I'm not entirely certain (what in the markets are?), but I think the S&P is ready to do a classic "head-fake".
Right now the S&P has rallied up to the 900 point. This is roughly 15-17% up from its lows. This is "good", but not "good enough". Which means we need a "head-fake", to lure short sellers back into the marketplace, and then to get them out with a subsequent surge, presumably up to the S&P 950 area. This is where we'll encounter heavy resistance, and then probably see the rest of the market tank after Bush invades Iraq.
I'll reserve comments about Iraq later, but let me just say that unlike the last time (January 1991), after the invasion of Iraq, this will be a great excuse to go short on the markets (yet again), and go short on the oil futures. The economy will be doing better at the end of 2003 (low energy prices, low inflation, high deficits, and the rest of the world being an economic basket case will mean the US economy will finally get out of trouble), and that's when we'll see the 'ultimate bottom', but it's not even close right now.
So what does all this nonsense of mine predict?
STAY ON THE SIDELINES!
OK, let's do one trade (this one has complicated parameters):
Buy 25 MDY @ 73.50;
Sell (or short) 25 MDY @ 79.50;
If:
1. Both legs are executed - great! Successful trade.
2. One leg is executed, set a stop loss of $3.50/share in either direction, until the other leg is executed, or the stop is triggered, which in that case cancel all trades;
3. No legs are executed by October 31st, cancel all trades. And happy Halloween.
(for those of you paying attention at home, this trade risks $87.50 in exchange for a potential $150 reward if things go right.. not exactly what you'd call a leveraged trade) |
