Tuesday, February 28, 2006

Relentless and Right

Smart action this morning with the indices spiking straight down in a kind of a relentless, unmerciful way. Given the weakness of yesterday's rally this move is welcome and my hope is that it starts a new wave down that takes us out of the range we've been stuck in for the last three months.

I scanned the news this morning (my readers know I don't read news, but I do scan them for a sentiment read) and I find two interesting things:
  • Everyone is talking about Housing bubble imploding. I think this is now bordering on hype and while I am a Housing bear a bounce is in the cards at these levels. We're still looking to sell more calls in this sector but we'd like to see a rally to make the sales worth it.
  • There is still lingering bullish sentiment on Oil and that tells me that it's heading lower even at these "beaten up" levels. The vol is fairly rich here so selling calls is excellent from both directional and vol perspectives.
So, am I a bear on the overall market? I know I'd like to be but more action is needed to really get me to growl. For now I am looking for oversold conditions to buy calls into or rallies to sell same. Getting long SPX puts has crossed my mind several times but this morning is exactly when one should be careful about chasing an index.

Cheers,
/Dmitry

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