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Monday, December 13, 2010

GLD Looks Vulnerable To Downside

-On 12/9, SPY broke out of my trading range 117.5-123 that I had forecasted for over three weeks. Problem is that I focused on predicting the future and being right, rather than recommending the best trades, especially when all my indicators turned bullish on 12/2. Here is SPY chart intraday.
-Speaking of a good trades, GLD looks vulnerable to the downside. I am purchasing 1 Jan 132 put and selling 1 Jan 142 call for higher than 0.15 credit. My indicators are diverging from GLD price trend for the past several weeks and volatility is rising as indicated by my Fair Volatility Estimate indicator. FVE value is at 22.3, while Implied Volatility is 18-19% for GLD options. (* FVE indicator is calibrated for SPY, so it's values would be less "accurate" for other indices, and even less so for individual stocks)

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