Monday, June 11, 2012

Monday Madness.

Sometimes you can win just by following the simple and obvious path. Looking back at today’s price action, my call for closing the long position on last Friday afternoon and get the hell out was absolutely correct and spot on. The euphoria of Spain bailout did not last long. I took a short trade on Euro yesterday when it spiked open (I wrote this exact thing on last Friday ) and closed it in the afternoon today. May be I closed it little early but with sentiments at extreme, I do not want to take any chances. Take the money that is on the table and run. No need to be greedy. Other than that, I have no skin in the market madness.

While it was the widest range day in SPX futures, I do not think going forward the selling will be too deep or heavy. But the best way to find that out is to wait it out and see where it goes. The reason I think the selling will not be very deep is: there are lots of bad shorts out there. What I mean is that when SPX broke 1284 last time, many folks who trade by technical analysis, shorted the market because the 200 DMA was broken. Now these folks are trapped and they will cover their short position around 1290. This means there will be lots of buying around that area. I also think that market will reverse in the area of SPY $129.50. That was the gap up area and I expect the reversal to take place by Wednesday or Thursday.

Sentiments are as bearish as I have seen in many years. It seems everyone is convinced that Europe is going to explode. The last Cot report is stunning in the sense that while the commercials are super long in Euro, the non-commercials (Large Speculators) and retails are super short.

I have never seen such extreme positions in my life. If history is any guide, the commercials have always been right in calling the turns.

And do not forget the stimulus God-Fathers, who are getting ready to unleash their powers and this time, nothing but the shock and awe will work.  I am not sure if we will see it this 20th June, but I am very sure of its coming by 1stof August. Coordinated actions by all the central bankers of the world to kick start the world economy! More like kick the can down event but that will help us to retire rich, hopefully.

Trading wise, we are happy to be in cash and wait for good opportunities.

Hope you are enjoying my banter filled market calls without too much TA or EW or Analog or any other kind of voodoo.  If you are, please pass it along to your friends and circle and join me in Twitter (@BBFinanceblog). Thanks for reading .