I must admit I am in limbo at the moment. My heart tells me that long is the way to go, my head tells me not to be stupid. I tried to pick the bottom between Japan's game and Spain's game only to get stopped out on all three instruments, and waking up an hour ago, I note that if I had no stops in place, I would be up on the XJO, flat on the SPX and down on the AUD/USD, which pretty much means I was right, just the stops were too tight.
Still my head tells me, (and I am more confused after reading bull/bear arguments in my inbox this morning) to stay clear, especially pre-jobs data.
One of the more poignant and stirring emails I received this morning is below, and encapsulates the mood of the market and my own personal views. However, I do bear in mind that a 30 point tonking on the SPX in 24 hours is something quite severe, and leaves most traders in no mans land, unless you have a high conviction, which in this market usually means you're wrong.
My gut instinct, is to go long, but my better senses tell me that its idiocy. Perhaps Julia may shed some light come 2:30 (did someone say she was in Brisvegas and about to say something re: RSPT?)
Hong Kong's damage is minimal, after suffering the most of the falls yesterday, which is actually encouraging for the bulls, perhaps the scenarios I painted last night will play out, and this 3% dump is merely an aberration to a greater picture. In which case the market has to at least attempt to recover the 1065 level over the next 24 hours before resuming a final thrust south to break 1040 once and for all.
Cries of capitulation, and exhaustion selling are abound this morning, as the SPX failed to stage an afternoon rally, getting absolutely thrashed 10 mins to the close (which took my longs out) and subsequently bouncing back above 1040 to keep everyone still guessing.
XJO has done pretty much what I expected it to do, which again highlights the dangers of trading it after hours with stops. Best to buy it post US close in anticipation of a move. (note to self - for future trading)
Below are excerpts of the email.
1. The TRIN (Trader Index) where a score of 1 means the market is in balance, anything or below means an imbalance is shifting through the system. This stat has reached a score of 4 or more only on four occasions, the first was during the Bear Stearns crash, the second was during the Lehmann Smash, the third was when the S&P shifted towards 666, the last just happened to be last night. Sign of things to come, who knows.
2. That damned Fat Finger Trader was at it again pile driving Citibank down 20% within seconds. At that point the NYSE market circuit breakers kicked in a halted trading on the stock. It seems those Fat Fingers come out to play more often than we thought. Coincidently, did anyone else notice the Aussie market shot up 600 points within a minute the other day and settled back down to its normal level there after? A quick sidenote, now we all know the Fat Finger Trader is a computer generated algorithmic trader which is there for High Frequency Trading (HFT), some argue that without these computer HFT trades, liquidity would be hampered, I say HFT is a blight on real price discovery and is only there to out bid, out sell real human investors by pinching pennys through trading micro seconds ahead.
3. From Bloomberg: "IMF is working to develop a precautionary credit line, MD Dominique Strauss-Kahn said." Last time they did the same with the New Arrangements to Borrow, on April 12, a $1 trillion bailout followed. Get ready folks. Europe bailout two is coming.
4. This from President Obama after a discussion with Fed Chair Ben Bernanke I think in our discussions, we share the view that the economy is strengthening, that we are into recovery, that its actually led by some interesting sectors like manufacturing that we havent seen in quite some time the tech sectors are strong. Indeed Benny Boy must either be the worlds best poker player or the histories worst Central Banker
5. US Consumer Confidence measure fell off a cliff as the index registered the feeble figure of 52.9 with a previous recording of 62.7 against a backdrop of a consensus figure of 62.5. This folks represents a 15% drop which quite frankly is huge.
6. 1 in 5 US Citizens with a mortgage have decided to stop paying even though they have the capacity to do so. It must be so invigorating to be so liberated.
7. Europe now faces a massive massive massive liquidity crunch again this Thursday (or Friday our time) as the European Long Term Recovery Operation (LTRO), which is a $442 Billion Euro Bailout fund, needs to be repaid or either rolled-over. This will be interesting. Interesting to note Spain, which has stated its banking system is uber strong (we know differently of course), has been most vocal about why the LTRO must end so soon, could this mean Spain has some sort of cash problem? Answer is most definitely.
8. The judge who overturned the overturning of the Obama Off Shore Drilling Moratorium, has been revealed as having sold all his exposure to Exxon just 2 hours before handing down his ruling, insider trading at its most heinous.
Anyhow, short of ideas at the moment, too low to short, and too dangerous to go long. If pushed for a trade, I would still lean to the long side for the next 24 hours, but my head cannot reconcile that notion with my gut.
(20min delay)