Why did you close out the March bear call spreads this month? What were you watching that told you this market was going higher?

Question:  When the market was pulling back from Feb 25 through Feb 27, 2013,  you decided to start closing the March bear call spreads.  This turned out to be a good call.  What were you watching that helped you make the decision to get out of these trades early?

Answer:   We decided to close out the RUT, MNX and SPY bear call spreads early during the March 2013 cycle and make a clean break, because of the data shown below.   Early in the cycle we also decided to underweight on the top bear call spreads and overweight on the bottom bull put spreads knowing that the market would probably grind higher.  These decisions allowed us to break even for the month, which is the key to making long-term consistent gains.  i.e. when the market moves against us a few times a year we need to do our best to keep our losses under 5% by either adjusting/rolling, or by closing certain trades early.  Our analysis in mid-February, which was the beginning of the March cycle, showed the following:

1)    New unemployment claims (rate of worker getting fired from their jobs) has been coming down fast over the last 5 weeks
2)    Jobs report came in strong, pushing over 230k jobs for the first time in a long time, which was a pretty big deal
3)    We were still in the seasonal UP trend, which is typically Dec through May
4)    The business investment number within in the Durables report came in at 7.8% growth, which was very strong.
5)    Housing bottomed 12 months ago and strength in home pricing has been accelerating; housing represents 7% of GDP, so when housing improves it will drive the overall economy
6)    S&P earnings are projected to grow 8% to 10% in 2013, and they came in okay for Q412.
7)    Consumer credit has been expanding every month for the last 24 months and the Feb reading was strong
8)    ISM numbers are now expanding across the US
9)    Market breadth is still strong, telling me that this uptrend will last at least another 2 to 3 weeks.
10) Technicals in the charts (for the indexes) pulled back and easily held over the 50 day SMA, telling us that the market was still in a confirmed UP trend and that pullbacks would most likely be brief and shallow.
11) Charts around the globe were mostly holding above their 50 day SMAs
12) Volume oscillators were showing that the market was still in a confirmed UP trend, even though the indexes were pulling back.  (volume is one of the few reliable indicators when examining strength of trend and prediction of trend reversal)
13) VIX (volatility) stayed relatively calm when the market pulled back, telling us that more money was probably going to flow into the market
14) The Dow already broke up through 14,100 and the RUT was already taking out new highs, but the SPX (S&P 500 index) was still below the 2007 highs; this told us that traders most likely would push the SPX up to at least 1560/1570 level, the 2007 high.  This is a typical moment play for the traders
15) The transports, industrials, consumer discretionary and financials (ETFs) pulled back in orderly fashion and held above each respective 50 day SMA, telling us that the market was most likely going higher once the markets consolidated a little.  This was a typical Elliott Wave 4 pull back.
16) High yield credit markets have been deflating for the last 6 months telling us (from the smart money) that the health of US corporations has improved substantially
17) The market is relatively cheap; based on projected S&P 500, 2013 earnings of $110, the price/earnings multiple is around 14.3;  the P/E ratio could expand to 15.5, putting the SPX at 1700, and  the market could still be fairly priced

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