Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

A Rembrandt Named 'Run the Stops For Expiration'

By

Jeff Cooper visits the SPY and how Fed day has impacted the charts

PrintPRINT
So far December, has been a picture perfect masterful classic of Bowling For Strikes.

December opened with the SPY at 210 prior to a plunge that undercut 200 on Monday, only to be followed by a rip to 205 in front of Janet.

An ensuing Late Day Breakout over 205 saw a push to our old friend SPX 2071 (cash).



Our scenario for Fed day of an opening spike followed by a drift back played out like painting by the numbers. Then came the almost too pretty celebratory rate rip.

You can't embarrass the Fed Chair.

This is a game of credibility and perception.

For the moment, yet another bridge has been hoisted over the chasm between reality and perception.

Suffice to say that it very well may be that the Fed has decided to raise interest rates and tighten money supply as the economy is slowing. This has happened twice before... in the mid 1960's and in the 1930's.

Both times coincided with a deep economic recession.

The Fed knows its history and that is why the statement includes the idea that the rate rise could be reversed quickly.

But the rate genie is out of the bottle psychologically,and no matter how many times the Fed says they are data dependent, the market is going to be in the game of handicapping the next rate increase.

No matter how many times you hear pundits tell you about 3 Steps & a Stumble, forget about it -- we've never been here before. We're not on the same playing field. This is not the same grass other cycles have played on...this is financial astro turf.

My gut was that the so called 'relief rally' would be a sell on the news, but I said I'll follow the levels.

It is remarkable how pundits can call this a 'relief rally' that the Fed actually moved when this is probably the most telegraphed hike in history.

Basically the Fed didn't want to repeat September.

On the above hourly SPY note the drift back to the 50 period on the hourlies prior to the late relief move to the 200 period.

Is this finally the move that sees a breakout above 2100 to 2150 that satisfies the geometry of a 100% advance from the early October 2011 low?

Perhaps, but how many times this year has  breakout looked imminent? That said, how many times has another breakdown been on the table only to V mysteriously out of the lurch?

This is a horrible year for hedge funds due in large part to the collapse in oil, so you can't underestimate the inclination to throw good money after bad into year-end.

Conclusion.

The Street got its tinsel jawbone for Christmas. The game plan for the puts to be crushed into expiration played out like a Rembrandt and enough hours have been spent over the initial 2040 SPX resistance level to enable cheaper puts to be bought for hedges on the rollout into March futures.

The 'anointed ones' AMZN and NFLX tailed off from their respective 50 day lines with a bearish look on Tuesday, but recaptured those with authority yesterday.

Ditto NKE.

The arbs ran these usual suspects including GOOG and FB and if there are still heavy shorts, the move could extend. However, when the game is running the stops  into expiration, they can run out of gas at any time.

Strategy.

A big up opening after Wednesday's late surge is suspect with the SPY at its 200 period on the hourlies and the cash at our old friend 2070. That said holding over 2070 implies the possibility that the pain trade is 2100 soon.  A plunge to 2050ish could play out which is a buy if it happens and if it holds.
                                                              
Another square-out at 2005 cash on Monday did a great job of defining a buying opportunity. The Hand did a masterful job of pulling back the rubber band as the Fed jawbone snapped shut on the shorts.

The Fed's applause meter, which is what we used to call the stock market, rose to the occasion on the roar of the crowd and the smell of the paint.

Twitter: @JeffCooperLive

Get Jeff's commentary plus day & swing trading ideas each day with a FREE 14 day trial to Jeff Cooper's Daily Market Report.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE