Well, what a huge waste of time this week was!
Remind me next holiday to just take the whole surrounding two weeks off. We had similar nonsense around Good Friday and do you remember that HUGE drop we had on Dec 31st that was completely erased on Jan 4th? It was very similar to the big sell-off we had on Jan 15th that was reversed on the Tuesday after Martin Luther King day (although that was the last good day we had for 2 weeks as the Dow droppped 750 points). Now I don’t want to connect that sell-off with Scott Brown’s win in Massachussets and we didn’t go short just because the Dems lost their ability to make changes – we had gone short a week earlier as I called the markets “shell-shocked” – too battered by bad news to take appropriate action.
My new mantra is “I can’t change the system – I can only tell you what they are going to do and how to make money on it.” This week that was really put to the test but no more so than yesterday, when we got all the highs and the lows and all the drama in a single 6.5-hour session. As you can see from David Fry’s Chart, we took a huge dip on the Spain downgrade at about 12:40, followed by a stick save at 2 and then a massive dump back near the lows into the close. As I had noted in the morning post, we were already short but I pointed out to Members in Chat at 12:26: “CNBC trotting out the Steve Wynn story again? That was two weeks ago… Looks like we’re heading for a panic frenzy on CNBC again!” This is why we watch CNBC, even though it’s like waterboarding ourselves every day, we need to know what they are up to!
I put up a nice TZA hedge for Members which pays 500% on a 20% drop in the Russell as we had noted copper’s inability to hold our $3.15 target – the Spanish downgrade was just icing on the cake but also totally expected by us as I had just that morning put up a chart of the cascading cycle of failures and mentioned Spain was next. As we had been waiting for this shoe to drop for weeks, when we finally got word at 12:44, I posted for Members: “FITCH DOWNGRADES SPAIN!!! Down goes Spain, down goes SPAIN!!!” (We have time for fun video…
