-- Posted Tuesday, 7 November 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Tuesday, November 7, 2006
“Phenomenally accurate forecasts”
Is the stock market likely to go crazy after the election? A betting man might be tempted to take the odds on that one, since so many observers evidently expect angry voters to deliver a jolt of electricity to Wall Street’s vitals today. The rough consensus among forecasters I respect calls for a short, nasty correction beginning as soon as tomorrow, followed by the resumption of a bull market that would enter its fifth year if it makes it till March.
That would square somewhat with my own forecast, which calls for a potentially important top in the Dow at 13045, nearly a thousand points above yesterday’s close. However, I’m troubled by the fact that so many seers apparently expect “something” to happen immediately post-election. Some are predicting stocks will collapse if the Democrats recapture both houses of Congress, while others think that just putting the election behind us will clear the air and allow shares to blast off.
A contrarian might be tempted to fade them both. Does that mean November option premium is a sale? I wouldn’t go that far, and a glance at the chart above reveals why. As you can see, CBOE put-and-call volatility is near historical lows, and betting it will go even lower is like betting it won’t rain several years into a drought. In practice, we’ve already placed our bet, buying IBM calls against QQQ puts. This “straddle” was looking somewhat subdued yesterday with IBM up a point and change, but if the rally continues for even another day, the position could explode. It gives us what the pros call “positive gammas” – a backspread that will automatically make us longer on a rally, shorter on a decline -- and although it could fizzle over the next week or so, the fuse is lit and burning rapidly.
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Last Call, San Fran & Sydney!
There are still some seats left at the two Hidden Pivot seminar scheduled -- in San Francisco this weekend; and in Sydney, Australia on December 2-3. You can request a registration form and further details by clicking here. Please specify which session you are interested in.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 7 November 2006 | Digg This Article | Source: GoldSeek.com
