Slop Ahead

  • Posted by
  • on November 17th, 2010

The ingredients are in place for a few days of slop:

1) Conflicting timeframes- rising longer term trend against plunging short term

2) Washout- only 8% of stocks above their 10 day MA, way too low to short but too weak to hold long

3) OpEx– typical midweek pinning and crosscurrents

4) Heightened Emotions- action driven primarily by fear of loss and fear of missing out

My plan is to let the rest of the time decay come out of my covered calls, and play on the range extremes only. Slop does not mean a lack of opportunities, it means fast and fleeting opportunities…alternating half day squeezes and plunges.  Long term bears should allow digestion of this sharp selloff, while long term bulls should wait for fresh patterns to emerge rather than trying to catch a replay of the September/October leadership move.

Mean reversion and trend following are clearly engaged in battle…Tuesday’s range provides a good framework in which to operate, and later compare for relative strength.  I see no need to look beyond a few hours, at least until next week.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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