Month End, Tread Lightly
Month End, Tread Lightly (But Be a Scale
Buyer of Puts)
Futures are slightly higher this morning.
Personal Income and Personal Consumption came in right on the nose, both up 0.4%.
Crude oil is lower on reports that the Israelis and Palestinians are working on
a plan to end the siege at Ramallah.
After Friday’s wipeout, I wouldn’t be surprised
to see any higher opening met with selling, but where the market goes from there
I don’t know. The default direction is lower, but we are at month end, when I
hate trading the most because of the blatant manipulation that takes place as
mutual funds engage in "window dressing."
Now that the market is cracking down on shoddy and misleading accounting and
conflicts of interest among analysts, how long before they crack down on
this monthly misuse of investors’ funds? I’m not holding my breath. Anyway
— be prepared for a little propping. Retailers, cyclicals, and of course,
semiconductors are the anointed sectors. Also keep an eye on the newly
discovered oil service and gold sectors for some manipulation.
On Friday the volatility indices sprung to life. The VIX, VXN and QQV,
had not really popped early last week, even though the market has been
under pressure. That changed Friday as the VIX gained 1.59 to close at 24.64,
the VXN picked up 2.06 to 42.24, and the QQV gained 2.90 to 37.11. This is
extraordinary on a Friday after a big economic report.
The market is still oversold here, but it is picking up momentum
to the downside and is extremely vulnerable. Month-end is coming, and I would
not be shocked by a rally, but it feels like we are heading for a fall. Although
the Nasdaq has taken the brunt of the sell-off, the DJI is starting to look
extremely vulnerable also. With the dollar declining and gold on the run, it is
looking to me like people are discovering that there are other places you can
put money besides stocks. That could cause the Dow to tumble because the main
attraction of the Dow has been that "it ain’t the Nasdaq."
If the Dow pops on "window dressing" Monday or Tuesday, we will be
buying June puts, and we will be scale buyers of puts on rallies for the near
future. I will be sending out suggested put-buying levels after the open.
Trade Updates (4/26/02)
Working Orders (Old Recommendations)
New Actions (New Recommendations)
On The Horizon…
Broker-Dealer shorts on a bounce.
Recap of open trades
HAL — Long the July 17.5 buy-write at $14.50
Call Spread Positions
WMT|WMT] — Long the June 60 puts at $2.50 (75%).
Sold half at $4.60 on 4/26/02, holding balance.
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