Daily Investment Interpretations

April 7, 2011

2011-4-7 (Thursday Night): The bulls appeared to be heading for another new high today when all of a sudden, news of Japan's Richter 7.1earthquake broke over the markets, followed by oil priced above $110 a barrel: U.S. stocks slide after quake hits Japan. The markets swooned and then partially recovered.  The NASDAQ Composite retreated 3.68 points (-0.13%) to 2,796.14. The Dow dipped 17.86 points (-0.14%) to close at 12,409.49, while the S&P 500 fell 2.03 points (-0.15%) to close at: 1,333.51. As mentioned above, Oil closed above $110 a barrel at $110.23, while Gold registered a new high of $1,460. The VIX rose 0.21 points to 17.11.  
    China data spark slew of upgrades
    Tomi Kilgore argues that the fact that the Dow Theory "buy" signal occurred on low volume doesn't mean that it isn't a valid prognosticator of a bull market: Low volume doesn’t cancel buy signal.
    Mark Hulbert writes: Bull market is alive and well
    Michael Ashbaugh's weekly column is entitled: Starting the second quarter on an upswing
    Articles that I like are posted on the TopStock Portfolios website. Their take on the next week is that (1) stocks are overbought, and (2) their inverse ETF market indicator is pointing toward a modest downturn over the next few trading days.
    Right now, I'm setting myself up with January 21, 2013, $40 calls on SSO, the Proshares Ultra S&P 500 ETF. These options currently cost about $16, with SSO at $54. That means I'm paying $2 in "rent" ($40 + $16 - $54) to "own" 100 shares of SSO (equivalent to 200 shares of SPY) between now and next January. That yields leverage from 5-to-1 to 6-to-1 on the S&P 500. If the S&P 500 rises 10% between now and September, per Sam Eisenstadt's A bullish six-month forecast , my $40 calls will rise 50% over that interval.
    A $54, at-the-money, January, 2012, call costs about $6, and would give higher leverage, but its value will decline as we get closer to the strike date of January, 2012, losing about $3 by September. However, it should still rise about 100% over the interval.
    Market futures are up a little tonight.