Monday, May 14, 2012

Cash And Cushy!

Once again we are in “Cash and Cushy”. We closed our short position around 10 AM eastern. After that the markets went up, then down and now futures going up again. The reason for closing the short positions is a simple one.  Technically speaking, everything is oversold in the short term.  There are confluences of supports and resistance, Demark exhaustion set up is tomorrow, short term cycle has bottomed, McClellan Oscillator is oversold and the last year’s tape is being played, everything points to a bounce.

You may like the following chart from Ciovacco Capital:

My earlier call was for SPX 1340 and I got out there. I will wait for few days to access the market internals and momentum. If SPX can close decisively below 1330 for two days in a row, I will add new short position. If SPX can crawl above 1360, I will go long, even if for a short while.  In the interim zone, I will just watch.  More so, folks are now bearish and are piling on to lots of puts.

In the 1st place we waited for quite a while before going short and only when I felt that the risk of whipsaw is less, I got into short position on May 1st  around 1410. And we are out on May 14 with a 14% return. No heartburn now, whichever way the market moves in between those 30 SPX points!

Let us see which way Greece drama plays out. I think Euro bounce is due. As of now it is still threatening to breach 1.28 but except Gold, rest of the risk assets are not following it. Part of the reason of renewed drop of Euro post lunch may be Moody’s downgrade of 26 Italian Banks and the knee-jerk reaction to it. By itself S&P and Moody’s are a joke and I fail to understand why anyone would react to whatever they do. But the biggest joke is that the Banks in Europe have any rating at all. So downgrade does not make a squat of a difference. 

Jim Flaherty, the finance minister of Canada made some blunt comment about Europe today:
 "This is a time of crisis in the euro zone. The whole future of the euro zone is up for grabs, and this is very important for many of the euro zone member countries, given the history of Europe in the last 100 years or so," Flaherty told CTV television.
"So they have to show courage. They have to do the right thing, use some of their taxpayers' money to bail out some of the weaker members of the euro zone - or start moving away from the euro zone and just say this was an experiment that has not worked."
(Reporting by Randall Palmer; Editing by Peter Galloway)
 That is pretty blunt talking and we have not heard such talks from politicians before. May be it shows that patience with Europe is running short and money from G20 will not be coming in easily?

That’s all for today. Let us not trade or invest with fear and greed.  As always, trade safe and be nimble. Join me in Twitter (@ BBFinaceblog) to stay up to date with the market moves. Thank you for reading