Fear factor rising, but where’s the bottom?
The market trend picture remains negative while at the same time the increasingly bearish sentiment – which now appears to be approaching extremes by several measures – suggests that a bottom of some sort may not be far off. Possible bottoming scenarios include a successful “retest” and hold near the January lows (i.e., about 1270 on the S&P 500), or a sharp climactic sell-off that takes the major indices to significantly lower levels first.
In the event of the latter case, the following key support levels bear watching: 1250, 1220-1230, and 1170 on the S&P 500; 2150 and ~2050 on the Nasdaq; and 11,400-11,500 and 10,700-11,000 on the DJIA. I will likely become more aggressive in my limit orders to sell puts if it appears that this scenario is unfolding.
New positions
I placed many limit orders to sell puts last week, but the market never really went low enough and/or the volatility never expanded enough to trigger most of them. The few that did trigger included some March 25-strike puts on Darden Restaurants (DRI), some March 15-strike puts on American Eagle Outfitters (AEO), and some March 35-strike puts on MDC Holdings (MDC).
Watchlists
I’m still away from my main computer and unable to run my usual watchlist scans this week.
