understanding the psychology of behavior

J. Crew declined some 20% today as they beat the street, but issued their warning.  JCG has one of the best management for clothing retail, and if they are hurting the generic big boys do not stand a chance.

For this reason I shorted RTH. Anyone who thinks the consumer is not suffering, and simply listens to ‘pretty-packaged-economic-data’ (because of seasonal adjustments) is kidding themselves to the real conditions out there.

RTH is also technically at a resistance point, and getting oversold.

If it rallies, I can see a potential move to 98 as per the chart, I will short some more.

I sold a bunch of my PWR.  IMO, the 32 level is a major resistance point. It may see a solid consolidation before it continues its rally.

Don’t get me wrong, I still really like PWR. Especially for the macro backdrop. The wind is really at its back (especially from the wind farms they are helping to build and get connected to the grid ).

I will most definately buy back on the pull back, and post when I do.

Nice move today in the Market. I have been in a meeting prior to the spike up, so I do not know what caused it. (The GDP and Job #s did not cause it, maybe it was the dollar rally.)

I have eased up on trades, especially for NYX.  The market looks to have some fuel to go higher, but my resistance levels are being met. (I will probably get out of the name with this move… too many negative implications currently surrounding the exchanges.)

Look to sell GS if low/mid 180 is achieved. (SMA resistance)

The 10yr has sold off too much, and is due for a bounce.  This may affect the market causing the market to come down some.

And why the hell is the RTH rallying? I will look to short it with 100 July Puts.

PWR acting strong. May see 32.

AGO… i think they are being kepted in a range until things settle more or they prove themselves during the next Q.

NLY… ease up on them as the Fed is chattering rate hikes, but I still like it for now.

Trade Cautiously… (as for me I’m off to another multi-hour meeting !!!!)

Yes… severe seller’s remorse. 

Should get somewhat overbought after this move, so if you got in the low 270s, some profit taking is a good idea.

NYX - this is the oversold position I am focused on.

Over the past year (above is only an 8-month chart, but I did look into it for a year) when the red line of the slow stoch is so grossly below the 20 mark, a bounce is typically seen. The exception was with the poor earnings showing earlier in 2008. The current decline is not from any solid reason, with the exception of the negative implications stated in my previous post. The degree of the bounce is in question, but the SMAs may act as resistance, with high 66 the first resistance level. (this is what drove me to close out the protection)

MA - I took on a call options as MA came back down, around 274. I covered the trade today around 282, yet am feeling a sense of ’sellers remorse’.

Seems as if there is a few more points in MA. Mid 290 seems likely in its push upward.

(Sorry for not posting the MA trade, but I thought it might get complicated like last time, and viewed it as a high risk because of the set up. I posted the NYX trade instead because I thought it was to be straight forward… fate does mock sometimes.)

Alright, so NYX is getting attacked, fundamentally (or seemingly so) from all sides.  

1. keeps losing market share.

2. congress is getting their panties in a bunch regarding margins on future contracts (even though Euronext really only has European trades, I guess it is feeling the pain in sympathy.)

3. revealed today, potential loss in market data revenue.

Today’s reason, while a real threat, should not affect NYX in the mid-term. Forced to close out my protection… too oversold, and it is due for a pop. I feel analysts will come out and protect the name due to valuation.

The Market appears to be sitting on a support line, while being very oversold. This seems as if the market wants to push upward.

However, the VIX was up the how day today… the entire day. Yet the market was up nicely. This is what really gives me pause.

The one indicator over the years, that has really never failed me, was to see the VIX spike while the market was up. If I ever saw this, I would short the hell out of the market. (Although I did not overly short the market with today’s observation.) The market is usually in overbought territory, and not seemingly about to pop upward.

IMO, I think this set up is good in that the VIX is increasing to properly reflect the uncertainty surrounding the US consumer. This set up is interesting.

In bull markets the SP500 maintains an SMA trend line. Obviously, not the case here… hence the market will be range bound. So, IF the markets rise, I do not expect 1425 to be breached. (Thought 1410 should be tough to break.) If the market declines, I can see 1320-1350. (The chart above suggests a possible ‘trading range’ low could be 1320)

NYX is oversold, and seemingly inexpensive…

I did take out some protection. If NYX is going to bounce from its oversold position, then 67-69 maybe seen via the SMAs. The Calls will be closed out there. If NYX breaks down, I will close out the puts in the high 50s. Pending on which way NYX goes first (to support or resistance), I will double down on the Puts (at high 69s) or Calls (at high 50s)

If NYX breaks high 62 (there is a ‘day traders’ support there), it will see the high 50s.  The action is tough to watch, especially since I was not expecting such weakness from the name.

It looks to be trading as if earning estimates are too high, and re-pricing for much lower estimates.  As it stands now, it seems inexpensive with a PEG of 0.90, and the fact that is crushed estimates last quarters.

7 straight down days, and a grossly bearish chart is tough to stomach.

Also, I am not a fan of the conflicting indicators I am seeing via the charts for the overall market. So prudence dictates protection against the NYX trade, or to close the position.

I am thinking about the July 65 puts as protection. (although it pains me to protect something so oversold and inexpensive)

I am observing some conflicting TA out there.  The market appears oversold, and wanting to bounce from current levels.  Except there are bets being made the market will decline.

Fear is rising, but so is the market.  This could be a re-adjustment in complacency and ultimately mean nothing for the overall markets. (As I have always felt the VIX is too low for the current economic environment.)

I am going to let my trades ride out, but I am cautious… very cautious.  Curious to see how things develop toward the end of the day.