Thursday, March 09, 2006

Housing, Gold and Oil, Redux

A few notable things this afternoon:

One, the Nasdaq-100 stalled after the 25 point rally (from yesterday's low to this morning's 10 am reversal) and sold off. The painfully obvious level of resistance is 1672. The reson I say "painfully" is that such obvious levels rarely work outright. However, the reason I am pointing this level out is that this time I think it really is important and needs to "work" in order for the down leg to continue. If we close significantly above it, I will scale back on our bearish positions.

Two, Housing is looking worse than ever. Even the rally barely helped. With RYL breaking 65, BZH breaking 60 and CTX free-falling towards 60, this sector looks so oversold that regardless of me being right or wrong in the end, the only way to play it here is to aggressively get long calls. We're already long in KBH and a few other names, but here's where we're going to get longer.

Three, Gold bounced as expected and now we're scratcing our heads as to whether to use this rally to get short outright. Not enough evidence here but do stay tuned. I think the best outcome for this commodity is to move sideways as I suggested a couple of weeks earlier. I doubt it's got upside right here, right now. So, why not sell calls? Because, the short signal that's in place now may get rejected, and if it does, we'll get the kind of a rally that negates all of the above. So, back to scratching heads. (Isn't being a trader fun? :)

Finally, Oil is acting as expected. Selling April call premium here looks right.

Cheers,
/Dmitry

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