Quieter Markets Could be Signaling an Entry Point for Bulls

I'm basically bearish, but I'm a bit stubborn. So I'm starting to buy into Jim's thesis that we are indeed building a bottom and that pullbacks will be relatively shallow and orderly.

For those that are waiting for the great big wash out or capitulation might be missing an opportunity to build a long-term investment portfolio with an attractive cost basis.

That said, I'm of two minds, I've been trying to sell some short-term Spyders (SPY - commentary - Cramer's Take), yes those quarterly puts offered by options-centric firms such as OptionsXpress (OXPS - commentary - Cramer's Take).

As I've mentioned previously, mainstreams web sites such as Yahoo! finance show the data on their option chain. (Notably big mainstream firms such as Schwab (SCHW - commentary - Cramer's Take) or E*Trade (ETFC - commentary - Cramer's Take) do not offer this data. That's a mistake).

To be sure, my reasons for selling some of these quarterly puts is due to the fact that I still has a nice inventory of April puts, so I have downside protection in place. I would not suggest selling puts outright as I think the Spyders will drop to $130 sometime in the next two weeks.

Despite "resilience" of today's action in which the selling was fairly muted on low volume, most remaining technical and sentiment gauges indicate a general lack of interest if not outright sell signals. Remember, volume is the key weapon of the bulls as it requires fresh inflow of money to drive stocks higher while prices can fall under there own weight or lack of participation.

The VIX initially popped up 7% to 27.04, but looks like it will close around 26.15. That still keeps it above the 25 level and the year-long uptrend remains alive.

If you are an active trader, take advantage of the intra-day price swings. But if you are long-term investor keep some powder dry and start picking away at names that offer value. In both cases, time frames are crucial; for the former a few hours or a day might be all you are looking at. For the latter, think in terms of six months to establish a full position.

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Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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