Thursday, September 3, 2009

Nothing Changed; September 3, 2009

The market has done nothing since the selloff Monday until the last few minutes of trading today. Today's sharp rally at the end of the day tells me the "cheaters" and smart money know the big jobs report tomorrow will be good. On a short term basis it appears the market is falling impulsively, but it's not complete. A correction to around the S&P 1015-1020 is expected before the next round of selling. As long as last Friday's highs hold, I will conclude that the market is in the big wave 3 crash right now.

On a very speculative short term note: I can easily see tomorrow being a fairly strong rally day after a good jobs number on light volume right before the long holiday week and the apprehension of most people not wanting to be short going into a long weekend. So I expect a strong rally day tomorrow. However, as long as the market stays below Friday's highs, we should see very heavy selling resume early next week.

My positioning remains the same.


Gregorios said...

Hi todd, been reading your blog for sometimes now & I appreciate very much your imputs. Thanks very much for what you are doing. A question: Where, do you think, eur/$ should reverse (target Price)? Do you think that the correlation, stock market up & US$ down will come to an end once the crash will take place & reverse? Thanks

Anonymous said...

Which options in particular would you recommend for P3? I am not experienced in options and would like some advise. ie I assume you bought at put on the spy. What would you recommend exactly as a date / option order ? Thank you!

Todd S said...

Hi Gregorios,

I think the EUR/USD might have already reversed with a top in at around 1.4450. However, gold and the stock market appear to be moving higher in the short term, and the EUR/USD should move with it so that top may be questionable. If 1.4450 is broken, I would expect a test and slight break of the wave A high of 1.4735. I will be looking to short again heavy on any weakness around that level.

The US Dollar will soar on one of the biggest rallies in decades when the stock market crashes. It should really be the only main asset that goes up in value during the crash. Of course, this means the EUR/USD will crash with the stock market. My first target for the EUR/USD is 1.27, but it has much further potential to fall.

Todd S said...
This comment has been removed by the author.
Todd S said...

purchased puts on the following:

SPY December 2010 at $80
QQQQ January 2011 at $30
XLF January 2011 at $9
SLV January 2011 at $9
IWM January 2011 at $35

Under normal circumstances, these would be terrible options to buy because you're paying a high premium for the long time frame you're getting. However, these are not normal circumstances and the market should crash within a few months. By having long dated options it allows the market time to top and crash, and it also allows me to take advantage of the cheap premium due to low volatility at the current time. When the market crashes, volatility will soar, and that too will increase the value of my options.