Market Analysis

[John]

I decided to start a thread where people can engage in general
commentary about the market and where it's going. I realize many of
you love to pontificate on this sort of thing so here you are.

Today we had the S&P and Nasdaq close at new 4 year highs. The Russell
made a new all time high. The biotechs and the chips are breaking out
as are the Dow Transports. The VIX continues to get crushed. And the
DOW continues to lag all the other indices.

If I didn't know any better, I would say we are headed higher. Until
we get some serious disappointing forward outlooks from some of the
companies releasing earnings, this market seems to be on a mission. So
far this market has shrugged off the London Bombings and murky forward
outlooks from INTC and YHOO.

Be careful about trying to pick tops out there. GOOG and CME look like
they are in a race to see who can get to 450 the fastest.

Anyone else like to add their thoughts?

John

[Michael Catolico]

i am not at all a technician but i pay attention to breakouts to new
yearly highs or lows since so many other traders seem to key on these
type of momentum moves.

i have looked at these kinds of things pseudo-statistically. since 1950
when the S&P500 breaks above previous 52 week highs over the next ten
weeks the index averages about another 6.2% gain. that would be around
1310 between now and the end of september. not sure how i'd play that
though. might try a directional butterfly AUG 1230/1250/1270 if i could
leg it for between $3 and $4. or i might just buy the SEP 1300 calls
for $1.50 and pay for it by selling the SEP 1190/1200 put spread as a
bullish shot.

michael

[John]

Mike,

I would definately go with the second choice. Buying the SEP 1300
calls and sell the SEP 1190/1200 put spread. Not a bad trade at all.
According to my numbers, statistically speaking, there is a 30%
probability based on the current stat vol that the SP will touch 1310
by SEP exp. Considering that is not taking into account this breakout,
but rather a random walk of price distributions, I would say the real
odds are substantially higher then that. And since you are putting
this spread on for a credit, even better.

I'm not a technical guy either, but I agree with you 100% about new 52
week highs. I don't really look at new lows, don't think they are as
accurate. I'm guessing this will be a slow and painful grind up to
higher prices, but I think it's a good bet we could get there.

John