DOW: +58 (+o.48%)
S&P: -5 (-0.34%)
NASDAQ: unchanged
RUSSELL: +3 (+0.31%)
THE STORY:
For those of us that trade a primarily directional strategy (puts/calls, longs/shorts), this week was just a big pain in the ass. For those that trade delta neutral strategies (spreads etc.) this week was ideal. The volatility/range this week was enough to make even the most salty of sailors seasick (pardon the alliteration). So what caused all of the volatility? Here it is blow by blow:
Monday was nothing more than a nice continuation of the previous week's selling.
Then Tuesday, ol' Jackass decided to throw another $200 billion (with a b) at the credit market. Here is a snippet from Yahoo! Finance: Wall Street rebounded sharply Tuesday after the Federal Reserve and other central banks said they will pump $200 billion into the financial markets to help ease the strain from the credit crisis. Get this... the government has now thrown over $1 trillion (with a t) at the market since October. I mean holy shit! This and the $500 billion (with a b) war in the Middle East, and we still keep printing money. But I digress. As a result of Jackass and his "benevolence" errrrrr.... stupidity, the market jumped HUGE.On Wednesday, the mindless buying continued until the Commerce Department reported that the United States' trade deficit grew larger in January to $58.2 billion (with a b). This sobered up the bulls and some very healthy selling ensued.
On Thursday, the selling continued in the 1st hour of trading until the S&P came out with a report that the sub-prime and credit write downs were pretty much over for the large banks and brokers. In short "we are in the clear". This report was met with more buying and the market ended up pretty large.
On Friday we learned that the guys at S&P are real fucking jerks as Bear Stearns and Co. (BSC) admitted that they are in "dire financial straits". Thanks for the Thursday report S&P! The result was a complete reversal of Thursday's buying and the market ended up virtually unchanged for the week.
This is a 5 day chart of the S&P 500 with labels of the play by play:
So you can see a couple things here. 1) We had some unbelievable moves this last week. 2) We ended the week pretty much exactly where we started.
THE WEEK AHEAD: more of the same.
To begin with, it is a short week with the market closed on Good Friday. Also, Thursday is a triple witching. What is triple witching you ask? It is considered a "witching" on days when contracts expire. The "triple" comes in when equity options, index options, and futures expire all on the same day. When this happens there is a historically large amount of volatility that week because market makers are being tight asses on the spreads that they offer, and traders (institutional and retail alike) are running to take profits or to shore up losses.
Monday is St. Patrick's Day which has been an up day 75% of the time. Thursday before Good Friday has been a down day 80% of the time. I could go on and on pulling stats and quotes from the Stock Trader's Almanac to support the idea that this will be another rocky week, but you and I both know that the market is in an area where a decision must be made. Remember that LINE I mentioned last week? There will be a pretty big territorial pissing match between the bulls and bears over that line, and until there is a clear winner, it is going to be wild.
Also, there will be no watch list or charts provided until there is a clear winner of that fight. I would hate to lay a ton of bearish ideas on the line while the market is finding a bottom. Hang on tight this week.
Oh yeah... I almost forgot. Genius does have its rewards.
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