6/12/2020 Markets drop 5% this week while QQQ is only down a little. SPY target of 275 in the short term. I’m 85% cash after selling Boeing on Monday.

Hi everyone. We got some interesting developments in the markets this week. After I sold Boeing at the peak on Monday (super lucky), I am now 85% cash and 15% stocks. My only two positions are MRO and PSEC. I’m looking at reentering Boeing at lower prices, and we will take a look at that chart after we take a look at the SPY.

Weekly chart of SPY below:

Our guess that it would be appropriate to sell SPY near 320 proved to be correct. Although I think we are still more likely to sell off than not the next few weeks, shorting here with a proper stop loss of 15 dollars would give us a risk reward of 2. Although this is the minimum risk reward I need when I’m taking a trade, I generally prefer higher risk rewards. As a result, although I would like to short SPY next week, I would need to wait for a small retrace up to the low 310s before pulling the trigger.

Either way, it looks like my broker won’t let me short SPY anyways.

Next let’s look at the daily chart of Boeing. We want to buy low and sell high, so I will explain what I think is “low” and what is “high.”

I think Boeing will trade in roughly the 90 to 240 range for a while. This range is 150 wide from bottom to top. I define “low” as the bottom 3rd of this range, and “high” as the top 3rd of the range. “Low” would then be the price range from 90-140, while “high” would be the price range from 190-240.

My current plan is to start selling weekly cash secured puts if Boeing reaches 150 or lower. That will allow me to get my first 100 shares once it hits the upper part of the “low” range from 90-140. If Boeing moves below 140, I plan to sell another put when it’s in the 110-120 range to purchase another batch near the very bottom of this range.

In conclusion, although I was bullish for most of the last 3 months, I am now slightly bearish given this week’s price action. My portfolio is 85% cash now (up from 35% cash on Monday) which reflects my view on the markets. Although I am not short yet, I am planning on doing a bear spread on the SPY if my broker approves me for Options level 2.

Thanks for reading, and see you next weekend!

2 thoughts on “6/12/2020 Markets drop 5% this week while QQQ is only down a little. SPY target of 275 in the short term. I’m 85% cash after selling Boeing on Monday.

  1. Hello Bigfry. You mentioned you want to short SPY. Would you consider positions in SH (ProShares Short S&P 500) or SDS (ProShares Ultra S&P 500)?

    Liked by 1 person

    1. Hi Mark, thanks for your comment. That is definitely a way to get around the issue with not being able to short SPY. I’m a bit concerned about the volatility drag for SDS, so if I do want to short the SPY, it would most likely go long on SH.

      Like

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