Follow the market; Stocks for Nov 4th :VXX, TZA, FAZ

So we had two days of manipulative rally run by the hedge manager inspite of bad news from Europe and USA the stocks kept rallying upside.

Based on the charts as of today close, its time to sell Gold or GLD, FXE and buy TZA, VXX, FAZ.

Yesterday US Fed and ECB Mario Daraghi gave almost identical speech, "The outlook is bad and growth is slow". Even most of the company are not relying on US anymore, they look for growth outside USA.


Anyways always follow the market and ignore any emotion or facts. Buying anything and holding overnight is very risky in this volatile environment.

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But suppose if you decide to take some chances and hold on some stocks overnight for additional profit  but the stocks goes in the other direction then what should you do ?

• Option 1:

I'll give you one example suppose you bought yesterday; 100 shares of DIA put option of Nov 19th at strike price of 120 for $ 370 and SPY put option of Nov 19th at strike price of 125 for $ 352. Today the jobless claim came under 400k, and ECB did cut the rate, which set the tone for the day as bullish and all the stocks opened higher.

You have two choices, one is to sell off immediately or second is to hold on till you make profit. In this situation 50% people sell their stocks on panic at the open.

Remember if your using option, never sell at the open, eventhough the stocks opened higher. Wait atleast 15-30 minutes for any pullback before selling.

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• Option 2:

Now suppose you sold the puts on the stocks which you bought yesterday and bought some calls of the stocks since every thing was rallying upside.

If you had bought a call on 100 shares of DIA @118 at the cost of $250 and 100 shares of Spy @ 125 at the cost of $235 taking a loss of $100.

• So at today close

Using option 1, the value of $ 722 investment at today close would be (241+227 = $ 468) which is a loss of  $ 254  which 35% down. Now in order to make profit or break even, that stock needs to go from $468 to $ 722,  which is 54 % up.

Its difficult for the stock to rally up 54% in one day.

Using option 2, the value of $ 485, investment at today close would be (335 + 336 =  $ 671) which is a gain of $ 186.

Using this strategy atleast you could have made break even or even more then your initial investment. 

So if you think that the stock will open lower next day, now you can again buy SPY, and DIA puts at even low cost at the close without losing money.

This is only an example to demonstrate sometime you have to "follow the market" and don't think whats right or whats wrong.

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Here are the events for tomorrow.

• G20 meeting last day, (if they don't announce any concrete plans, stock may sell of tomorrow afternoon or early Monday.)

• Greece PM may resign if they win confidence vote. If he doesn't win confidence vote, then he loses PM post. In both cases the PM is losing. (A new election will be bad news for the market, as people will decide their next PM)

• Employment Situation  8:30 AM ET

Nonfarm Payrolls - M/M change   ( any number under 90k is bearish sign, any number above 100k is bullish sign )
Unemployment Rate - Level    (9.1% is bullish sign, 9.2% is bearish sign.)
Average Hourly Earnings - M/M change    (0.2% is bullish sign.)
Av Workweek - All Employees    (any number below 34.3% is bearish sign.)
Private Payrolls - M/M change    (any number below 120K is bearish sign)

• Treasury STRIPS 3:00 PM ET