Where's the market going next?

Posted by optionsguy on November 30, 2011 (03:24PM)

A question posed to all in the trader network "Is this news the end all to the European debt crisis?".

Washington Post - Aiming to prevent Europe debt crisis from spreading

Regards,
Brian (Og)

Posted by Market Pawn on November 30, 2011 (04:44PM)


It can't hurt, but I wonder how much will it thaw commercial credit in Europe, which it was designed to do.  Probably, like U.S. banks in 2008/2009, some large banks will access the funds and redeploy them in higher yielding "safe" instruments like U.S. and German bonds.  They could even make money in JGBs with such funds.  Will they use them to make short term commercial loans?  Not sure.  Will it even help banks accept counterparty risk to each other?  Remember the Fed action in 08/09 was coupled with a commitment to purchase mortgage securities.  That is absent here, where many of these banks hold sovereign debt of dubious worth.

More telling was Germany's signal today that it intends to use the IMF (rather than the ECB) to sort out the sovereign situation in Italy, Spain and Portugal.  Here's the article:

http://www.cnbc.com/id/45496004

Using the IMF instead of the ECB solves Germany's dilemma of needing to find a way to keep Italy solvent while not underwriting potential loose spending by openly committing to bond purchases.  IMF money always comes with nasty strings attached.  It's telling that Italy is also in negotiations with the IMF.  IMF money should lower Italy's bond yields, which are a bit of a problem at the moment.

Which way is the market headed?  We have to ask Incubus.  He's always very definitive on that subject.
 
But 4% daily moves in any direction aren't really healthy.

Posted by Bayou Steve on November 30, 2011 (06:39PM)

With all the liquidity issues occurring in Europe, I don't see how this effort does anything more than kick the can down the road further. How in the world do they fix the problem if the PIIGS don't severely cut spending by their governments.

There is huge unemployment already present in these countries. The governments cutting spending will throw the entire euro zone into a recession worse than what they are experiencing now. They are essentially in a death spiral with no way out. If there was a way out they would have fixed it by now.  

My only complaint is that the "experts" seem to have no idea this was about to happen or they knew and did not talk about it. At least from my research, I based my investments on a continued sideways moving market. Several of my covered calls went way into negative territory when just two days ago I was in great shape. 

Now they are talking a Santa Claus rally - why because the fund managers who have been sitting in cash need to make their bonuses by year's end and the central banks bought them the time they need to do just that. 

What I would like to know now is what other rabbits are available to pull out of their hat to further prolong this situation and how can we tell when they are about to pull it?

Posted by incubus on November 30, 2011 (07:32PM)

Key entry to the entire article - 

"....But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix"

If only a prerequisite for any global political office were at least a smidgen of economic background, maybe a rudimentary aptitude test to qualify to run for office in the first place.

For now, we have CB's taking up slack for outright fiscal stupidity, mostly catering to special interests instead of doing their jobs both here and in the E.U..

I guess the phrase has been altered from "You can't fight the Fed" to "You can't fight the FedS".

Posted by snowman on November 30, 2011 (09:34PM)

From my Sunday post


"Looks like they announce at 10:00 a.m. Monday, but have not been able to confirm this. What I feel will happen is the Euro strengthens and the SPY jumps to 117.50-119 on the Open. Look for strength to continue as short covering takes place. Then after the announcement the SPY will blow through resistance at 119.50 to 121.50. Then there should be a pull back Tuesday to 119.50 only to continue on to 125.50 by the end of the week."

Having no pullback emptied my account by 40%. Live by the sword, die by the sword I guess. I really need to take a look at what I am trying to accomplish. I switch from day trade to swing trade and keep losing.

I would have to say we are stuck in the 121.50 to 129.40 range again. I know that is not much help, but is reality. Europe has until the second week in January to print money. That threat should prevent a big drop.

The only good news is Gold should soar like an eagle. Along with oil and everything else we depend on......

"With all the liquidity issues occurring in Europe, I don't see how this effort does anything more than kick the can down the road further. How in the world do they fix the problem if the PIIGS don't severely cut spending by their governments."

Bayou Steve Europe's problems our now ours! Thanks to our continuing contributions to loans never to be repaid.

