Saturday April 18, 2015

$SPY, $STUDY, It is always worrisome when stocks take a dive on Friday, as few investors want to buy the dip ahead of the weekend and a bleeding on Friday tends to extend into Monday. After reaching or getting close to record highs earlier this week, the major indexes were under pressure from all directions Friday. The SPY joined the DIA and the QQQ in Sell Status at the weeks close leaving just the RUT with a short term Buy rating by the Alpha Market Model while our overall asset allocation recommendation remains at 62.5% Long and 37.5% Cash.  There was little to no change over the week in the individual Opinion count of the various trading list which we follow each day.  The total number of Long ratings remained at about 72% of total.  Given the lack of news over the past week I can live with the difference between the two views.

For the second week in a row the book value of the Alpha One Model holdings declined slightly, much less than the market but the overall portfolio gained week over week as the result of the daily option trade.  Over the past week there were five option trades, each a winner.  Three trades utilized BTO Calls on the SPY and two BTO Puts.  On Friday I moved the contract out another month from the May to the June contracts.  Each trade used about $10,000.00 in capital and the weekly profit was a little under $4,300 for the week after trading costs.  Modesty keeps me from quoting the return on capital for this activity.

Although the S&P 500 failed to follow the smaller stocks to fresh highs this week, it didn’t break down either, even after Friday’s selloff. So it is too early to call a correction. The S&P 500 is still in the sideways pattern started at the beginning of March. The March lows in the 2040-2050 area continue to serve as support for the broader market index. Long term uptrend is intact and there are many more earnings due out in the next couple of weeks. Things can change quickly.