Wednesday, March 18, 2009

You Know What They Say About Assumptions...

Wowza! You gotta love that reaction to the FOMC announcement. In today’s earlier post on GLD, I said, “Assuming we don’t see a huge intraday reversal, GLD will end the day breaking its 50 MA, and primary trendline.” Well, at the time I thought it was a pretty good assumption….lol. So what can we learn from this?

First, it’s sometimes tough to pass judgement on a daily candle prior to the close, because sometimes you get these crazy intraday moves that completely reverse the candle: (chart)

Second, the FOMC announcement is always a wild card, often causing huge swings in the market. Thus you better be prepared and not be overleveraged one way or the other, unless you’re willing to deal with the occasional thumping!

With the post announcement bull madness, the $SPX has now reached the 800 level, as well as its declining 50 MA. It will be interesting to see how far the bulls can take this rally before we finally get the inevitable multi day pullback. We’ve moved up about 20+% now over the last week and a half. That’s starting to sound overstretched to me, but with news driving a lot of the movement an overbought rally is still within the realm of possibility.

Tyler -


Kok Leong said...

This is interesting. We are in the same boat, going long on GLD :) Holding a Bull Call now, and if thing goes right, gonna turn it into a Condor. Happy Trading!

Tyler said...

Just curious, are you rolling that bull call spread into a call condor or an iron condor?

Kok Leong said...

Call Condor... :) 102/104 Bear Call? depends. Depends on how much time left to expiration as well.

Tyler said...

Gotcha. Good Luck!