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May 23, 2008

Selling Time

The dive toward the 65DMA continued today on the SPX as we witnessed the solid selling day I discussed in yesterday's post. Although a potentially significant support level was lost at 1380 and change, the action continues to appear corrective in nature.

stock chart

Because of the declining volume, my confidence level with regard to extending this downturn fell enough to induce me to close out my SPX short today. I captured 32 points of downside in 3 days.

Curiously, the NDX held up fairly well, but it still seems stretched relative to its 65DMA. I will spend the weekend pondering potential plays here. My first instinct is to sell OTM calls rather than directly shorting the index. While I don't think price is about to collapse here, it is very unlikely it will come screaming back to new highs, so selling time seems to be attractive.

stock chart

I'll post some thoughts on gold and silver over the weekend. Have a good, relaxing weekend, everyone...


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