I’m back after a week of pause. The recent sell off on commodities due to bad macro data in US and slowdown in China, placed investors in the "risk off” mood last week. Us indexes are in the correction phase, therefore I’m going to wait for basis building on my watch list. I haven’t many good signals on the stocks I monitor at the moment, therefore I continue to wait. Having a look to major indexes, my feeling is that the correction could last for some other days with a test of area 12400 for the Dow Jones, 2340 (maybe 2250 as well) for Nasdaq 100 and 1330-1320 for S&P500. There’re are some gaps opened on these last 2 indexes.
I also want to share with you how the relative strength of sectors are evolving for S&P. You can see that the previous “dangerous” signals of weakening for energy and industrial were confirmed in fact, they continued to get weaker. Continues the over performances of Utilities, Healthcare, Consumer Staples and Telecom. Therefore I think the best strategy would be monitor strictly these sectors for purchases in this moment because if market starts up in coming weeks, they could be the new leaders.
About my portfolio in Us I have open only a spread on JP Morgan (I opened up 2 weeks ago even if the sector isn’t weak, but trade size is quite small).
I made a strategy similar to covered call, using options: I bought a call-leaps with strike 25 with low time value and sold july 45 call. I put the debit limit order close to the bid and get executed. My strategy is that JPM will remain flat or will goes slightly up in next 3 months.
Because on this strategy the reward is limited but loss can be high, I placed a stop order below April’s low.