Posted by El Dorado on November 30, 2011 (09:34PM)

Brian, 
Not sure where the market is headed, and I’m not educated about economics. From my perspective if the banks apply the same standard as in home lending I doubt the world will see much relief. Seems a little ridiculous to me to rely on banks to help people or governments, not like they’re the salvation army. 

Posted by incubus on November 30, 2011 (10:15PM)

Stepping aside to look at the big picture, none of this would be happening if Glass-Steagall hadn't been removed.

Posted by spshapiro on December 01, 2011 (08:11AM)

My dear Brian, Yesterday must have been a slow day at the corral, and ‘da Dog’ probably rang you and said sumtin’ like, “Go stir up some noise” and this was the best you could come up with while you had both hands wrapped around a big beef sandwich.  However, this is the end of the European debt crisis, like WWI was the war to end all wars.

Your lips…..meanwhile it was a nice day to cover some of the puts I had been selling.    

Posted by doougle on December 01, 2011 (08:32AM)

I'd be happy to know how much the market will move.  The VIX can mislead.

Posted by The Otter Way on December 01, 2011 (09:08AM)

I think there will be a push above 125 early... It started at 4 am.  But, there is a large gap that has to be filled... It's between 120 and 125.00.  So it should drop by days end.

One might buy the call at the bottom, and sell the put... and one might buy the put and sell the call at the top.. 

The very last thing I did last night was to buy the 130 January put.  I do believe VIX will again be above 30 very shortly.

Good luck to all...  I'm not saying that we don't go higher... It's going to be swings of 3% until the Euro is settled.  There is no group who can control it... Bear or Bull..

It is half full or half empty.

Posted by optionsguy on December 01, 2011 (10:20AM)

Hello All,

Thanks for the great response to this question. It adds a lot of fodder for my blog I posted last night and I think this just confirms that the blog is timely and may make sense.

Here is the blog - titled:

"Maybe Time for Longer Term Straddles & Strangles..."

http://community.tradeking.com/members/optionsguy/blogs/92170-maybe-time-for-longer-term-straddles-strangles

Regards,

Brian (Og)

ps. Kudos to Snowman for the Sunday call and a call out to Mr. Shapiro - I did take notice - a dissenting opinion. I now know what I am having for lunch today - smile.

spshapiro said:

My dear Brian, Yesterday must have been a slow day at the corral, and ‘da Dog’ probably rang you and said sumtin’ like, “Go stir up some noise” and this was the best you could come up with while you had both hands wrapped around a big beef sandwich.  However, this is the end of the European debt crisis, like WWI was the war to end all wars.

Your lips…..meanwhile it was a nice day to cover some of the puts I had been selling.    

 

Posted by spshapiro on December 01, 2011 (11:13AM)

In times of uncertainty, such as now, it appears to me that making things simpler is a better course of action than adding to the complications.  I am not arguing that Occam’s Razor has some ontological basis, but that for feeble minds it is easier to deal with as few variables as can describe reality.

I have freely confessed that I have no idea where the market will end on any given day (week, month, maybe year), although I have noted over the long term it tends to go up.  I  am merely one of the chorus in noting that this moment has been even more directionless than usual, although there has been a pattern of more frequent market turns than many times in the past.

I have said that I feel uncomfortable putting up say 20000 to earn an intraday return of 50, although I realize that if you do that 100 times a year, it would constitute what I would consider a good return on your money.  It may just be a personality quirk but I rather earn 400-600 in a 3-6 week span and do it less times a year. (I’m not looking to pick a fight with my furry female friend.)

Anyway, the point is, if we know the market keeps on going up and then down, and then up…, buy low, sell high, rinse and repeat.  If you are going to wait a while between the buying and the selling, mak’em pay you to wait.

Finally, dem big beef sandwiches do taste good, but they will eventually catch up with you.  And oh yeah, they say laughter is good for the heart, but not when your mouth is full.    

You must Log In to post to this forum.

Not a member? Register Now to …

  • See what other traders are doing
  • Make your own trades public
  • Share your thoughts on a trade
  • Join or start a group
  • Connect with like-minded traders