The bulls are killing all our condors!
The condors are simply no match for the bulls. They simply can’t fly high enough to escape the charging bulls.
The SPX made new multi-year high on 14 Nov 2006 and closed at 1393.22. The Dow made new all-time high of 12218 on the same day. The media has been going on about the new record high in the market, and rightly so. The bulls are indeed in charge for now. Market internals were equally impressive yesterday. Volume in the NYSE spiked 22% while the volume in the Nasdaq rose 12% on a day where Nasdaq composite rose 1%. The higher volume on an up day like yesterday is a confirmation of institution participation.
The strong bull market that we have been experiencing since August is killing many of our neutral positions. Our neutral strategies can normally withstand some moderate up and down movement but are totally defenseless against the onslaught of a raging bull. What happened over the past 3 months is something that defies the law of probability. The charts below show how much has changed since August expiration.
All in all, the SPX gained a total of 90.92 points to date since August expiration on 18th August. Who would have imagined that the SPX would be a whisker away from the 1400 level? Indeed, the probability of that would be incredibly small.
Similarly, the DOW rose a whopping 836.53 points since 18th August. What will happen in the next 2 months? Well, it’s anyone’s guess isn’t it? As it is now, there is no overhead resistance for both the SPX and the DOW. We will have to be careful with any new trades as long as a top has not been formed.
The  immediate to short term outlook of the market is bullish. There is no reason to go short at the moment unless you intend to part with your capital. As such, our advisory may start to see some bullish bias. You may want to hedge against your negative deltas if you have any as a result of a neutral trade entered earlier. We may even start sending out advisory to hedge against some of our current positions. Subscribers will receive full details when the need arises. Lastly, remember to enter small positions to preserve your capital.
