Index Condor Portfolio
Last week was yet another down week. However, our Index Condor Portfolio was successful in capturing a +51.2% return on the January Condor! As a result the year to date performance on the Index Condor Portfolio is up +15.1% while the market is down nearly -10%. We currently have a Feb condor out collecting premium and will be looking to enter another position this week.

AppleOption STP Portfolio
We have taken a beating with Apple stock… but it is undeserved! Fundamentally nothing is different with the company than there was 20 days ago when it was sitting at +$200. We have dipped below $160 which should have allowed new members to pick-up a great position in the Feb 160 Call. We otherwise have positioned nicely for the earnings report (Jan 22nd). Apple Q1 Earnings: How Big the Bounce?

AppleOption LTP Portfolio
We had no new additions to this portfolio in the last week. The Long Term Portfolio will easily ride through this drop. This is a temporary blip in Apple’s long-term chart and we have taken advantage of the weakness. Patience will prevail and yield a delightful return.

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Index Condor Portfolio - Current Holdings
AppleOption STP - Current Holdings
AppleOption LTP - Current Holdings

This week the Tech sector could make or break the market. We are looking for positive earnings from Apple (AAPL), Potash Corp. (POT), Microsoft (MSFT), SunPower (SPWR), MEMC Materials (WFR) and Ebay (EBAY).

So again we can look back to the New Year and realize that in the last 13-days the Dow Jones fell 1,165 points or -8.8%, the S&P 500 dropped -9.8%, the NASAQ plunged -11.8% and the Russell 2000 is down -12.1%. So now that we are down… where do we go?

If we decide this is a waterfall decline or bad news panic drop, then as swiftly as we crashed so will a rebound come. In this situation, you would generally want to hold on to your positions as most of the value shall return.

If we decide this is a “bear market,” then we will move through multiple contractions. Your goal would be to preserve capital and the amount you rely on corporate earnings will lessen because most traders will not be willing to pay more for future earnings.

Everyone points out the swift drop in 2008, but we can extend our view back to October 9th and find the market in more of a long term downtrend as the Dow Jones fell -14.58%, the S&P500 -15.33%, and the NASDAQ -18.6%. The typical definition of a bear market is a -30% decline of the Down Jones in 50-days OR a decline of at least -13% lasting 145-days. We have experienced 17 declines that met the previous criteria since 1950, with the average decline of -30.8% lasting 363-days. If we define bear market based on the S&P 500, we will look for -20% drops. Since 1950, we had only 9 periods meeting this criteria with an average decline of -31.91% over 400-days.

Now where does that leave us today?

The market is definitely looking more and more like a bear market after every trading day. We have a few potential catalysts in the coming month that might spark the bull market back into action. Apple reports earnings Tuesday, the Fed will announce interest rate changes on one of the next two Wednesdays, and a hand full of other earning reports. Next week’s tech earnings will make or break the market.

If the market preforms poorly, the only good news is that a new bull market will be formed at the end of this bear market. The typical rebound after a post-war recession the median gain of +23% occurs over the next six months. During years that coincide with a Presidential election, the incumbent party is likely to loose, and the market performs even better with the S&P gaining closer to 30% in the next six months.

We are left to defend our wealth, a move to cash on winning or neutral positions would be a wise depending on how we react this next week.

If the market fails… we predict the S&P 500 to bottom near 1250 and the Dow Jones to bottom near 11,200.