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December 23, 2009

Time to Sell Time?

You will be treated to a short, chartless post this evening as I am a bit under the weather and nothing much has changed since Monday. The drop today in the dollar index appears to be the beginning of the pull-back discussed in Monday's post. The pull-back should fuel a corrective bounce for the intermediate decline in precious metals, as well as spur the SPX to the upper bound of the crash channel. I expect this portion of the action to last no longer than through next week, at which time the buck should print another 2-3 week rise to tag or slightly break the 200DMA on the DX.

There are many ways this precious metals correction can end, but as I stated Monday, I'm more concerned about buying in the neighborhood of the bottom than calling the bottom. One set of circumstances that will get my fingers tapping out buy orders, for example, would be for gold to test the 2008-09 consolidation breakout at the same time the DX is testing its 200DMA.

In the meantime, the only trade I may attempt would be to sell OTM calls on either the SPX or NDX if the minor corrective move in the buck unfolds as expected. I really doubt the equity market has much impetus for an explosion higher given all the negatives stacking against it, and even if the rally stretched further, the move would likely get reversed as a correction finally takes hold. In other words, time will be on my side, which is exactly what a trader wants when selling time.

Well, have a Merry Christmas everyone, and see you next week.


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