2/25 Morningline

Blue chip stocks (SPY) broke below their range of the last two days, gapping down 1.4% at the open. The retracement from the Jan. 14 high of $115.14 to the Feb. 4 low of $104.58 was in the neighborhood of a Fibonacci 61.8%.
Treasury long-term bonds (TLT) gapped up half a percent. Higher bond prices mean an expectation of lower interest rates.

The "fear index" on the S&P 500 (VIX) was up sharply, trading 11% above Wednesday's close.

In its next leg down, I would expect SPY to burn past the $104.58 level to one of the next resistance levels: $102.37, $101.22 or $95.14. More broadly, the decline from $157.52 in October 2007 down to $67.10 in March 2009 was retraced by about 50%, another Fibonacci level, and the next leg down on this broader chart could bring SPY down into the $60s. Investopedia has an excellent article on Fibonacci retracements. The dollar fell against the yen (USD/JPY) for the fifth straight trading day and now stands 3.4% below the high set on Feb. 19. The currency pair is showing a macd bear signal this morning (and about time, one might say). Oil (USO) gapped down by 3% before recovering somewhat. Oil is priced in U.S. dollar worldwide, so a cheaper price for oil can be expectations of a more valuable dollar, although there are so many other factors that can impinge  that it's impossible, really, to draw any conclusions.

The ultimate book about Fibonacci numbers and how they apply to retracements and Elliott waves. It has had a great influence on how I evaluate price levels.

Among holdings, PALM has gapped down 19.6% on new revenue guidance from the company. This is a zombie position, left over from a covered call that expired unexercised, and a cautionary tail of what can go wrong with covered calls. At this point I'll continue to hold it, tucked into a corner of my portfolio, in the hope that things will improve. Earnings are to be announced on March 18.

Let's run the numbers, at about 10:05 a.m. Eastern:

Indicators:

• Blue chip stocks etf (SPY) is trading at $109.25, entered macd bull mode at close on Feb. 15 (at $109.74)
• Fear index or volatility (VIX) 22.30, bear (bullish for stocks), Feb. 12 (22.73)
• Treasury long bonds (TLT) $91.00, bull, Feb. 25 ($91.18)
• Corporate junk bonds (JNK) $38.52, bull, Feb. 18 ($38.40) 
• Emerging markets (EEM) $38.44, bull, Feb. 16 ($39.43)
• Gold (GLD) $107.26, bull, Feb. 12 ($107.04)
• Oil (USO) $38.04, bull, Feb. 10, ($36.51)

Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3503, bull, Feb. 19 ($1.3611)
• Yen per dollar (USD/JPY) ¥89.05, bear, Feb. 25 (90.14)

Stock option holdings, March expiry:

• AKS, iron condor (p19/-p20/-c25/c26), $21.07, bull, Feb. 12 ($21.68)
• CAL, covered call (-c19), $19.46, bull, Feb. 16 ($19.88)
• CSCO, iron condor (p22/-p23/-c25/c26), $24.08, bull, Feb. 8 (23.50)
• GCI, covered call (-c15), $14.69, bull, Feb. 18 ($15.27) 
• WFC, iron condor (p26/-p27/-c29/c30), $27.12, bull, Feb. 22 ($28.01)

Income shares:

• AOD, long shares, $8.32, bull, Feb. 19 ($8.46)
• NLY, long shares, $18.10, bull, Feb. 17 ($17.50)

Zombie shares:

• MCO, long shares, $26.60, bear, Feb. 5 ($27.34)
• PALM, long shares, $6.30, bear, Jan. 26 ($11.17)

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