I sold SPY calls yesterday and I’m now short (SPY: 249.44 +0.02%) via Dec 2014 puts.
This is based on the overbought levels and a few other indicators, like a very high number of stocks above their 50MA and a very low VIX.

It’s not a fundamental case and I’ve got no opinion as to what the economy is or isn’t doing. I just think at this point it’s a higher probability trade than being long.

If I were short here, I’d be buying. Here’s a few random indicators (my favs of late) that paint the picture.

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  • WSJ buying on weakness $166 million as of 3:30pm
  • SPX/SPY is deeply oversold
  • SPY is sitting right on 50SMA, a decent support level
  • SPY volume low on this drop
  • Large traders are buying (bottom box)
  • Precious metals are holding up well, and also dropped on low volume. Showing my pet SLW:

Yes, I’m actually committing to a direction here.

The other night, I had the weirdest 2-part dream. My dreams are often prophetic (yeah yeah, whatever). If you’re into that sort of thing, here’s the dream message: fuel – on fire. Doesn’t take a rocket scientist to predict that oil / gas are going higher. But “on fire” means A LOT higher.

(SPY: 249.44 +0.02%) 20-year chart, 1-year bars.

I was looking for a fitting pattern, and only the triple top seems right. I’m still mostly long the markets, selling options to hedge and to collect some money while holding.

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This is a daily chart of the S&P 500 Futures.

Look at the lower boxes. In the lowest one it’s obvious that the small traders are unafraid! A potential contrary indicator right there.

Obviously, not something to base a decision on by itself, but combined with whatever else you’re tracking, might be helpful.

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I’ve got some skin in the game, and want a bearish move in the short term, a bullish scenario – long-term.

January 1990 through December 2009 (a period of 20 years) a total of 1,003 unique companies have been constituent members of the S&P 500.

Isn’t that crazy? This basically convinces me that owning individual stocks is very risky.

Dissolution of S&P500 is a lot less likely than bankruptcy of any given stock, and you’re at least guaranteed the dividend. Plus the options (for call writing) are very liquid and fairly priced.