The market started out weak. But, when SPX slid below the 900 level, buyers came in and drove the market into the green. Financials and techs struggled to find strength. The market was held up by commodity-related sectors. Agriculture and gold miners were particularly strong. This weekend, in my weekly Sector Watch, I specifically mentioned MOO (the ETF for Agribusiness),
"MOO also jumped higher last week and pushed to its highest level since Oct 2008!! Above $35, MOO could pushed to $40!! "
I also mentioned a few stocks in this sector, including POT, which surged higher today and closed above $100, a level that it has not come close to since October of 2008!! Besides playing the agriculture sector, we also played a couple of quick trades for the options expiration week.
We first played FSLR May 200 calls. FSLR has been trading sideways in a tight range since breaking above $200 last week. We picked up these calls at $3.5. But, as the market got weaker, we closed the trade at $1.9, losing 46% in about 2 hours:
These options traded as high as $4.1 and closed at $1.65.
We also played CME. This morning, I mentioned in the Trading Room:
May 12, 2009 7:49 AM
ICE/CME
starting to look interesting…
Then, in the afternoon, CME broke out higher, and, I played May 250 calls ($5.3) and at the same time picked up June 280 calls ($6.1). CME charged up from about $245 to above $260 in about 2 hours! I was able to cash out the May 250 calls for +108% in 45 minutes!! I allowed the June 280 calls to ride higher and cashed those out at as high as +64%.
The May 250 calls went as high as $14 and closed at $12.
The June 280 calls went as high as $10.2 and closed at $9.5.
The advantage of buying both the "front month" near-the-money options and further out "out-of-the-month" calls is that as a stock runs up fast, you can lock in the profits on the "front month" options as it moves "dollar-per-dollar" with the stock. This allows you to make a very high percentage gain in a very short time; in my case, a double in 45 minutes. Then, as I had taken the profits and basically risking on "house money", I felt more calm to let the further out options ride higher. In addition, the further out options do not move as fast. So, as a stock rises up fast and starts to fluctuate, the further out options will not lose its value as much. In my case, I allowed my June calls to ride up and cashed them out at near the day high.
FSLR is still very interesting, as it is still in its tight range. So, we’ll keep watching FSLR. It could either break out or break down, and produce opportunities for good expiration plays.
The Dow ended up +50.34 points; SPX slid just 0.89 points; Nasdaq lost 15.32 points:
As mentioned earlier, techs and financials were weak, with SOXX (semiconductors) losing 2.54% and XLF (financials) slipping 2.12%. GDX (gold miners) added +4.42% while XME (metals and mining) eked out a +0.48% gain. Both SLV (silver) and GLD (gold) were higher. UNG (natural gas) extended its run by +4.8%. USO (oil) was +1.05% higher. MOO (agriculture) rose +3.02%. FXI (Chinese ADRs) was flat.
SPX
SPX slid 0.89 points to close at 908.35. It stayed above the 900 level and above its daily MAs. The MACD was flat.
Nasdaq
Nasdaq lost 15.32 points to close at 1715.92. It closed below its 10-day MA. The MACD went lower.
While it was encouraging that SPX managed to close above the 900 level, Nasdaq closing below its 10-day MA was not very comforting. VIX was strong in the morning, rising above 33, but, dropped in the afternoon and closed below 32 again. On the other hand, SKF (financial ultrashort ETF) continued to bounce and closed up +3.78%. The market is showing mixed signals as options expiration manuevers rock stocks back-and-forth in a tight range. For instance, GOOG traded up to $412 yesterday, looking as if it was ready to break out; today, it dropped to $396 and closed below $400! There are a lot of opportunities this week as the premiums are far less on the front-month options. One of the key indication is volume spikes on the intraday charts, especially when the stock breaks a key resistance. For instance, on CME:
CME (10-day Hourly)
As you can see, in the afternoon today, CME saw a volume spike and pushed above the resistance at around $250. It sailed up another $12 after breaking above $250!!
There are still 3 trading days left before the May options expire. So, lots of time to play. But, we’ll need to see some strength back into the financials and the techs to see this market higher. Jobs data, in addition to PPI and CPI later this week, may bring the incentive to move the market.
Good night and HappyTrading! ™
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