Morning Note - S&P 500 closes at highest level since 2008

The DOW JONES actually closed down -2 points or -0.02% to  11,370 while the broader S&P 500 added +4 points or +0.38% to 1233 - showing that the mid cap space continues to out pace the large caps. In London, the FTSE 100 added +13 points or +0.23% to close at 5807. Locally, SPI FUTURES are indicating a drop of -7 points when trading kicks off this morning. 

We're still seeing the broader commodity market trade within its range as shown by the Commodity Index and a break up above this level would be bullish for the commodity space. Too early to tell if this will happen however it looks encouraging at this stage. 



The most bullish technical move overnight came in the S&P 500 which broke out from its recent trading range to close at 1233. This shows strength in the broader US market however its worth noting that breakouts in an environment like this needs some further confirmation before we get ahead of ourselves. I'd say a close above 1250 would confirm that we haven't had a false break and this would clear the decks for a rally through December and into January. 

Its really does come down to picking stocks in this type of environment and be willing to act to lock in profits or generate income from the portfolio when ever you get the chance. One of the better ways to generate income is to sell options against stock holdings. This doesn't suit all investors however it is effective for those that want to generate some income each month and are comfortable to sell stock holdings into any significant strength. Its a strategy that works well in a range bound market. I'm talking about the Buy and Write Strategy. 

We tend to put a variation on this strategy and try to time the market by purchasing stock, waiting for a bounce then selling a call option into the strength. One recent example of this was in QBE we're we bought stock around $17 - it has now bounced to $18 and we will look to sell a call option over the stock. This means we sell into the market the right for someone else to buy our stock at a specific price in the future. For that, they pay you a fee. For more information on this strategy  download the ASX Booklet HERE. You may also like to visit www.globalincomestrategies.com.au. This site gives access to a Buy Write model portfolio that has been in operation this year. A full list of all trades are available in the financial summary section. Use the following logins: 

Email: trial@trial.com
Password: trial 

Have a great weekend. 

James Gerrish 
(02) 9375 0117