Today, the Covered Calls Advisor is issuing a major change from a Slightly Bullish investing posture to a Bearish posture. This major change comes as a direct result of the negative psychology that this advisor believes will continue to pervade the stock markets until the Gulf oil leak is contained. With BP's announcement this weekend that the so-called Top Kill approach failed and also the likelihood that oil will continue to drain into the Gulf throughout the summer, the current slow economic recovery is likely to be overshadowed by the negativity that will continue to plague investor psychology as long as this spill continues. This advisor forecasts that this event will be identified as the "BP Black Swan".
The Covered Calls Advisor's investing strategy corresponding to a Bearish market is to be:
50% long with, on average, 1% in-the-money covered calls positions; and
50% short with, on average, 2% out-of-the-money covered calls positions. These positions will continue to be established on near-month options expirations (currently June 2010).
This viewpoint is now shown on the Overall Market Meter in the right sidebar. For reference, a more detailed explanation of the Covered Calls Advisor's investing strategy under each of the various market sentiment indicators is provided here: link. Covered calls positions will be established in accordance with this investing strategy and will be posted on this blog on the same day they occur.
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Regards and Godspeed,