Saturday, September 17, 2011

Trading Thoughts for Week of Sep 19

Here is my outlook for next week, which will be dominated by FOMC meeting.

On Monday market will celebrate UTX acquisition of GR. While everyone will scream that it's a cash deal, and how corporate cash will be put to work now, I believe UTX actually went to debt market to borrow it. Nonetheless, this hopefully finally pushes SPX up to 1230 sell level (on this in the last paragraph). I am a cheerleader with very small position left, after 1220 Friday sell on portion of my last long was triggered. I will use this opportunity to sell my remaining tiny long.

On Tuesday we hurry up and wait for FOMC meeting to start. Bond market will be getting in the way of stocks. There will be no reason to trade that day. It will be choppy and totally indecisive, as most pre-FOMC days are. I will be hopefully flat SPX by then. We will get ZEW data from Eurozone. I expect a gloom and doom to continue. While EUR/USD may dip on that initially, pre-FOMC screwville will do the trick to confuse many. I am once again a EUR/USD long cheerleader with small runner left, looking for a push higher on flawed idea of QE from Fed weakening the dollar. I will be looking to sell my small long position and reverse into a big short post-FOMC (on this in the next paragraph).
On corporate front, ORCL and ADBE report earnings, which are very important (more on this in the last paragraph).

On Wednesday it is a day of glory, as the scared central bank supermen will be called upon to save the world. I will be looking to initiate my SPX short, just as the market will be dancing twist in blind joy of celebration. Obviously, I am not entirely sure yet on how the post-meeting scenario plays out. I will go light and average in direction of the trade. The idea is we go down after the decision at 2:15 pm edt, but it may not happen immediately. I may use post-FOMC push higher to short SPX, as FOMC has produced a late day rally last time. It may look very counter-trend on short-term charts, be careful and watch your levels of entry and stops. This market is schizophrenic at best. It may also pay off to wait out the twist-dancing frenzy, and initiate the short afterhours.
I will also be looking for EUR/USD short, if it gets into 1.4050 - 1.4140 sell zone, due to temporary dollar weakness across the board at first. My idea is that dollar deals with it very fast and reverses higher against most majors in DXY basket, as big players buy it back in preparation for equity sell-off. Remember folks, it has already been all decided by big money, on Wednesday we get to see what they do and just follow them. Some, if not many, will be totally clueless, as DXY chase higher will start out of nowhere. I remain a DXY bull. I may revisit and reassess EUR/USD levels to adjust for this possible renewed risk-off FX weakness due to equity sell-off prior to 1.4050 - 1.4140 zone being reached. It will be tricky I bet. If you guys have any questions and/or suggestions on how to trade this day, please comment here.

On Thursday it is back to reality. Eurozone industrial orders and PMIs are out. I expect a total weakness and a serious downdraft in euro resulting from poor data. Hopefully my EUR/USD short is on at that time. There will be various meetings going on throughout the week about how to save Europe. I am very sceptical after failed Ecofin meeting results, where they told Timmy-TurboTax-Geithner to take a hike, and pushed all solutions weeks and months out. I smell a rat. Equities in Europe will take over on the downside again, and hopefully I will have my SPX short trade already on at that time. In US initial claims will probably disappoint again, and this time there will be no OpEx to rescue the market higher.

On Friday I expect a total exodus, blood bath, huge sell-off, due to all of market's latest worries coming to forefront again. I also expect possible weakness and lower guidance from corporate reports during the week to add to those worries and additionally weigh on equities. ORCL and ADBE are the most important to watch, as traders decided that NASDAQ will lead us up. SOX has entered 380 - 390 sell zone, which I mentioned before in my posts. I think that market's run higher is done for a while. As I said above, I was a cheerleader of this market into this SPX 1220 - 1230 sell zone, and now I am turning bearish again. My ideas on what this market will do from here on can be read in my SPX Roadmap for the rest of the year, which I posted a few days ago.

Good luck with your trading!

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