Will the EU fix everything or make a bigger mess?
Going by their track record – "fixing" things does not seem likely. The markets put on quite a show yesterday but the NYSE and and the S&P (we said to watch them, remember) could not close the deal at resistance and now it’s all about jobs and whatever the EU is going to do. Unfortunately, I will not be around today so I have no idea what’s going to happen but let’s review how we played this (aside from the obvious "cashy and cautious" position).
I mentioned in yesterday’s post that we weren’t liking the rally and had flipped bearish into the close. We got our $99 short entry on the oil futures (/CL) and rode those down to $97 and stopped out at $97.25 (up $1,750 per contract) as we got exactly the kind of inventory report we expected. Maybe the oil markets aren’t fixed but it sure is nice that I can call a trade at 8:30 to do something at 10:30 that works out perfectly, isn’t it?
As we expected, the overwhelmingly bad news did lead to some profit-taking yesterday but, as you can see from the Big Chart – not all that much damage has been done but, if we can’t take back those "Must Hold" lines on the RUT and the NYSE today – it’s not going to be looking good into the weekend.
In yesterday’s morning Alert to Members, we added a more aggressive play on the S&P with the SDS Aug $20/22 bull call spread at .55 (now .57), selling either WFR Oct $7 puts for .45 (now .41) to make a .10 spread or the JPM Sept $37 puts for .50 (now .53) for a .05 spread. As long as you REALLY want to own WFR or JPM if they drop 10% – this is a very cheap way to speculate on a drop in the S&P. Even better, SDS is already at $20.32 so any move down at all puts you well on the way to a 1,000% or 2,000% return on your net cash.