Options Trader: Monday Wrapup

by: Philip Davis

What was that?

We had a sudden, very broad-based drop-off at 2:17 and there was no clear indication as to what caused it. Luckily, I didn’t like the market at 9:47 when I said: "I think we have a buy opportunity on semis if the broader market holds up. But meanwhile, 20% of profit stops as we need to lighten up anyway." I added: "Amazon.com Inc. (NASDAQ:AMZN) doesn’t care, JDS Uniphase Corporation (JDSU) doesn’t care, Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL) don’t care, Google (NASDAQ:GOOG) doesn’t care - could be time for tech if the SOX can shake it off. If the companies I just mentioned start tanking, then we run away!"

Well, it turned out to be an excellent time to run away as we had a nice run-up in the morning that let us stop out of a lot of our positions ahead of where we were at Friday’s close. We got stopped out of 17 positions in the end, including a lot of big winners that we just couldn’t leave on the table:

Chart #1

Things went so well today we even got a win with Tesoro Corp. (NYSE:TSO) as we grabbed the $120s beginning at noon and eventually traded up from our $110s. But before we get too excited, we’ll see if it sticks!

Our market highs didn’t stick, even though we shook off some disappointing data rather well in the morning. Don’t blame Europe as they had a good close. We can blame Bush, though, who came on TV just before the markets tanked:















Dow 13,062 -58 12,468 12,600 13,000 13,500
Transports 2,834 -47 2,825 2,900 3,000 3,250
S&P 1,482 -11 1,430 1,460 1,500 1,550
NYSE 9,627 -77 9,218 9,465 9,600 10,000
Nasdaq 2,525 -32 2,454 2,500 2,600 2,750
SOX 492 -5 477 490 500 560
Russell 814 -15 803 820 850 900
Click to enlarge

US Markets

Doesn’t look as bad as you thought it would, does it? We got an early indicator from XAL (Airline Index) and the Transports that kept us well out of trouble. Not even a late plunge in crude could save those indexes from finishing at their lows of the day.

Crude finished down .75 at $65.66 and gold held flat at $683, while the dollar was dead at 81.45.

Oil and Dollar

All in all, it was a a disappointing day in the markets but we still finished in very good shape for the month with roughly 4% gains for most of our group. I said this morning that if we can’t break out of our levels, then it will be time to "Sell in May and go away." Whoever said that, however, obviously didn’t know how to trade puts. There will be many opportunities in the week ahead no matter what the market does. It’s just a little bit nicer when it goes up!