What a wild week!
The Dow is up 400 points since Monday and we are just 150 points away from our November 4th high. Once we get over 11,500, we have no reason at all to be bearish from a technical standpoint and fundamentals are out the window so what else should we be looking at? We ended up too bearish on our $10K-$50K Virtual Portfolio as we hit our double-down targets on a couple of index shorts so I am CLEARLY in the bear camp this morning as we’re still playing this as a double-top, rather than a breakout but what if we do break out? As David Fry said this morning:
Any worries from Europe, China tightening, higher Jobless Claims are mere inconveniences when the light is a bright green. Let’s face it; this is what the Fed stated they wanted with their POMO activities—higher prices overall with higher stock prices emphasized. The Fed prints money and buys bonds from the Primary Dealers and (wink wink) they know what they’re supposed to do with it. Bears just better get out of the way.
Looking at David’s Nasdaq chart, we can see that we are back at 2007 highs. I find this truly amazing as it seems to me things aren’t quite as good in America as we THOUGHT they were in 2007, before we found out that Financial earnings were a scam and before our homes lost 1/3 of their value and when our neighbors used to all have jobs but CNBC is telling us over and over and over and over again how great things are so it must be true because they are on TV and TV doesn’t lie to us.
So there’s our ridiculous rally premise and we’re "very excited" to go bullish if we break over the 2007 market highs. XLF has been a real laggard so we like taking advantage of a run in the banks with trade ideas like the FAS April $20/25 bull call spread at $2.70, selling the April $21 puts for $2.55, which is net .15 on the $5 spread that’s already $4.25 in the money. So, if FAS makes a .75 gain between now and April expiration and holds it, this trade makes a 3,233% profit. That’s pretty good right?