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Weekly Market Assessment
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BlackPacific Capital

Following the Crowd

Weekly Market Assessment
December is known for being the best month of the year and with a good jobs report today, this market fact may still be able to hold true. We started the month with 4 down days, a 10 Year Treasury Bond again approaching the 3% level and a mixed ISM(Institute for Supply Management) report that drove the market down. On Wednesday, the Beige Book, which is a collective summary from each of the 12 Federal Reserve Banks gave their current outlook on the economy, which stated that the "economy continues to expand at a modest to moderate pace." No surprise as this seems to be the the common language from the previous meetings. The jobs report came in with 203,000 jobs created and an unemployment rate that now sits at 7%(First time in 5 years). This week the market also saw U.S. equity fund inflows continue to increase while bond funds have now seen 7 months of net outflows. This expresses how investors are moving into risker assets as we break into new highs and are beginning to get a "better" understanding of the Federal Reserves intentions. Is it now time to leave behind the safe havens and follow the crowd into the equity market?
Crowd behavior is heavily influenced by the loss of responsibility of the individual and the impression of universality of behavior, both of which increase with the size of the crowd. (Greenberg, Martin) The Federal Reserve is feeding the investment community with loose monetary policies which is drawing in more and more investors to the equity market. So the question must be asked, will we fall victim to this crowd behavior theory and lose sight of our individual outlooks or will this experiment with artificially low interest rates prove that going with the crowd is the right thing to do?         
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Next week we get Retail Sales report.  I'll be looking at BBY ($41.05). After Black Friday and an improvement in economic sentiment, we should get a positve report, which should give a boost to the stock. Ill be looking at weekly spreads or an Iron Condor going into next week as this trades at its 10,20 and 50 day moving average. 
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk
S&P 500 (SPX)- I sold a Vertical "CALL" Spread at 1805/1810 as we had a Friday close below the 1810 level and looked for a continued sell off in the market as a run up to the jobs report on Friday and end of the year profit taking while we are at year highs. A week option gain of 11%
Netflix (NFLX)- After news came out that Carl Icahn may have eliminated his entire NFLX position, I sold a weekly Vertical "CALL" Spread at $360/365 and closed the position the same day for a 15% option gain. 

Telsa (TLSA)- After trading up huge on Tuesday with a gap up of over 16%. I looked to open a Vertical Call Spread on TSLA the following morning as I thought traders would be taking profits after such a huge run up in the stock. It opened up and then sold off on good volume where i sold a Vertical "CALL" Spread at $144/145. An option gain of 26%   
Priceline (PCLN)- Sold a Iron Condor at $1205/1210 and $1125/1120. PCLN 20 day moving average was at $1125, which i thought would form a support level on any sell-off and a psychological resistance level at $1200 made these two strike prices good levels to sell an Iron Condor. A week option gain of 27%.   
Amazon (AMZN)- I sold an Iron Condor on AMZN at the $405/410 and $365/360. After the 60Minutes special on AMZN, it opened on Monday +$7 and then sold off, to close below Fridays close, which formed a bearish engulfing pattern. Sold this option position for a 18% gain.

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