SPX @ 1561. So, in my last two posts I called for
1) Obviously we seem to be needing new all time highs in SPX and DAX to finally
flush out the last of the bearish speculators. I do not expect much follow
through and will follow the scenario outlined in the last post with a trading
range between 1540 and 1570.
2) Sentiment, technicals and fundamentals now warrant a decline below 1540, maybe
all the way to 1500-1510 in to earnings season.
Both these statements I actually hold on to still. I am short puts and calls around this strategy. Tomorrow is ECB day and there is a tradable chance (i.e. market is underestimating the chances of a rate cut IMO), that ECB lowers the rate or signals strongly for lower rates. That would create a huge spike since short interest has risen the last few days near the all time highs in the SPX. Without that ECB fuel, I expect us to visit 1510 without much of a pause within the next 1-2 weeks. A second trigger could be the payrolls report friday. So within that event setup lies the trading strategy.
I would hold onto the statement selling around 1570-1575, expecting we do visit the region around 1510 into earnings season. THAT would provide fuel for another leg higher but that is also a leg I would sell in to... altough at slightly higher levels, lets say even above 1600 if we are lucky.
That is my road map at the moment. Obviously any long equity exposures are hedged partly or completely by short commodities as pointed out previously and in the yearly strategy update.
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