Beeble -- My yesterday post was the basis of my market trading, fwiw I will try to highlight the action today..
I wrote..<<I would think that Fed would like to send feelers of concern without acting on
the interest rate front. I would suggest that benign wage inflation and this huge gap
between output and capacity on domestic front alongwith weak European performance
may restrain Fed, but a shift in stance is a 1500 point potential hit in my opinion>>
I think today is a day where I would like to let my mind think of something different, what happens if Fed tightens or what are the grounds of this case...will the Fed act or will not do anything.
I do see a possibility that as a strong feeler to the market AG could decide to go for material move of 1/4% so as to nudge the bonds towards 6.25% level, he may see this as the best opportune time to prick the asset bubble. If you look at HSI, Korea charts most of these charts are sitting at highs and a little correction would not be so bad, I have this strange feeling that if I was AG I would despite of Europe weakness and Asea nascent recovery would not have found a better opportunity to raise rates even knowing it may be for 'one time', this has some history before, it will send a significant signal to the market that we are changing stance, however the approach of the market after few very 'bad days' or a day only or a session may be --that a pro-active Fed may be liked. As numbers flow in showing no inflation, AG would achieve two goals one would be to have the asset bubble pricked without a major problem. (Any asset price deflation would not be too long lasting for two reasons one strong economy would continue to give good earnings and more over with earnings having beaten expectations this quarter these two factors for the first time provide AG with some comfort to see some floor to the fall in the global markets) Secondly I would think that markets may like the action as long term rates on Mortgages have already moved up to 7.5%. The markets have traditionally rallied even after initial fall on a pro-active Fed stance, they like when Fed errs on the side of caution.
Market new highs are associated with new basing periods,we have this huge bull run over a period of five years with significant corrections on the way up. Thus in my opinion a run from 990 to 1378 is a run which is little suspect on correction front, remember that move to 1310 area, that is kind of move which gives now lease of life to the market, we have not really got some terribly good correction, for the health of this market we need one, and in wake of corporate sector earnings and banking turnaround with Transportation and health the only way to get it is through new fear of core inflation with an added element of Fed tightening, a full quarter basing between 1230 and 1364 may set the market very well for a summer rally, AG in terms of timing would like the summer rally to take off from 1180 or 1230 and not from 1378..
I also think of his concerns on ASEA in his last speech, it was to save global financial system from meltdown now that bonds have materially moved on the other side and will care of excess demand, I see a possible case of action on part of Fed. Not many a people venture into this gray area of Fed thinking processes, however I think that this is good for an analytical trader who happens to comment on daily movements.. I would rather have an independent view with a strong bias than to have 'sheepish herd mentality', every time I have made a good trade I did it on back of what was least expected like my recent call on OSX top at 80 level, we shorted it after some thinking but were rewarded accordingly. AG can take back .25 of the .75 he gave the markets on back of global meltdown, he would initially send a strong signal but in wake of strong earnings and looking at the various sectors I would think that this is a possible scenario, I have catered for this outside chance by buying some 1230's towards close of the session, just a gamble.. In my scenario building process I do go sometime wildly off the 'tangent' and right now here I have this opinion my trade would be contrary to conventional pundits.
<<I would suggest that benign wage inflation and this huge gap
between output and capacity on domestic front alongwith weak European performance
may restrain Fed, but a shift in stance is a 1500 point potential hit in my opinion, I
have taken a very defensive posture and has been cautious for last few weeks and will
continue to do that until things completely change.>>
My yesterday post contained this warning, I would like to think that a trader should be prepared for down and upside move equally, for me the potential of a surprise has increased considerably, as I contemplate on various factors and my analysis of ''if I was in his shoes''. As a global economist with a birds eye view of what's happening around me this one factor of 'how much a damage a move can make' is important question for AG. The kind of thinker he is he can have good view of the economy, he knows that it is going rather too well and he also knows that threat to global financial systems are now waning, for him to move now in back of corporate developments where even dead sectors are making a move provides him with ideal opportunity to make the move and prick the bubble. This is something I would not neglect or overlook.
Our job is to see a possibility of a move a flash earlier than others that is what market is all about, 1328 my level highlighted yesterday was tested and we saw a rebound I was short and covered it, although we did move down to 1325 but the level I highlighted 1322 was never taken out. I got a little early warning on break in very early part where I shorted more that was BKX level of 888 I had highlighted ,,, you must have seen that once BKX 888 was out we were at 772 in no time, and most important this 888 broke much earlier the SPM was around 1337...
<<i would sell on highs like 1360 area and buy around 1328 to short
again below 1322 for a test of 1292 in near future. For this test 888 on BKX and 2500
on Comp will be decisively taken out, I can see that these worries can take market to
as low as 1980 on NDX, so for us as day trader we have to have this cautious stance
and nimble approach to trade the volatility we will see as I have said before a pattern like
890-990 band and I would like to trade this band from lows to highs... >
I have a case here for today and I would like to work on it, for me market will dip and waver until announcement is made, if they leave it unchanged I will not be surprised to see some selling even after initial buying, I would still think 1355 is the top of the move....a break of 2555 will lead us higher to upper band of 1255-60 area but we will see some selling at that resistance.. On down side 1318 and 1310 represent trading rebounds whereas 1364 break represents change of mentality. SOX 402 break is a good move and just symbolizes the sentiment we highlighted Tech's will out perform in a strong economy..
I do expect a major move to 1292 if any stance is changed and outside money puts far away provide the best protection.
Bottom line I see all this as a opportunity and I see no fundamental change, for me the economy is right on track but me a daily planner have to do the most difficult job to define my moves and redefine them to write my trading and try to leave as much info as possible for any one trying to make some sense out of my strategies.. that I try very hard... gives me ample satisfaction.. Last but not least remember what I have written about Tech have potential to turnaround whereas cyclical's, driller's and Oils, will be hardest hit ,, if sentiment changes, DRUGS may be the best defensive sector with some techs and fliers like AOL .
Only if 907 is taken out on BKX I would suggest some selective buying in MER C JPM otherwise I will wait for a good chance to enter. All these trades are on a nimble foot and any of my major sector break like 2100 on NDX and 2500 on Comp or 1318 should give ample warning to defensive postures..
I weigh the two arguments on Fed options, I have a 50-50 balance, a strong case of doing nothing or and equal argument to do something. Foe me market is opportunity I will be trading to get the beat, as I said yesterday << DOT has taken out 625 and will
probably find this test of 600.8 once again if worries multiply DOT may retest 540 area,
I would trade DOT long above 632 and short below 597.... >>
My levels on short side were never tested the long came into action above 531, I was short the whole morning as soon as 888 on BKX was taken out, covered on the way up getting cue from BKX, I decided that once BKX bounces from 872, (between 870 and 850 is nothing be careful and short the market if 888 is taken out again... ) we should cover our intra-day shorts at 878, that we did.. |
