What a great morning we're having!
We were having a discussion in our Live Member Chat Room this morning about why we were staying short-term bearish despite the low-volume rally of the last few days when the market began to spike higher, so I immediately put out a note to our Members saying:
Wow, Futures flying straight up now, about 0.3% the other way now – nice morning swing. /NQ testing 4,400 for a fun short with tight stops and /ES 2,099.50 and /YM 18,030 (no short above 18,000) and /TF 1,230. As long as /TF and either /ES or /NQ are below their lines – I'm for shorting any of those 3.
The Russell hit 1,222 (up $700 per contract) and the S&P hit 2,091 (up $425 per contract) and the Dow paid $250 at 17,950 – so the Egg McMuffins are paid for and we can start our trading day.
Of course that's nothing compared to the Trade Idea we gave you yesterday morning (and these newsletters come to you pre-market, every day by SUBSCRIBING HERE) to short Oil Futures (/CLJ5) at $53.50, which are up $3,000 PER CONTRACT this morning at $50.50. That's not bad for a day's work and it keeps our hourly profit rate well over $500 for the day (we had a good start yesterday morning too).
What gave us a quick round-trip this morning was, of coruse, yet another Greece fire. This time it was Germany saying "Nein!" to giving Greece a 6-month loan extension saying Greece's proposal was "not substantial" – meaning it didn't guarantee the Banksters who really run the Government would get paid. "In its rejection, Germany argued that the Greek request doesn't meet the bailout requirements and said the proposal only aims at getting bridging financing without fulfilling its commitments."
I know this may come as a shock to the EU Banksters but, when you lend money to someone at 10-20% interest rates, which they have to pay because you have rated them a terrible credit risk – THE RISK IS THAT THEY CAN'T PAY YOU BACK! What's going on here is the EU is more like a loan shark – who will take your blood if they can't get your money.
Meanwhile, in our own bailed out economy, $11 TRILLION Dollars worth of bailouts and stimulus has gotten the S&P all the way to 2,100 this week but we're kind of stalling out here after almost a non-stop run from 2,000. That's a 5% move up and those who follow our nearly-flawless 5% Rule™ know that means we've got a 20-point pullback coming (weak retrace back to 2,080) or, more likely, a strong retrace back to 2,060. If that fails to hold – it's a long way back to 2,000!
Note the pathetically low volume of the last two weeks, averaging about 1/2 of what we were doing on the last sell-off. That is NOT an indicator of a strong base and certainly not the kind of support you need to break over a key technical spot like 2,100 – no matter how many times you "fix" Greece. At the same time, the DAX is testing 11,000 and the Nikkei is testing new highs at 18,400 so we'll watch them and we've got some fantastic ways to play them, which we'll discuss later in Member Chat.
One of the big things keeping us bearish is the US Economic Surprise Index, which tracks whether or not the FACTS of the data releases are beating or failing expectations. As you can see from this chart, we are failing by almost a 20% margin recently – last time data was this far off the market was Q3 of 2013, when the S&P took a 5% tumble.
Of course, that was 5% with the Fed pouring in more and more cash through QE3, which is still going on in the form of QInfinity and the Fed's statement yesterday gave no definitive signs that were slowing down anytime soon but the Fed also didn't definitively say we wouldn't – so the fear is that investors may actually look at the data, which kind of sucks, and begin to pull money out of the market at a rate that is faster then the Fed is putting money in (still $80Bn a month).
There's nothing wrong with a 5% pullback in the S&P and a re-test of the 2,000 line from above. If it holds, we'll have a nice base to go long off and we'll have more confidence for having tested it. If you short 5 S&P Futures contrfacts at 2,092 (where it is now) and put a stop at 2,102, you risk $2,500 in losses but, if the S&P does fall to 2,000, you make $22,500. This is why we don't worry about a little pullback…
