Hope everyone is well and those in the path of Sandy are working on getting things back to somewhat normal. It has been a hectic 2 weeks and I still have no power. I am a routine kind of person, so it has really taking a toll on me, especially on the trading side. Hopefully I will have power come Monday, but it's not looking good right now. I know UPB usually does his Sunday night class, but he has had some issues as well. If UPB is unable to do his class Sunday night, I will try to do something either Sunday night, or Monday. I hope you folks can understand that the lack of content on the site the last week or so is due to extenuating circumstances and not anything else.
It's nice to know one of my normal 'routines' went as planned and read my Barron's this morning. I would have to say the theme of the entire publication was "fiscal cliff" as almost every piece started with that verbiage. I know that term has been out there for months but looks like folks are really starting to use it to explain the skittishness of the market last week. Of course you could say the sell-off last week was better then expected as last time Obama was elected the market dropped over 5% the next day.
Quite honestly this 'Fiscal Cliff' talk is not old news, so my guess is this is not the main reason for the sell-off. With the market still up 5%+ for the year, you could say folks are locking in profits at the 15% capital gains, instead of waiting for next year and the possible 20%. I also think there is quite a bit of unwinding in some of the major movers this year that are widely held like AAPL, LNKD, and PCLN. You could see it in late September as PCLN and LNKD sold off for no reason that i could tell. You have folks saying insider sales are the reason for the sell-off in LNKD, yet that has been the story since $60. I said it earlier in the year and I still stick by my $150 $SPY target by years end. Now we are precariously close to the 200DMA on the $SPY at 137.24, and the 200DMA has proved to be a vital line in the sand for the bulls.(see line in the sand and the chart below)
Here is what we look like right now:
A break below the 200DMA on the $SPY, and I will start to rethink my stance for the rest of the year. For now I think these dips are opportunities, and finding the right ones can mean 1000%+ gains on some calls. Stay tuned this week for more updates, and hope everyone enjoys the weekend.