Discussion in 'Trading' started by bond_trad3r, Jul 30, 2011.
Should be one of the most interesting tradings days in world history. How do you play it?
Depends on Sunday's action. There is likely huge range. Everybody and their brother is long at the 200d which makes me think that we spike then reverse and trap all the new longs for a shakeout next week. Then we do a failed fail for the real bottom.
So it's always tricky which means----(best guess)---gap up and run. then when the senate fails to pass a sell off to 1267, VIX will spike, premiums will soar people will panic sell at the bottom then we can rally.
Long, long, short, short, short, Long
The opposite, Selloff. Gap down and retest low for a panic sell-off at the open with reversal like Friday.
The only certainty here is volatility. Therefore selling options is the best way to go. ATM straddles? Its been a while since I traded options....
I got a buy signal at EOD on Friday, so I am currently long. Interestingly, I got a similar buy signal on the prior Friday.
Since my strategy is to enter only when the market has moved sufficiently, i.e. I try to follow, not anticipate, the smart money, my guess is that they would like to see the market rally on a deal, which is why they let it drop when they perceive a decreased likelihood of a deal. Of course, they will then be offloading those shares at higher prices to dumb money.
Just for context, my long signals are profitable about 63% of the time, so the odds are in my favor, but that doesn't mean anything for any given trade, really.
I have to believe there will be a brought to you by Disney solution by Sunday night. High fives all around market rallies. All contrived, all bs, but hard to conceive they let this go the wire...
Sunday , Monday,Tuesday,Wednesday will be nice trading. Keep emotions cool and risk in check as always.
Personally how I will "play it"
News off, Music on, watch price. Just another day, only faster. Volume,range,tick charts help assist your visuals when your time charts are just too chaotic with huge bars.
I look at the charts and I see 1200 before we rally this Fall. It looks like even if they pass something the reality is the economy is not great. Traders are worried now with good reason. Weak stuff is selling hard, insiders are selling, and the 200d if it breaks will cause quite a downdraft. BUT I do think we rally in Fall before we roll over at 1400 or so for another recession in 2012. We are technically in a big sideways market for years and we will not likely see 1500 for new highs before we rollover for another plunge. Hopefully we see continued volatility so that at least nimble traders can make money otherwise the equities market will be forgotten as people realize there is nothing for them. That means for Wallstreet volatility is good. People will like to see a quick crash and burn over a few months because they will then again deploy cash and buy which will keep the money flowing. Up/down, up/down.
The death nell is a low volatility march.
Next week promises none of that. It will be big swings. It may be so volatile that orders need to be resting or triggered as market buy/sell if touched.
Before the futures open on Sunday, if the whole thing is not done, they need at least a bill oked by the house. Otherwise, they may be playing with fire.
If there is a chance that it can go beyond the deadline and they know there would be no default, the President should make a speech on Sunday stating there would be no default.
Moody's & S&P will still downgrade our ratings even if there's no default because the debt deal does not address the spending problem. But I wonder when they'll downgrade us.
currently debt service payments are roughly 1.5% of the GDP. in the past they have been upto 3%.
however, default has already occurred long time ago when the US government started printing more dollars to pay bills.
what matters is the how much 'growth punch' is in the economy to keep debt ceiling in a proportionate levels vis-a-vis inflation. if economy grows by 3% then raising debt ceiling by 3% should do not harm with inflation being low right now. but raising it by 6% is going further into the hole.
so at $14T, and economic growth at 1.6% the maximum debt ceiling can/should be raised is $224B annually. That would barely see them through till the end of September. In August with current ceiling US government will be short by $140B.
Hence the correct comment above: that spending cuts are not in line with the increase in ceiling.
Obama is afraid that too much spending cuts will slow the economy and with higher unemployment rate he will be out of the WH in 2012. This is selfish approach and front line Democrats should confront him on this.
Both Democrats and RATS are not taking the hard pill and are still guarding their self interest over a national economy and future going to tough times for long.
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