Here are the CLASS 1 BUYS with buy-in days of either this past Friday or this coming MONDAY. The CLASS 2's are for Monday's buy-in
CLASS 1 (short-term= 1-5 days)
The indication that a reversal will happen this week, and as early as Monday are extremely strong. If it does not happen Monday then Tuesday. I am not saying that it will be a strong reversal, but that there will be a reversal and how long it will last I do not have any indication yet.
Now the question is which indexes will perform the best. Of the CLASS 1 INDEXES listed above, I am showing more relative strength in the IIX, XCI. The broader base HiTech indexes such as the NDX & MSH should also do fine. The weakest indexes of the above CLASS 1's are the DDX and SOX. The SOX has already gone below those levels in the spring, when the DOW was at 6400.
My strongest position is now in the OILS and OSX. On Thursday the OILS indicated that they were one of the strongest indexes, but on Friday it became one of the weakest of the Non-HiTech indexes, and only slightly stronger than the HiTech indexes. The OSX also showed the same weakness.
There are strong indexes still, such as the XBD, XAL, BKX, DRG but they were not CLASS 1's or CLASS 2's.
As I indicate last week, I have noticed one technical signal that the overall market is topping out, which still needs confirmation, and that was when the SOX and DDX set lows which were lower than the previous lows. Well, it is obvious that such signals have intensified with Thursday's and Friday's performance of the HiTechers. Most of the HiTech indexes are already near the lows of BLACK MONDAY in October, and some have surpassed it.
On a more subjective note - I wonder if there was a large volume of puts with Dec's expiration. If there is, I would have to presume that the MM's would want them not to be profitable and expire worthless. I would have to believe that the majority of the HiTech calls will expire worthless. In light of such I would feel that the MM's would do what they can to not pay the huge profits of those who are holding PUTs especially in the HiTech sectors; therefore there may be a chance for a short squeeze that may help pop this market up.
In light of the HiTechs setting lower lows and receiving a substantial signal that the overall market is topping out, I believe that there are 2 possibilities: 1) ANOTHER CORRECTION or 2) RANGE TRADING
Therefore for this interim starting now I will be more nimble and start playing puts when the technicals get overbought, but still play calls when the technicals get oversold. In the past I stated that I have a basic rule that I do not short in an uptrend, especially with PUTS. Now I will, since the technicals indicate that the uptrend in the overall market is at jeapody.
I still have the XOI's and 25% of my original position of the OSX. I am holding onto the OSX still only because my cost basis is now negative $7 on the JAN 100's. In other words if the JAN 100's expire worthless, I still made $7 per call. I have reduced my target for the OSX from the 130-135 range to the 125-128 range by Jan expiration. As for the XOI's, I originally felt that the XOI's could easily get back to the 480+ territory, but have now reduced my target to 470 by Jan expiration