Wednesday 26 September 2012

No Cigar Yet.

I am amazed to see how quickly the sentiment changes from euphoria to doomsday. Was it last week, there were talks of SPX 1500 or higher? And now the coming doom! Part of the reason being the Fed has taken out the surprise factor. For last three months the Pavlovian dogs have been drooling about the coming QE and now that it is here, they are caught in the headlight.  And so far we just had about 2% correction.

Few days back I wrote that we should expect a correction of about 5% or so and that would be a good buying opportunity. I cannot say for sure how deep the correction will be but so far it appears that it is not a real deal. So long SPX does not break down below 50 DMA, there is no reason to take it seriously.

I think we will test SPX 1410 on Friday and if we bounce from there, which would be an opportunity to long. Again, timing is everything and if that bounce fails to clear the high of September 14, then and only then we can say that we have a good shorting opportunity.  Of course this is a text book situation and the real thing may unfold differently, but it’s all about probability. Nobody except GS and JPM can beat the market everyday of the quarter.

Nothing has been fixed, Europe is as broken today as it was day before, China is still a fantasy land of infinite growth, Japan with its 240% debt to GDP ratio is now ready to fight China and drag USA with it, Israel and Iran can’t wait to bomb each other. But hey, what does it matter, USA can still print money and prosper.

We know how it is going to end but if your central bank is giving you free money, it would be very un-patriotic to refuse that offer. After all, it is the land of the free and brave. I am not so brave but I still want the free money. So I am waiting for a pull back of gold and silver to their 50 DMA and take an entry which should be good for at least the 2nd quarter of 2013. The fly in the ointment in the theory is a possible war somewhere in the world which will cause huge recession worldwide. But that is something we do not have  much control and if I can read the evil plan of the Banksters, we are OK till May of 2013.

Tomorrow we may see a bounce but the selling is not over yet. We need to test the 50 DMA in SPX which is around 1410 and see if that holds. I am ready to wait till Friday to decide if there is a trade worth taking.

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  1. I agree, no real deal yet. But still it's been an amazing week for day trading.

    Treasuries were mechanically goosed (no panic buying there at all), and notice how they went up simultaneously with the market from 10:30 EST. 8 up days in 10Y paper, time for a little sell off.

    Also, AUD bouncing back to 1.04-05, oil is holding, gold is holding too, /DX is having bear flag forming. All in all there is not much excitement around for a crash.

    And you're right, probably there won't be many going home short market on Friday.

  2. Rajesh,
    Thanks for your help. Appreciate.