2,400 Tuesday – S&P Tests the Bottom of our Target Range

How low can we go?  

If 2,850 is our Must Hold Level (below which we are bearish – and for good reason apparently!), then 20% below that is the bottom of our range and that's 2,280 and the S&P 500 bottomed out at 2,350 yesterday so we're not quite there though we certainly attacked it with a running start as the index fell 325 points (12%) on heavy volume.  

As I noted yesterday, while this is now close to 40% from the top, we had no business being at 3,400 in the first place so stop thinking we're going to bounce back to there – that would be silly.  It's a lot more likely that 2,850 becomes the top of the new trading range and 2,280 should be the bottom but we're in panic mode now and the selling volume is still overwhelming the buying interest so we could go quite a bit lower – but it's going to be a great buying opportunity…  at some point.

It's an incredible buying opportunity for people who still have cash to spend but a 40% drop in the market tends to make people very cautious.  As I noted last Thursday, as we dipped to 2,480, our prefered way of bottom-fishing is to sell puts, because it puts CASH!!! in our pockets by simply promising to buy stocks for an additional discount – far below where they are trading today.  

Since we're back near the bottom of our range (and, keep in mind, things can get worse), why don't we look at some more stocks we'd like to own if the World doesn't end?

  • Intel (INTC) – $44.60 is $190Bn in market cap for a company that has made over $20Bn for the past two years.  Yes there will be a slowdown this year but this is not a Zombie Apokalypse, this is a virus and, even if it kills millions, that still leaves Billions of people who will still want computers, phones and tablets.  Again, we're not looking to buy them for $44.60 but we can sell the 2022 $30 put for $4, which is promising to buy them for net $26 and requires just $463 in margin selling 10 of them for $4,000 in our Long-Term Portfolio (LTP).


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