26 November 2008

Trading Agenda for the Holiday-Shortened Week

I'm planning on following Phil Davis' advice/outlook for the remainder of the trading week, which includes Wednesday and a half day on Friday:

In member chat yesterday we expected to see a 2.5% follow-through to the upside and we also said that not passing those levels (873 on the S&P, 8,650 on the Dow, 5,450 on the NYSE, 1,500 on the Nasdaq and 450 on the Russell) is a very good reason to cover for the weekend and be done with this crazy rally as we strap in for the next dip. That includes all of the fabulous calls we made yesterday and today, as all those crazy gains should be taken off the table or well protected ahead of the holidays. I still favor the DIA Jan $85 puts as overall protection to be bought around 8,600 as well as the DXDs again, now that they are back to $75, making the Jan $75s at $12 nice portfolio protection as that ETF was at $100 on Friday but hasn't been lower than $60 since June.

In place of DXD and DXD call options, I'll consider closing out my SSO position and switching over to shares of SDS.

Likewise, my UYG position is ripening, almost ready to be picked and sold at market:

And once I close out my UYG position, I'll swing on over and pick up SKF shares:

Finally, regarding FXP, the Gray Lady provided justification for playing the short side of China:

"Demand is definitely shrinking," Wang Wei, an investor relations manager, said as he toured one of the brand-new plants. "Everyone is cutting back capacity."

It is happening faster than most anyone predicted: China's economy, long the world's fastest-growing major economy, is slowing down. Economists are forecasting that after growing nearly 12 percent last year, China's economy could slow to 5.5 percent in the fourth quarter of this year — a stunning retreat for a country accustomed to boom times.
"It's the speed of the deceleration that scares people," says Liang Hong, a Goldman Sachs economist who said she recently surveyed companies in China.

The American recession is one big reason China's epic economic growth is imperiled: as Americans buy less, China sells less. And China's own efforts to keep its economy growing, through a stimulus package worth nearly $600 billion, may not replace a falloff in American demand as the United States' recession deepens.

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