Last week I closed out my positions in AAPL and SPX coming into Monday all cash. Last week left me a bit frustrated as I was pleased with positions into Friday but the Thursday night news and Globex market action had me believing that this was not normal and Friday was going to be an interesting day. So that night I decided that if this action held into the open I would immediately close the SPX position leaving the AAPL position on. Friday morning I closed the SPX position and the AAPL trade was working great until the end, when I was expecting a pullback making the 580 Call Calendar a pin. AAPL didn’t pullback at the end so I left profits on the table and what would have been a positive week created a overall net loss of -0.40% for the week.
With Friday’s action I came into Monday looking for more bullish setups than bearish. One stock that I favored based on relative strength, chart pattern, seasonality, & possible short squeeze was PPO. More details can be found in this post.
It is definitely hard to allocate money to the long side here as we are overbought on many metrics to include the McClellan Oscillator reading of 261. I watch this closely for readings over 200 and hitting 250 is screaming overbought and in need of a pullback. Despite these overbought conditions I decided to allocate money as I wanted to have some exposure to the long side. We are in need of a pullback but that doesn’t necessarily mean we have to. So after seeing PPO pullback some I decided near the close to gain some exposure to the long side via September single calls.
The most bullish case and the one I favor is a pullback from these levels giving traders a chance to buy. I do believe one has to be quick on the trigger and I will say that if we see a bad jobs number and selling I would have no problem going long as I think that is your chance to get in. In these cases I prefer to watch the emini-SP in the pre-market to see where price was accepted based on the numbers.
Also the way we came back from the poor ISM data shows me that traders are looking buy on weakness and that is what I am preparing for.
Cash – 95.3%
Long – 4.7% (PPO 4.7%)
Short – 0.0%