80,000 of 100,000 of retail day trader accounts where I work this morning shorted the gap up
No one was long into a new year of trading. Everyone missed the continuation even thinking the done deal was priced in Monday. It fooled a lot of folks. Those 80% got a crumb reversal, the rest were hosed into the close and covered near high's. Enough got burned staying short too long. Many are in cash not sure what to do now. My advice-stay away long or short. Naked shorts on vacation still
The only reason the markets been up is the play on futures and the rigging of the markets in asia. If anything happens to that, things are toast. People I think were hedging their portfolios, as was I. As we go into the year, it will become obvious to many that this run will only last through a few double tops and due to the onslaught of inflation, be forced to sell into the rallies. During the days the futures traders at some point will capitualate against the pm's in them and overwhealm the systems. Who knows how long that will last. But now for the first time we can see how congress intervenes and gets into crisis mode. That is something now everyone sees and they won't be able to do it past a few cycles against the options markets. I would predict about six months, and the markets will return to their normailzed volatility in uncertin times.
I agree this looks like a topping event. The next couple of days will probably be wrapped around filling the gigantic gap and playing with the resistance levels at both ends of the gap. Earnings reports increase their flow starting next week and peak the week after. Earnings are likely to disappoint putting the market back into a slide. The high for 2013 may already be in or at least close to it, especially if the 2012 high is breached. The VIX is too low to support the wall of worry needed to move the market back to 2007 highs. The rest of the year looks to be one crisis after another with the deficit ceiling and the spending cuts having to repeatedly be addressed on top of a slowing global economy. Now may be a good time to get out even if it is not a good time to go short.
The argument that there is gobs of money that will go to equities as the safe haven for returns and hedge against the inevitable dollar decline is full of holes and short-sightedness. There is too much competitive currency devaluation for equities to continue to go up without growth on pure monetary expansion. Japan is driving a hard line with devalue of the yen and the Eurozone is intent on following an inflationary tack. This leaves little room for dollar devaluation. The treasury bubble still has at least another year to play out. 2013 looks like the year for safe haven assets including the US$, PMs, and treasuries. Lack of growth, austerity measures to face out-of-control deficits, and oversupply of goods including houses look to be the order of the day for this year. A good revolving play might be something like FSG and FSA for short periods, although the low volume on these can kill you.
It was more than just short covering, the futures were already up +200 on the open. The big boys stepped on the market big-time.
I waited for any dip after the opening run-up to bug-out. The dip was only about -$ .45/sh worth on the SPYs. That only took about 15 minutes. I could see that they would be pushing the DOW to over 300pts today. Good thing I bugged-out early, as the SSOs gained another $ .79/sh on the close (about +38%) increase from the open.
Long and short is a bit precarious right now, but it looks as if we will go higher. The question is, right now, is how deep the fill? I am guessing, max. $144.73.
Shorts are kinda like those Tasmanian Devils you see in Romania, some of us will NOT give up...I have been burned on many a stock short, only to watch that stock get absolutely hosed afterward...my timing short of housing stocks was so close to the top it wasnt even funny, covered for a loss then the bottom fell the eff out ...I am STILL shorting stocks selectively - EFF Bernanke !