Wednesday, March 29, 2006

Wall of Worry

Finally, something worthwhile to talk about. Without resorting to rehashing the obvious, here is what we are doing with Cadence money:
  • I am an official Oil bull. We own Oil futures, Oil stock and Oil OTM call options. True to my word, we got long the futures contracts once June crossed the 66 mark. Everything else followed in response to bullish formations on individual equities.
  • I am an official Gold bug (for now). We are long Gold miner and GLD stock. We're also selling put verticals on dips (if there are any). Note that I am more excited about Gold than Oil here as Gold has put in a major long signal that has a potential do return more explosive, directional move. And no, I am no a vol player here.
  • We've sold a large number of vertical put spreads in the Semiconductor sector via SOX. Not super-bullish here, but I do think the sector will stabilize and guide higher. If the Nasdaq is to keep the "new" highs, Semi's won't stay down, or at least won't guide lower.
  • Not excited about Homebuilders. Unless the sector wants to "rotate" higher, selling calls here is right and is our strategy. I do want them higher but every spike will be met with selling. I'll reiterate that a long term short signal is in place on the entire sector and this uptick is our opportunity to get in. Buying puts into rallies is ok as well as I expect vol to pick up.
  • The Nasdaq (Composite) looks great and I like NDX-100 even more. We're selling put verticals with a doze of cautious optimism. I have to say that I don't like selling index spreads and the fact that we "simply had" to do a number of them tells me that the market is heading a lot higher. By the way, let it be known that I hate chasing runs. The funny thing is, today, putting on bull trades after the index is up 30 points doesn't feel like chasing at all. Yes, weird. That's ok - I let my human self feel anyway he likes as long as his trading counterpart makes money.
The above are the big movers in our book. We also have mild interest in GOOG (that's a market of its own). Interestingly, GOOG is off more than 10 after-hours. Naturally, the overall market is off as well and that presents a perfect bull case. See, GOOG is off on technical news, and with the entire universe buzzing about the Nasdaq making a 5-year high the opportunity to buy is almost unprecedented. Shabby analysis, I know, but my trading gut tells me I am right.

Climb a wall of worry? The evidence speaks for itself.



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