Hi Bill - I hope you are right because those of us who are net short are feeling the pain right now. Interesting alternative view, Charles Nenner (who has been 100% right since May 11th) sees last week as the high until September 4th and then the drop begins there. He was on CNBC, if you did not see the interview I could probably find you a copy of the clip on the web if you would like.

i agree with mr. cara. the yield curve inversion is the next fear headline.

i think i may have to endure some short term grief here but i'm going to start building a put position on the DIA in here. daily stochastics and r.s.i. have some room to move higher, hence the potential for some grief but this is looking tired. i'm not trying to call a major top, just make a buck.

mtziq are you buying long puts of dia, and if so what month?

thanks,

rick

rick,

i'll own september puts here. my time frames tend to be fairly short so i don't feel the need to buy time. due to the fact that i know how wrong i can be, i'll buy them in a couple of stages and try to get a decent average cost. i will also stop out if i'm really wrong.

it occurs to me that maybe i shouldn't post specific trades because of my shorter term orientation. a lot of the posters here seem to have broader perspectives which is good but i figure, hey, put my money where my mouth is.

Thanks, Bill. Good information for me as I look at how this market may move through the end of the week.

The home builder stocks have been rallying since Tuesday on low volume and its continuing into this morning while other stocks that have rallied are pulling back. I've been watching the hourly RSIs and they are all way overbought now.

Housing is weak and the bad news just keeps coming (another builder released grossly reduced guidance this morning). And yet this morning, after a few minutes of uncertainty, they resumed the rally.

I'll be watching carefully how this group trades this afternoon. I'm wary that this rally could extend into options expiration.

mtzion:

always glad to see posts that discuss short term trading - as that's my time horizon

I still see oil as the key here - if it keeps falling equities could keep rallying.

The US issued this around 10:30 today:
"US will seek sanctions against Iran in September if uranium enrichment program not halted - Iranian diplomat: War games timing on August 22nd a coincidence"

Oil is at a critical level here, the contract is expiring also - so maybe a shakeout here as longs have to close contracts and cut their loss.

Any surprise drop below 70 could have a quick run to 65ish...

... though 1298 on S&P sure looks like a nice short point - but I'm always wary of shorting around round numbers (like 1300)

"Always expect the unexpected"

--tradesman

tradesman,

oil is like gold, i think. they became the strong economy stocks. if oil keeps falling, it indicates that this economy is weaker than the bulls think.

the broad market is a tough short because overbought can stay overbought longer than i might expect.

and when you're overbought, price can move up quickly. it doesn't take much of a breeze to push the boat. the indices can run away from your strike quickly.

here, the market is coming off of a lot of shorting, a lot of vix spikes and some deeply oversold conditions. a lot of times this makes for those last unexpected s&p bursts, like in this case, say a quick move to 1310.

however, scaling in a little at a time can help to guard against the sudden gusts of wind.

they're probably gonna blame the fed dude fisher for this rejection at the SPX 1300 level but bonds and notes started struggling a couple of hours ago.

mtzion:

... nice commentary...

Most of my shorting upto this point has been with sectors - (mostly gold stocks this week).

I am thinking of "diversifying" and moving into some short term options trading...

I was wondering some time if you could comment on some of the learning processes you went through when you first started out in options trading - or maybe you have some favorite books or sources of "useful" informtion on short term options trading.

Any input along these lines would be appreciated as I would like to keep my "Tuition" (ie: inevitable losses) under control.

thanks ...tradesman...

I have worked up the balls yet to move into options yet -

Sorry, on last post last line should have been deleted...

tradesman,

that's a loaded question for me cause me and options go back but a couple of things come to mind.

i keep it simple. i buy calls or i buy puts. i don't do iron butterfly strangles or call/put long gamma short theta spreads. i know they seem to work for a lot of people but if i want to define my risk, i buy a c.d. it's more a personality question.

1.) know thyself. if you're the sort of person who has a hard time admitting you're wrong, don't do options. be able to admit you're wrong and stop out on a dime. in my experience, that's huge.

2.) start tiny. if you get a good hit, take some off the table. take your wife out to dinner. buy a couple of shares of a preferred stock that pays a dividend.

3.) learn the vodoo of technical analysis. stockcharts.com is a good site. mr. cara has some excellent summaries up above under his technical analysis section. i like the way bernie schaeffer thinks using sentiment but i find his website difficult to navigate. larry mcmillan explains a lot in his books. there are so many good sources of information that weren't available 20 years ago. i find it amazing.

4.) don't get too excited when you're right. it'll make your greed overcome your brain and you'll lose your stake. besides, you've already acknowledged that you are going to be wrong a lot so why get excited when you're right.

5.) don't get too shook up when you're wrong. just stop out. walk away. go have a coffee and a smoke. it's easier to replace opportunity than it is to replace capital.

6.) turn off cnbc. punch through charts endlessly instead. stochastics. r.s.i. long term charts. short term charts. i think maria b. is cute but she never made me a dime.

7.) avoid option trading around big events. like, fed meetings. the days around a fed meeting are just an excuse to eat up premium.

8.) did you ever notice a great hitter in baseball? he's not the guy who hits home runs. he's the guy who when the count is 3 and 2 knows how to foul off 4 or 5 pitches in a row until he gets one he can hit. don't swing for the fence unless you're dead to rights sure and that's rare.

9.) don't think bullish or bearish. in other words, don't get too dogmatic with options. they're bombs with timers on them and they will blow up in your hands.

i find the emotional challenge the biggest part of it. i know i am going to wrong and right at different times. my challenge is to manage both situations without fear or greed.

i'll shut up here but it's be great if some other people would chime in on this topic. i know there are a posters with a lot more expertise than me. i'd love to hear how someone else would answer this question.

p.s. i'm definitely feeling a little early with my puts. i'm wondering if i should be letting the daily chart get a little more overbought.

Wow, mtzion, true words of wisdom. Thanks for taking the time to share those pearls. I wish I had this advise some time ago, but I am now going to print out your remarks and add them to my morning mantra.

Ditto... that was an excellent post mtzion.

Thanks for taking the time to respond to my question...

-tradesman