Monthly Archives: November 2011

Ugly AM for Short Leaners

That includes me!

It was a 1, 2, 3 punch of good news this morning.

  1. China lowering bank reserve requirements.
  2. Central Banks lower dollar swap rates hoping to bolster liquidity.
  3. ADP employment: comes in at 206,000 vs. 103,000 expected.

You don’t see this parabolic action often, with $ES_F futures up over 3% before the open, and the CAC40 up over 4%. For those that like Fibonacci, we’ve taken out 61/50/38% over the last 3 hours. Not bad if you were long at the close yesterday.

S&P 500 Futures

The ominous headlines this morning:

  1. 2 Million public workers strike in the UK
  2. UK embassy evacuated in Tehran
  3. UK expels Iranian Diplomats (France, Germany and Norway recall their diplomats for consultation) Hmm…
  4. Syria towards civil war

ISE Sentiment Index

The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction.

Investors and investment professionals can use this unique put/call value to determine how other investors view stock prices, as well as to supplement and validate their own market views.

More here.

Citi – Forget Decoupling on ZH

There’s a good article on ZH this morning, I like this quote:

Their crucial insight is to tie the evolving crisis to the Kubler-Ross stages-of-grief and recognize that expecting a decoupling (or lower correlations between and within asset classes) is only for those in denial – trade the phases of the crisis instead (focusing on exploiting the asymmetries and dislocations as opposed aggressive directional bets).

CSI

Bouncing S&P

CSII’m disoriented.

A 5.2% bounce in the CAC40 and a 3.0% bounce in the SPY ? It looks like the IMF-Italy rumors from Europe and the Black Friday sales numbers (fabricated numbers) sent a wave of euphoria through the markets this morning. Again, nothing has changed. Rumors might have some truth to them, but european sovereigns are still a huge mess and contagion management is still absent. It’s been 2 years.

Is this an opportunity to short the EUR.USD? It’s up only about 0.5%. Doesn’t that seem a bit weak given a 5% rise in Paris and 3% rise in the $SPY? It does to me.

My ratio spread idea that I proposed last week is performing well. I added a 120/112 bear spread now that 115 has appeared as a potential resistance point if the market decides to head south. Unfortunately, I continue to get burned with my ES trades, I’m not working with the right time-frames (for me). I know that and have made this error more than once. I’m writing that here for one reason, so I don’t forget, again.

I hate reading negative headlines day after day without an alternative point of view. We’re fed politically motivated rumors attempting to reassure, though these attempts fail miserably because they’re UNBELIEVABLE, think ‘super committee’. We’re fed ‘viral’ Black Friday sensational pepper spray fights and occupy protests – which sadly are MORE BELIEVABLE. You really don’t have to wait for consumer confidence numbers to understand the mood on the street.

On French television last night, by pure coincidence I watched a pepper spray-human combustion-aluminium lady rerun of The Experts (CSI). It wasn’t agency issue water based pepper spray, but butane. Ah! The person that selects these reruns must have a sense of humor, if only Grissom had a financial column…

AT&T is going to lose 4 billion!

This AT&T T-Mobile deal was a really stupid idea to start with. What were they thinking?

I wrote about it back in August (here and here) and it looks like we’re starting to see the end, atleast I hope so.

AT&T braces for T-Mobile deal collapse

Happy Thanksgiving

117/112 SPY Trade Idea

I’ve been looking for some good trade ideas in SPY options, keeping in mind:

  1. The market is NOT oversold – RSI is holding up but heading south.
  2. The market is NOT panicking – VIX is not lurching skywards (though it’s relatively high at 31).
  3. The $SPY chart shows major range resistance between 110 and 128 – we’re sitting at 118 before the open, and futures are showing weakness. $ES_F

This is a tough spot to trade because we’re sitting in the middle of a perceived range and headline risk is very high. This morning might bring some good news (or not) to the table with claims and durable orders being released before the open.

My interpretation is that any good news might bring some short covering and a small bounce, and that the expectations for bad news are being baked in, slowly day after day so even bad numbers won’t send the market into panic. The market is trending downward in an orderly fashion with the current headline focus on Europe.

This is the 6 month $SPY chart:

S&P 500 ETF

Notice also that during August and September we held a 112 – 120 secondary range for almost 8 weeks. This might be a sign that the $SPY will again hold this range as support if the $SPY continues it’s current trend.

I’m looking at the following December ratio spread  for a small credit.

Buy 1x 117 puts and sell 2x 112 puts