Today’s Speculative Bets: Puts on NASDAQ and S&P500

[equalizer]

For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

VIX vs SPX
http://bigpicture.typepad.com/comments/2008/06/10-year-vix-cha.html

[jficquette]

[quote=equalizer]For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

[/quote]

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don’t end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30’s or 40’s.

John

[jficquette]

[quote=equalizer]For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

[/quote]

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don’t end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30’s or 40’s.

John

[jficquette]

[quote=equalizer]For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

[/quote]

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don’t end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30’s or 40’s.

John

[jficquette]

[quote=equalizer]For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

[/quote]

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don’t end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30’s or 40’s.

John

[jficquette]

[quote=equalizer]For very risky bet on falling oil try the airlines. Small drop in oil will easily double the prices. Cautious investors like Stuart Schweitzer of JPMorgan Private Bank have started buying distressed debt, companies that wont go under like (my guess) GM or WAMU.

stockstrdt: What factors convinced you to go short, technical ones? The VIX is not surging (only in the low 20’s as opposed to midthirties back on black Stearns day) which is typically very bad for bulls. The 50 day EMA and 200EMA last crossed earlier this year and this is also bearish. With the dow and S&P 500 near strong resistance at 20% off peak, we are near crucial junction. We could get slow painful decline aka 2001-2002 or my prediction that 90% odds in pres election years the market will rally from July-Oct. The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?

[/quote]

The low vix is what scares me. The market is almost parabolic in its downtrend yet there is no fear. Downtrends like this don’t end until fear comes in.

I believe the lack of fear in such a strong downtrend is odd and my guess is that when fear comes into play we will see some big down days as soon as the S&P takes out 1250. Circuit breaker type days. Then we will see the vix in the 30’s or 40’s.

John

[LA_Renter]

“The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?”

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here…I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

[LA_Renter]

“The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?”

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here…I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

[LA_Renter]

“The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?”

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here…I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

[LA_Renter]

“The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?”

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here…I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

[LA_Renter]

“The party in charge is going to sit idly by and watch economy, market just slide down without putting all stops to help their party?”

Good point. But exactly what are all the stops they are going to pull. An emergency rate cut, a bailout of LEH (when that point comes). The FED is boxed in here…I mean really boxed in. If you ask me the FED slashing rates to 2% was the party in charge pulling all the stops. That was the lube along with the stimulus package that was going to be just enough to get us past the election. Then came $140 oil. Ooops! It backfired which is so unlike the current perceived party in charge. jficquette made a good point, the VIX is low and the market is going into a No Mans Land. If oil does pop it is going to be met with some violent short squeezes that will only add anxiety to the markets. The only catalyst I can see for a rally is a huge circuit breaker drop. So I guess in theory we could see a big rally in July-Oct just from what level it starts is the question.

[stockstradr]

>>As to shorting oil, why throw good money after bad?

That’s a fair question. I was being more dramtic than serious in my follow-up post “I’m going to double-down my oil bets”

I think there are better bets. God only knows how high oil will climb before we see a significant correction. Maybe $200/bbl.

I’ve been watching the Shanghai index again. It has fallen from 6,100 down to 2750, and has now recovered a tiny bit. Back in May ’05 it was at 1,000 and I was in China visiting in laws and begging my wife (who is Chinese) to help me find a broker and open an account in her name so I could buy the Shanghai index. We visited a few brokers, but in the end she refused because her family felt the Chinese stock market was too risky. Well they are right about that, but I was smart enough to see that 1,000 had to be near the bottom. After that the index went up 6X in 2 1/2 years and I didn’t make a friggin’ dime on that.

So now with that Index crashing again, my second chance may be coming up. However, I want the Shanghai index to go lower than 2,700, certainly below 2,000 before I start buying.

I’ve heard there are now some funds or ETF’s that westerners can buy that have exposure to the Shanghai exchange, but I’m not sure of the specifics.

[stockstradr]

>>As to shorting oil, why throw good money after bad?

That’s a fair question. I was being more dramtic than serious in my follow-up post “I’m going to double-down my oil bets”

I think there are better bets. God only knows how high oil will climb before we see a significant correction. Maybe $200/bbl.

I’ve been watching the Shanghai index again. It has fallen from 6,100 down to 2750, and has now recovered a tiny bit. Back in May ’05 it was at 1,000 and I was in China visiting in laws and begging my wife (who is Chinese) to help me find a broker and open an account in her name so I could buy the Shanghai index. We visited a few brokers, but in the end she refused because her family felt the Chinese stock market was too risky. Well they are right about that, but I was smart enough to see that 1,000 had to be near the bottom. After that the index went up 6X in 2 1/2 years and I didn’t make a friggin’ dime on that.

So now with that Index crashing again, my second chance may be coming up. However, I want the Shanghai index to go lower than 2,700, certainly below 2,000 before I start buying.

I’ve heard there are now some funds or ETF’s that westerners can buy that have exposure to the Shanghai exchange, but I’m not sure of the specifics.

[stockstradr]

>>As to shorting oil, why throw good money after bad?

That’s a fair question. I was being more dramtic than serious in my follow-up post “I’m going to double-down my oil bets”

I think there are better bets. God only knows how high oil will climb before we see a significant correction. Maybe $200/bbl.

I’ve been watching the Shanghai index again. It has fallen from 6,100 down to 2750, and has now recovered a tiny bit. Back in May ’05 it was at 1,000 and I was in China visiting in laws and begging my wife (who is Chinese) to help me find a broker and open an account in her name so I could buy the Shanghai index. We visited a few brokers, but in the end she refused because her family felt the Chinese stock market was too risky. Well they are right about that, but I was smart enough to see that 1,000 had to be near the bottom. After that the index went up 6X in 2 1/2 years and I didn’t make a friggin’ dime on that.

So now with that Index crashing again, my second chance may be coming up. However, I want the Shanghai index to go lower than 2,700, certainly below 2,000 before I start buying.

I’ve heard there are now some funds or ETF’s that westerners can buy that have exposure to the Shanghai exchange, but I’m not sure of the specifics.

[stockstradr]

>>As to shorting oil, why throw good money after bad?

That’s a fair question. I was being more dramtic than serious in my follow-up post “I’m going to double-down my oil bets”

I think there are better bets. God only knows how high oil will climb before we see a significant correction. Maybe $200/bbl.

I’ve been watching the Shanghai index again. It has fallen from 6,100 down to 2750, and has now recovered a tiny bit. Back in May ’05 it was at 1,000 and I was in China visiting in laws and begging my wife (who is Chinese) to help me find a broker and open an account in her name so I could buy the Shanghai index. We visited a few brokers, but in the end she refused because her family felt the Chinese stock market was too risky. Well they are right about that, but I was smart enough to see that 1,000 had to be near the bottom. After that the index went up 6X in 2 1/2 years and I didn’t make a friggin’ dime on that.

So now with that Index crashing again, my second chance may be coming up. However, I want the Shanghai index to go lower than 2,700, certainly below 2,000 before I start buying.

I’ve heard there are now some funds or ETF’s that westerners can buy that have exposure to the Shanghai exchange, but I’m not sure of the specifics.

[Author]

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