The Best Summary of The Week – Fri March 1 2013

1) NEVER SHORT THE MARKET WHEN BERNANKE MAKES 3 SPEECHES IN ONE WEEK. 

2) Any bearish sequester effects can only take place if mainstream media plasters it as a “doom and gloom” situation for a few days. Perhaps over the weekend.

3) This primary bull market is extremely, extremely strong. I am beginning to think it is possible we break through the multi-year triple top on SPY by early April (thanks Uncle Ben). 

Image

Congrats, bulls. Ben had your back this week.

The next two weeks, however, will be volatile as we are strongly setup for some consolidation.

Next week, options open interest is highest in the SPY 150 puts and 148 puts. Pretty bearish. Also in recent weeks, Green Fridays have mostly brought Red Mondays. We’ll have to see what happens over the weekend to make any attempt to figure out Monday’s move.

Happy Sequester Day

 

Advertisements

Why All You Bulls Are Screwed This Week

Did the bulls take control of this market again?? Nope! Not yet!!!

Image

What moves markets? Volume? Price?.. NO NO NO my friends…

EXPECTATIONS

Now that expectations of Ben keeping his finger on the printing press are confirmed, we have this rally. Wonderful.

So what’s next?

THE SEQUESTER. This market is pricing in a last minute deal but guess what folks?? Probability says it won’t happen, and if you’re an experienced trader, you know that solid trades are based on probabilities. Here’s why it won’t happen: The Republicans want the sequester to go through.

Republican Congressman Paul Broun (R-GA). “I want to see it go into place.” [Cherokee Tribune, 2/9]

Republican Congressman Mike Coffman (R-CO). “I don’t think going over the fiscal cliff would have been a huge deal” [kdvr.com, 1/02/13]

Former NRCC Chairman Tom Cole. “We just had additional revenue for the federal government, so I don’t see any way in the world the sequester won’t happen either as written or renegotiated or reallocated cuts.” [Talking Points Memo, 2/05/13]

Republican Congressman Scott DesJarlais (R-TN). “Sequestration needs to happen…Bottom line, it needs to happen and that’s the deal we struck to raise the debt limit.” [Cleveland Daily Banner, 2/1]

Republican Congressman John Fleming (R-LA). “The sequester is law. Those cuts happen no matter what. We’re willing to hang in there and insist that those cuts go into place…” [NHPR, 1/30/13]

Republican Congressman James Lankford (R-OK). “greater chance that they’ll be implemented than not at this point.” [Politico, 2/13/13]

So my friends, keep those shorts on (those of you who had the balls to stay in) and you’ll be handsomely rewarded.

No matter if we gap up or down tomorrow, tomorrow will be RED. SPY target 148.

What To Expect Today – Weds Feb 27 2013

So let’s look at the facts:

1) Durable goods orders ex-transport were slightly better than expected. NEUTRAL

2) Stock futures are slightly up this morning. Can’t be because of durable goods, so it must be Bernanke’s testimony today giving the market optimism. BULLISH

3) Sequester is in 2 days and Bernanke is warning Washington of its potential detrimental effects on the economy. BEARISH

4) Yesterday’s 0.7% bounce in SPY followed a 2% down day. So we have our natural, expected bounce up after a large-sell off. NEUTRAL

5) We are technically still in a downward trend. BEARISH

What does this mean?? It means there are more downside catalysts present in today’s market. I do think it’s possible we could have a slightly green day today, but this week is set to end deep in the red.

Be wary.

For more, read the post below. Are You Ready For This Week’s Violence?

Are You Ready For This Week’s Potential Violence?

Okay, so the market didn’t end in the red today. That’s okay. This is a good thing. Bernanke accomplished his goal of buoying the markets and we achieved a nice healthy 0.7% up day after a 2% down day.

Many traders are anticipating a gap down tomorrow morning to continue this bear trend. However, durable good orders are released before the open and any news right now is being acted on intensely. Technically, there is room for some upside tomorrow as indicated in the chart below. Today’s hammer is a bullish technical pattern, after all.

Image

Although it is possible we gap up slightly tomorrow on durable good orders and/or overnight global markets strength…most likely we continue this strong bear trend and end the day in the red (SPY) around the 147 level…especially after today’s healthy/natural bullish price action.(Which was partially driven by AAPL and rumors of a stock split. Otherwise, we would have only a 0.4% day and I would not be so bearish about tomorrow) This inclination for the SPY to continue its bear path could mean some violent downward action tomorrow if we don’t gap down in the morning.

Image

Bernanke’s testimony included a plea to Washington to not allow the budget cuts to go through because they will surely dent the economic progress of the U.S. THIS IS VERY BEARISH FOR THE WEEK. If Bernanke thinks the sequester is bad, then the markets will too. He is currently running the show. Friday is going to be bloody carnage if a deal is not made (most likely scenario).

VIX falling today means nothing. By the end of the week, this thing could be at 19.50.

I do not think the real money bulls will be back this week at all.

I am long March 1 SPY 149.50 Puts.

Best of luck.

Be Wary – Today’s Bull is Tired

Traders, this gap in futures this morning is really pretty. I know. It’s what we’ve all hoping for…a continuation of this beautiful rally. But remember, the 153/154 level for SPY is multi-year resistance and the only news hitting the tape this morning is that Italian election results are looking to favor Bersani.

Other things to keep in mind: the U.K. was downgraded by Moody’s today, people are expecting Bernanke’s testimony to boost the market, and bearish bets for Friday’s sequester are very high.

If Bernanke doesn’t give the market the juice it needs to keep this rally going mid-week, things could get really ugly by Thursday.

Be careful buying in at these levels. Good luck!