The Week That Was

That was quite the interesting week in the market, for those of us that trade. There were plenty of opportunities to make and lose money on every turn. What started as an almost all-out rout turned into almost a flat week. Amazing to watch unfold. I, myself, got caught into a bad position when Zecco locked up my account for the ACAT...BUT did not transfer out the positions to my new broker because I had positions that expired Friday. So I called Zecco and plead with them to market sell all my option positions. They refused. I told them I would fax/sign whatever they needed to liquidate the positions. They said maybe, but it might take a few days and no promises. They did unlock my account slightly before the market close, but I was unable to trade before they closed. The cost to me ended up being substantial, more than some people make in a year. I'm not worried, I still ended up on the week slightly. Could have been my best week in the market ever. One of my positions was up over 600% intraday.

So the market is giving the green light, again. Should it be trusted? I say, "no". The Libyan conflict and the ever-escalating Bahrain conflict, add in the lack of true disclosures from the Japanese government AND another possible oil spill and you have a possible volatile mix. VXX completely sold off and I did sell off my VXX options for a decent profit and then rolled 1/3rd of the position over to the APR VXX 40's at $1.77. I am basically playing VXX/GLD long contracts and hoping for another perfect storm where gold goes up and the market sells off a little. I don't think GLD will sell off with the market like last week. That fall-out should have shook out the scared hands and any margin calls. I think gold should return to a flight-to-safety moving forward, at least short-term.

Still have to be careful here, though. The central banks are intervening hard to keep the status quo. Which brings me to one of my new thoughts. There is such debate over whether gold is an inflationary hedge or a deflationary hedge or when it should/shouldn't outperform. Notice when the CB's started their major push of intervening last week that gold started moving hard to the upside? I think that gold doesn't care one bit about inflation or deflation. All it cares about is how much government intervention/corruption there is(include CB's in government). If government intervention is moving up, gold should be moving up. If the government lets the market fall and sits on its hands, then gold may move down. However, I am convinced there is no chance of the government not intervening constantly anymore. Therefore, gold should continue to outperform the broad equity indexes year-in and year-out.

One caveat to that thought is if the government/CB should ever intervene to clean up the system that it would be greatly negative on gold. I'm not talking about conjecture, that happens all the time. I am talking about broad reform to clean up the system. Like the one that happened with Volcker. That cannot happen because the Fed has too much interest-rate risk and the government needs way to much debt funding to function.

I feel we are still on a down channel for equities. I am also still willing to be quite the contrarian and say the USD will snap higher. Although, I have no explicit bets for a higher USD except to have a high cash position.

Things I'm currently looking for:

-Gold to stay flat/move higher into a market moving lower

-SPY to move under 125

-Brent crude to move over 125

-USD index moving back over 77

With all this in mind, I am confident that VXX/GLD long options are the best way to catch some upside with some downside protection.

For the record, I am moving to OptionsHouse. There pricing for large contract orders seems like the best out there. Plus, an iPhone app!