understanding the psychology of behavior

I managed to watch Mad Money tonight, and the NBR CEO was interviewed. I have to say, the interview really turned me on to NBR. (Not from Cramer’s excitement, but from the comments from the CEO.) With the excitement I reviewed the charts.

The NBR daily chart is bluntly bullish, with extreme upward bias. The weekly shows a better picture…
NBR:

The weekly chart of NBR clearly shows the break in a multi-year negative trend. However, a resisatnce point will be approached very soon around the 39 level.

Nothing goes straight up, and corrections will be seen. How severe the pull back is a different story. NBR’s pullback may not be major, but a consolidation will happen. And I believe soon.

Natural Gas is due for a consolidation. Soon it will be approaching resistance levels. A band from 11.50-12.50 may act as a consolidation point for Natural Gas. As the commodity price consolidates, so should the related stocks, ie NBR.

I may look to enter upon a consolidation via in the money Sept 08 Calls.

I read this Reuters article quoting Sam Stovall, CIO at S&P, that the SP500 will finish the year at 1560. I just keep asking myself… HOW?!?

With Job Losses coming hard and retail gas prices being at a level of much concern, I can see the consumer in a real spending freeze.  Also, inflation.  Larry Kudlow, imo, makes a good point, that with elevated inflation the price hike will get passed along to the consumer or companies will take a hit on profit margins.

Either scenario sucks.

The only bullishness I can see that will take the SP500 to previous highs is if ‘write-UPs’ occur at a rapid pace.  Now I expect write-ups to happen, especially since the investment banks have access to the Fed window, but not to a level that will get bank stocks to enter such a rally that previous highs are tested.

AGO is looking bullish here, but some protection is merited. It is overbought and on a major multi-month resistance.  Selling some July 25 Calls would be the play.  (Be prepared to close them out on a pull back or breakout.)

General theory is that more people use credit cards during an economic slump, but I found this article that would suggest other wise. (article)

I just thought it was interesting, as MA and V are trading at premiums, a hick up in their growth estimates will make the stocks fall. Just a heads up, the survey conducted is too small and does not take emerging markets, where the psychology is different, into account.

NYX reports on May 6th. If all goes well 72 may be seen via the weekly.

If 72 is seen this week, as protection I may take on the 75 May Puts. (If I take these puts on, they will be closed prior to earnings.)

Thinking ahead, as always, the market is seemingly bullish, but getting over extended after this recent push upward. It does not seem ‘there’ just yet to execute a short, but its on my mind.

This is supported by the VIX. The VIX is oversold, but could linger around the 18 level while the market drifts upward toward resistance.

I will be looking to short soon. The Sept 142 SPY Puts are of interest.

Glorious day indeed.

On top of a beautiful day in the NYC area, thanks to GOOG and C, the markets should have a great open.

I don’t know why C is up 8-9% on its report. Frankly I was not a fan, but that is why we primarily play market psychology… hence my GS calls trade.

Anywayz… I will most likely close out my GS trade today. And if I get what I am looking for on NYX, will close that out to. (I will probably re-enter an options trade for NYX prior to earnings, but take out longer term options that would include next quarters results… Sept. calls)

Happy Trading. 

There is a fairly strong negative sentiment (as indicated via the DMI) within the VIX at the moment. On top of that, it is still in a relatively overbought position. This tells me the VIX could see 18-19. As the VIX declines, the markets should rise.

Looks like the positive sentiment within the market should remain… at least short-term.

The VIX looks to want to test 18-19.  A negative sentiment has been developing with it, and with today’s market reaction, the movement seems more likely.

With a declining VIX, the market may continue to trend upward… barring a negative catalyst. (MER reports tomorrow, and this may hurt the Bulls if they report worse than expected.)