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Feb 24 / Stocks -
Canadian Banks, SPY
IN THE GAME
It's important to stay aware of
trends and decide whether or not the "game" is over or
just "half-time". I believe for now the market has
called a "time-out", so here is what I am doing now.
Here's what I am doing today. CIBC
(CM) announced excellent earnings as did National Bank.
The euphoria on the Canadian Banks has returned them to
"pre-oil jitters" valuations. This is a prime time to
sell covered calls and that's what I am doing this
morning with my retirement account. For example on TD I
am selling the March $82.00 strike and considering the
April $82.00 as well. If I wanted to get taken out for
sure, I would sell the $80.00 strike. Yesterday on
Canadian Bank positions I sold a number of naked puts in
my non-retirement account. Today I am on the other side
of the fence selling covered calls. I am not sure TD
bank can reach my covered call strikes in this weaker
market. I believe the euphoria in the Canadian Bank
earnings should keep valuations up for a while longer
but how much higher they can move is difficult to tell.
I prefer to error and sell covered calls and be taken
out and then have the chance to buy back in when the
"excitement" ends and sell calls again. As well should
any of the big 6 banks report poorer earnings than
expected, I would believe the rally will stop almost
instantly and be followed by a move back to more
realistic valuations. All my Canadian Bank stocks are
being traded in Canadian dollars on the TSX.
On the SPY. Any rise in the S&P
500 over the next day or two I believe is a rally before
more selling takes place. I plan to buy puts on any
rally. The uptrend is definitely stalled at this level
and any bounce higher is more than likely a relief rally
and bargain hunters returning. I would expect more
selling before we revisit the Feb highs we recently
made. Note how I said revisit those highs as I expect
this market will recover sometime in late March or April
unless oil moves higher. Then it's anyone's guess where
we will be heading.