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Indecisive market and today’s disaster

Will you believe me if I claim that today’s market trend was a disaster? Well, if not take a look at the daily chart. In the morning we gapped up and everything looked bright, but we ended down. Extensively down, compared to the morning’s start.

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Two days ago I tried to explain, why I was shorting the market (SPY) and pointed out three potential scenarios which would happen. I expected the market actually break down through the 50 day SMA. Well it didn’t happen. Let’s see what was moving the market.

I was thinking that European debt would be the weighting factor pushing the market down. At least as long as earnings report season progresses (Thursday, Friday when JP Morgan or Citigroup reports earning). I believed that the earnings can be the only catalyst which can turn the market up.

Well, I was wrong. Comments from FED were enough to push the market higher last two days and prevent it from breaking thru the first resistance (50 day SMA). So what happened yesterday? Ben Bernanke announced a stance of FED adopting a wait-and-see policy and the market jumped up. See the chart.

 

SPY
Click to enlarge

 

When I saw the chart for the first moment I panicked (obviously, I was shorting SPY) and I tried to find the reason, why the market jumped up. When I found, that it was FED’s comment, similar to those we have been hearing for last three years, I calmed down. As you can see, later on the market slumped down and ended lower.

Today’s action wasn’t any better. Huge gap up, strong move up and at around noon the market deteriorated. closed the gap and ended in intraday loss. That’s why I consider today’s trend a failure.

 

SPY
Click to enlarge

 

However, such action of increased volatility and responsiveness to worthless news (such as Chines growth, c’mon, guys, do you really believe in China? Just look at so many fraudulent Chinese companies these days being suspended from trading recently – YUII, RINO etc.), indecisiveness in direction and inability to move lower as I expected, I decided to take my profits of the table and wait what would happen next. I closed my short positions in SPY with nice 63% profit and I will wait for the next move. I still am bearish on this market and think, that it will go down. If that happens and the market shows this weakness to me I will re-enter my short positions. Another reason I decided to close positions was that I was holding naked puts (I typically trade spreads) and these are more dangerous.

There are a few reasons why I think the market will go down. European debt and US economical issues are one of the most important factors which will turn this market down. The only event which can do otherwise is shining earnings. I am still bullish on VIX, because volatility will be increasing these days.

You can see all my holdings here.





One response to “Indecisive market and today’s disaster”

  1. its always good to be prepared

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