A Toppy Market Or Just Getting Started?

Broader Market Weekly Performance:

Dow -0.47%

S&P +0.07%

Nasdaq +1.02%

Russell +1.81%

www.BookingAlpha.com

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MARKET UPDATE:

Week 4 of 2012 trading brought the markets to new relative highs but ended the week with a thud as resistance held firm. Helicopter Ben Bernanke reaffirmed his zero interest rate policy this week and along with earnings, it was enough to push the market even further.

Economic data this week signaled things are okay but not great. Jobless claims moved higher and GDP missed expectations. The Euro zone is still a disaster but the headlines have stopped and has enabled the market to continue to grind higher.

Earnings headlines have been positive for the most part but what the talking heads on TV *forget* to report is that the majority of reporting companies reduced their earnings outlooks prior to reporting. Therefore, the beats that are being reported or actually merely surpassing a reduced earnings target.

Positive earnings headlines have not been enough to push the market through resistance and with the run the markets have had, the action feels a little toppy. Keep in mind this is a short squeeze and it could have further to go but things are starting to feel more and more shaky by the day.

The Nasdaq leads the indexes up +6% this year alone. Yes, you read the right, +6% this year alone. Even if things were great domestically and Europe was not a financial powder keg, market can't rise at a 6% per month rate. To provide some perspective, "good" years of market performance are considered to be +10%. So even if this year was going to be "good" for markets, January alone would constitute 60% of the performance for the year.

The S&P is up +4.6% YTD and remains short trem overbought along with all the indexes. I anticipate a visit to S&P 1280-ish in the next 1-2 weeks and have positioned the BookingAlpha portfolios accordingly.

Navigate wisely and stay profitable, my friends. Happy trading!

BOOKINGALPHA UPDATE:

Monthly Trading Service Commentary:

This week brought the successful expiration of the SPX Bear Call Spread yielding profits of +15.6% in 21 days. Not a bad trade considering last week it required a roll adjustment up a couple strikes and out 1 week. The adjustment increased our credit received and reset our risk to higher strikes. Ultimately, it was a great adjustment yielding more profit while mitigating risk.

No new positions were added this week and the portfolio is 40% invested with 60% in cash. The 2 spreads open, a SPY Bear Put Spread (debit spread) and a Bear Call Spread (credit spread) utilize Feb options.

The SPY spread is in nice shape considering the market action. The QQQ spread continues to managed closely as the Q's are the most overbought and currently threaten our position.

Nice roll adjustments are available if the Q's continue their strength but it is too early to deploy them just yet. Taking into account the extreme rally and overbought situation, it is most prudent hold the position as is and wait for the roll adjustment opportunities to come to us and/or let the Q's lose some of their recently gained altitude. Time is always on our side with Bear Call Spreads in overbought markets.

The Monthly Advisory continues to outperform and deliver consistent drama-free Alpha:

+4.60% YTD BookingAlpha Monthly Advisory

vs.

+4.56% YTD S&P 500

See Trading Record

Weekly Trading Service Commentary:

There was no trade for this week's Weekly Options Expiration due to lack of prudent opportunities.

Las week's IWM Bear Put Spread using Feb Monthly options is still open and in good shape despite IWM's rally. The trade is designed to profit on a pullback, or at least a slower rally than experienced lately.

IWM is the second most overbought of the indexes (behind the Nasdaq / QQQ) advancing >4.5% this year already. This is an unsustainable pace that cannot keep up. Keeping in mind that markets can stay irrational longer than any one trader can stay solvent, I executed the deep in the money Bear Put Spread.

The IWM position provides a nice buffer in the event the rally continues short term. I used Feb options to provide extra time for the position to work out if the rally does indeed continue short term. However, any further rally will be short lived due to the extreme overbought circumstances of the market.

The Weekly Advisory continues to outperform and deliver Alpha:

+5.30% YTD BookingAlpha Weekly Advisory

vs.

+4.56% YTD S&P 500

See Trading Record