The November 6th letter was titled “Getting Ready For an End-of-Year Rally”. The drop that preceed that letter had few thinking or saying a rally was at hand. Our systematic, objective analysis is based on just that, not subjective indicatiors or others' opinions. Since that letter, the DOW Jones index is up just over 10% and has been too much of a good think too fast.
While it is highly unlikely that the broader markets will have a decline of any meaning to the recent move higher and long-term trend, our internal gauges are telling us the oppisite of what they did on November 6th. That is a short-term signal, 2017 is posed to move higher and we'll report on that.
Breadth and sentiment market internal have signaled that long risk is now at a high level. That doesn't mean the market will decline on cue, but thier historical accuacy that has guided over the years shoud not be ignored.
Adjustments and Comments on Open Trades
FSLR – Shorted 10 Nov $35 puts for $580. Got assigned, so sold 10 Dec 32.5 calls for $1,700, converting the position into a covered call.
FB – Shorted 10 Dec $115/110 put spread for $1,220. Cost to close currently $.34, so move stop to .61 to lock in 50% of max gain if it weakens.
CF – Shorted 10 Dec 22.5 puts naked for a limit of $.15/share and $.20/share and for an average basis of $.175/share. Move stop break even.
TBT – Purchased 1,000 shares at $40.00/share as core trade. With TLT (bonds) strengthening, TBT (yields, which move inverse to bonds) is falling; thus, we recommend selling the Dec 40 calls for $1450 to lower cost basis to $38.55/share.
TBT – Shorted 10 Dec $40 puts for $1,400 as income trade. Cost to close currently $.34, so move stop to .70 to lock in 50% of max gain if it weakens.
ESRX – Shorted 10 Dec $72.5 puts for $910. Stopped at .45, locking in 50% of max gain.
TER – Shorted 10 Jan $24/21 puts (i.e., a bull put spread) for $520. Cost to close currently $.15, move stop break even.
UNH – Shorted10 Dec $145 puts for $1,750 (core trade if assigned).
UNH – Shorted 10 Dec $140 puts for $850 as income trade. Currently trading at .04 x .13, maintain stop to .42 to lock in 50% of max gain if it weakens, and also bid $.05 to close for $800 gain .
FXE – Shorted 10 Dec $101.5/98.5 bull put spread for $38o. Moved up nicely, move stop break even.
SPWR – Shorted 10 Dec $7 puts for $320 and 10 Jan $6 puts for $250. Had nice breakout so move stop break even.