End of the year – end of the rally?
While it’s too soon to definitively declare an end to the intermediate-term uptrend that began two months ago, the overall market trend picture has now shifted clearly – but not yet decisively – negative. It’s still consistent with a correction in the current uptrend, but it could also be signaling the beginning of a new downtrend (or worse).
If the current weakness is a correction in the current intermediate-term trend, then the market might be expected to resume its action to the upside quickly – probably within the next week or so. Otherwise, a new intermediate-term downtrend could take the S&P500 down to the 1200 level without breaking the current longer-term uptrend.
As the market sold off last week I tried to sell puts on a variety of stocks (e.g., Albertsons (ABS), Gannett (GCI), Kraft (KFT), Merck (MRK), and Pfizer (PFE) among others), but most of my limit orders didn’t trigger. I did however manage to initiate one new position: I sold some January 35 puts in Frontline (FRO).
Shipping/transportation stocks like FRO have been declining over the past year or so and they’ve fallen to levels that are beginning to attract my interest. Another stock that I just added to my watchlist is pipeline operator Kinder Morgan Energy Partners (KMP).
