Here is a trade I pointed out yesterday, Sugar. You could certainly justify being long this market as of this morning. I have not gone in yet mostly because I noticed we were trading right up into a trend line. You never have everything it seems, but I don't like buying in downtrends into trend lines even though at times they just blow right through them and I miss the moves. What I would ideally like to see here is a down close tomorrow, then a Friday penetration of Thursday's high. That would likely put the entry above the trend line. At times I am too picky and at others I am glad that I am so we will just have to see what winds up playing out here. It is probably the prudent play to have already gone long today, then if what I diagrammed plays out you would either add to your long or if you were stopped out just take a second entry.
One of my early mentors told me that trading is nothing but a series of probes, and that you just have to put yourself in position to "get lucky." As with all mentors, the older you get the more the things they told you ring true. When you are young you think you know it all and dismiss words of wisdom with a lark.
I heard this morning we should rebuild all the roads and schools because we can borrow the money so cheaply and there is a good social return. Huh? Really, has that what this has come down to? We know we are going bankrupt so we focus on a feel good approach while we crash instead of a fix? In the midst of this wonderful world full of many great people, there are sure some ding bats in important places. If you have been reading here long you know I predicted the Greece type of protests were coming here at some point and we are on the verge of that now. I wish I had been wrong. However, this does not mean the stock market cannot rally. It is going to start a rally pretty soon. Maybe it will rally enough where we can give the free loaders what they are angrily demanding, and also lower taxes like the other side is demanding ( not as vociferously ), because things have improved so much. Time will tell.
Normally after a classic late day save like yesterday, I would be pounding on the PPT. Although it is likely to have been them especially due to the timing of it being close to when the Imperial leader was talking, there is one thing that gives me pause to accuse them again. I texted a friend yesterday who emailed me about the Dow getting ready to crash and I told him this was a good spot for a snap back.
The reason I thought that is we had just taken out the low from a couple of months back, and that was an obvious trap spot in my mind. Since we often see reversals in the normal course of business when we are in a trading range environment like this, when we hit the extremes, it could have been a normal market reaction and not manipulation by the the PPT. I feel the most important characteristic of manipulations that make them easy to spot is that they come out of the blue at times when none of the normal market situations are at hand for buy programs. I think many of the normal buy program parameters were in place yesterday, so I am not sure if this was the PPT or not. On the surface it appeared to be, but I am not sure a booth review would uphold that call on the field.
In light of those comments, I think that reversal is going to be short lived and we will drift back down some over the next couple of weeks, where our buy spot will develop.
A couple of other miscellaneous items to point out. For those looking for dividend plays, I suggest Annaly Mortgage ( NLY ). At yesterday's close the yield was 16% due to the price dropping. This has been a good spot to park money over the last few years, and I will probably park some there when I think this low is at hand. Also, the sell the VIX trade is there at Fridays close if we stay down under DOW 10750 on a closing basis. This is a zone type of trade, there is no magic in selling it right at the close. A Dow close at that level will trigger the setup to be in play. How you buy or sell things is always an individual decision.
I am not sure if I provide any Social Return here but I am pretty sure I am providing Financial returns for readers. In summary, I am expecting us to drift a bit lower again here over the next couple of weeks, then it could be off to the races on the up side.