selloff and Russian Prime Minister Vladimir Putin has a whole box of them!
1,760 in the S&P 500, here we come, the 200-day moving average!
Keep in mind that fast markets, such as the one we have, I can get you only ballpark prices at best. It?s every man for himself. Praise the Lord, and pass the ammunition.
