Sunday, October 9, 2011

Trading Thoughts for Week of Oct 10

SPX has hit the bottom for 2011. This will be my ongoing thesis for a few months. I have to be honest with my followers: I am a bear, a grizzly bear, but I am a trader with an open mind and humble approach. I can not be right all the time, nor can I be ignorant to the changing facts and data. It is time to be on the other side of a bear - even if just for a few months. (more on SPX at the end of the post)

Here is my outlook for next week:

Q3 earnings season is here. It is going to be a very interesting event for traders - a tricky one. While companies will report good results (for the most part), they will undoubtedly disappoint on the outlook. CEOs are not stupid, they know how to underpromise and overdeliver. Why would you be optimistic in the middle of a bear market? Let's keep a score of how many CEOs will say the following: "Europe is the major reason why our outlook for next quarter is uncertain". We'll sum up the numbers at the end of reporting season.

Eurozone is dealing with the fact that Slovakia is about to stink up the joint.
How are EU heavyweights dealing with this problem? These bullies are telling the Slovakia to speed up the process and get the EFSF approved. Poor Slovakian politicians are sweating not to be the ones to kill the EU. How sad! Here are some fiscally responsible folks from a small, relatively unknown country, addressing an inevitable bankruptcy by a "cheater" member nation (Greece), which they will have to support and bailout, only to be faced with unlimited bailouts still yet to come: Italy, Spain, and eventually all banks which hold the bad sovereign Eurozone debt. If what I just said is not a reason to break up EU, then I do not know what is.
In the late breaking news, Merkozy is pledging the support for their banks (I guess Dexia caused some sleepless nights) without giving any details, again. Who needs details? They have been navigating this slowly-sinking ship without any coordinates since EU inception. I remember their presser a few months ago where they said "cheater" nations better watch out. Does anyone in their right state of mind believe that EU heavyweights did not know about the cheating going on when the fake Union was formed? Oh please... I am so over this theater, that I have actually went long EUR/USD and will be laughing about this for a few more days. Rest assured, my friends, it will not be long before this trader reverses back into short. Let the charts speak first though. We are not at that reversal point just yet. Looking for 1.3630 to unload remaining portions. Looking for resistance between 1.3730 and 1.3830 for initiating a scale-in short.

SPX is in a delirious state here. Traders who missed the bottom are kicking themselves. Shorts are scrambling to cover in total disbelief. Skeptical longs are still on the sidelines waiting for a big pullback or another huge leg down to load up. This is where bear markets are the trickiest. Just as SPX went down to 20% off the top, everyone felt like lower prices are still to come, CNBC was putting an all-night "New Bear Market" special together, and then..... I wish I had a first page ad in Wall Street Journal which said: "I told you so".
I will not mention any names, but I am continuing to watch and read some pretty negative commentaries from influential hedge fund managers, renowned market watchers, and well-respected market technicians. They are all saying that SPX is going down to a new low in the next few weeks. I deeply respect their opinions and their life-time achievements of being wrong on the market over and over again, but categorically disagree with them. History and charts repeat, when SPX hits 20% off the top it bounces for a few months. Why does it have to be different this time? Let the charts speak! I say buy all pullbacks and wait for a bounce of 16 - 20% to short again in January.

Update: Oct 10 @ 1:35 pm edt
EUR/USD long objectives met. Flat and waiting for reversal. On continuation of this rally 1.3730 - 1.3830 zone is a desired short area for me. DXY has to display strength and pullback buying interest at that time. Will monitor and update...


  1. so you still think the spx will drop in the next days to the 1020-25 level?

  2. sorry, thats right 1120-1125

  3. Yes, but I will be looking to make adjustments on the actual level of pullback due to SPX continuing to move higher. It is at 1189 as I type. So if it stops somewhere here, then perhaps I will look for 1135 - 30 as a possible level to hunt for another long.

  4. alles klar!!