STOCK MARKET NEW YEARS EVE FIREWORKS?
Late Friday everyone ran for cover as they knew the stuff going on in Washington was dangerous in the short term. You can see my Emini S&P Trading system and the trade it generated Friday which I took, a short on the opening. It works similar to the Bond System in that it exits the first profitable opening. I have to admit that due to the crap in DC I exited this trade at the close and took the big gain so I did not completely follow my own rules. It was a good trade for just one day in the trade with a gain of more than 21 points.
I will be debuting this at Robbins trading next year in an auto trade program. We need to let it run for a couple of months live there first to get actual trades in their system. It has worked well this year. I made a couple of tweaks to it like I normally do at years end with my systems. I do this when I see a few things happen that indicate some fundamental changes have happened. They are generally very minor or none at all.
This system has not been as good as the Bond system over the years in all honesty, but it has been profitable. Since everyone seems to love to trade this market I have decided to let this loose publicly and we will see where it goes. It is only going to be available through them and details to that will be forthcoming. We have to let it trade for a couple of months there first. I have opened up a $15,000 account there that will just trade this exclusively so we will see what happens. There is no reason for any BS on it at this point, the results will be what they will be. I certainly like the trade it gave me to do Friday, but obviously they are not all as good as that one.
I have been thinking some about this situation in Washington and here is my take on it for better or worse.
1) It has been BO's plan all along for no deal to take place, especially anything that cuts spending in any way.
2) I find fault in both parties and the way this has been handled, both leaders are terrible leaders
3) This paves the way for BO to let the unemployment rate go up to where it really is and gives him someone to blame it on. I have wondered for months how in the world they would ever let the rate go back up to the real number since they have doctored it clearly the last two reports for political gain. They can't keep it fake for 4 years, so they need a crisis to move it back to the real number. Now he will have one.
4) Nothing much will change in the big picture regardless of how this is "resolved." Democrats want to spend without any checks of any kind and Repubs don't want taxes to go up. The big picture problem will not even be addressed except on some microscopic level by any of this garbage being bandied about.
5) We need to check all of this at the door, he is a terrible president of that there is absolutely no doubt, HOWEVER, he is good for business!
Let me explain what I mean by the last point for those conservatives who just erupted. He is not good for business in general since his policies are very anti-growth. What I mean is that he is good for business for us as traders. The huge dislocations he is creating and will continue to create, will provide us with very volatile markets to profit from. We continue to roll on with the philosophy of never wanting bubbles to ever pop. In spite of this they ultimately do and when they go they create huge opportunities for us traders who are willing to play both sides of the market
It is understandable to me why no president would ever want to be the one who presided over what needs to happen to allow the world to get back into economic balance. However, it will get there one way or the other. Manipulation can only go on for so long before it just breaks down and natural market forces take over. This will happen like it always has. The way they want to keep spending recklessly with no checks or balances or any cutting whatsoever, will ultimately lead to both huge spikes upward in things as well as devastating collapses. Let's try and ride the waves.
The reason to use technical analysis and other such tools, is for us to be able to tune out a lot of this crap. The tools I use have been telling me to look to the short side in several markets over the last couple of weeks and I have stated as much here in the blog. It is for that reason that I felt the bias was down in stocks and it had nothing to do with this mess in Washington. Come the first of the year life won't change much from the prior day regardless of the outcome. Even if things don't get resolved BO has cornered the other side into having to consider cutting taxes back on the lower incomes afterwards, so you may see a pay check or two have the payroll taxes back, but before too long the Bush era cuts will be back. They are intent on raising unemployment by penalizing rich people, so that is what is going to happen. I don't think in spite of people who tell us who don't run businesses, that raising taxes will result in a boom in new hiring of employees, that it will come to pass. Rich people are not going to expand their businesses after having their taxes raised this much. Anyone with any common sense knows this. I thought it was really interesting that the courts in France struck down as unconstitutional the tax rate of 75% on rich people, what a blow to socialism that was.
We will survive BO on some level, but I am worried what that level is going to wind up being. Maybe everything will be just fine and his plan of reshaping us to Europe will magically work but we can all see how Europe turned out so I am not too hopeful on that front.
For the time being I think we will most likely see sharp down then sharp bounce backs throughout the course of all of this. As bad as things may wind up looking at certain times, there will still be great buy spots this coming year so be ready.
There was an interesting call that came out recently from Goldman Sachs that the top for Gold is in. I think readers of this blog know I agree with that and said it quite some time ago. This is not of any value for short term trading, but I thought it was interesting to see that type of call from them. They handle huge trading volume and are rumored to also do trades for the PPT, so their opinion on something like this should matter.
We are already pretty short term over sold here in the ES so it would not surprise me to see a quick down and reverse back up.
Good Trading and thanks for reading this year