Options Trading Newsletter - Market Chills - Issue #142
Market Chills...
Market Chills…
Last night, I awoke engulfed in a freezing chill. The room temperature went down to a mere 2 degrees, transforming me into a human popsicle. I sprung out of bed and looked for the heater remote had looked at the weather and it was 2 degrees, no wonder I was feeling like a popsicle. I popped up from bed and switched on the heater and went back into the dove of covers.
Just hours earlier, the room had been a haven of warmth and comfort. In an attempt to address my children’s complaints of overheating, I had turned off the heater before bed - a decision I was now regretting. In retrospect, I should have just turn down the heater instead of shutting it down, what was I thinking…
This ordeal, reminded me of the current stock market trend. The market like my room temperature level can shift from comfortable to extreme without warning. Investors often perceive a hot market as a signal for retracement, leading them to adopt a contrarian position - similar to how I switched off the heater. Initially, this action seems wise, but as the market continues its bullish trajectory, defying the bears, the decision can lead to financial pain and loss. You could recall some months back even the notable investor Michael Burry, could not hold on to his short positions and had to give up with huge losses, when the market went higher instead of crashing.
In moment of discomfort, whether in a room's temperature or in market fluctuations, a short term adjustment is often more effective than a complete reversal. Assessing the situation over a longer term can provide insights into whether an adjustment is a temporary necessity or a signal for a complete strategy overhaul. In my case, a simple lowering of the heater's temperature would have sufficed, rather than switching to an air conditioner.
This ordeal taught me a valuable lesson, in both life and the market, hasty decisions can lead to unintended consequences. A thoughtful, patient approach, acknowledging the potential for both short-term discomfort and long-term gain, is often the wisest course of action.
Tonight we continue our holidays to an even colder location close to the mountains. I would defiantly be much wiser to act the next time my kids complain of the heating. Take care your trading this week, we will not be sharing new positions this week in Options Today segment.
SPX (4594)
SPX is going for it… to retest July high of 4607, it came a few points short of reaching it. It would probably reach it next week before scaling back as the swing up from end October still looks too extended.
So the next resistance is still expected at 4607 and immediate support at 4541. Next week, the ADP Non-Farm Payroll on Wednesday and Non-Farm Payroll on Friday.
Trade range for the week is 4550 to 4650.
NDX (15997)
NDX is relatively at the same level last week. It gave up the gains made mid week. For those who has had a good runup for the year or even the last month, in the hope of making the year end report card look better.
The next level up is 16764 while on the downside is at 15600.
Trading range for the week is between 15800 to 16350.
HANG SENG INDEX (16830)
HSI is worse as it can be as it could not hold 17000 level last week. It is totally going to the other direction as compared to the US market losing more than 1000 points in 2 weeks. If it does not bounce up from the current level above 16879, it could potentially go lower to the lower side of the down channel.
The lower support now at 16800 and resistance at 17500.
OPTIONS TODAY [Double Butterfly on SPY]
We caught the one of the butterfly on the call side and exited on Friday with a gain of almost 2x.
Even if we take up the loss of $0.18, the net gain is still at $44, 84% ROI in a week.
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