After being consumed in fear over the weekend, I woke up and was pleasantly surprised that not only wasn’t there any green gap due to the establishment of the new Italian government over the weekend, SPY actually enjoyed a small .42% red gap. And the small gap didn’t even get filled. Guess what, the attention was now on the Spanish bond rate which was over 6% today. I wasn’t totally kidding when I stated that after Italy, Spain would be next to have its leadership changed, so that the market can keep going up.
My fear level was escalated due to a series of events:
- The 20%+ rally since October killed my confidence in the bearish call.
- The realization that I had been navigating Tradestation’s compromised 200 day MA’s and missed key trading decisions as a result, sent me into a state of panic and helplessly surrendering to jinx.
- The newly formed symmetric triangle is a continuation pattern, likely to resolve upward. This also negates the prospect of MACD crossing-over downward.
- The professional money manager/blogger who I follow and highly respect (aside from the foul language), The Fly (@The_Real_Fly), has been 90% invested. And in response to the weekend Italian news, he twitted “IT IS TRUE. S&P FUTURES WILL BE +1,000 on SUNDAY NIGHT.” On Sunday, he blogged “The Godfather of all Short Squeezes Approaches“.
- Santa rally and the final months of presidential cycle are seasonality that favor the bulls.
There are two ways to interpret today’s lukewarm market action in light of the Spanish bond rates (as well as France and Belgium’s). First, a bullish bias: despite the gloomy indications by the bond rates, markets were holding up well; that could mean the market wanted to go up and there will be good news to come soon. Second, a bearish bias: given the gloomy indications by the bond rates, markets have yet to go down big.
From hindsight, we can see that the bullish bias was the correct take on the Italian bond rates last week. Greece brought down the market by 20% and yet Italy only caused a 5% correction. That was because the market knew Berlusconi would be ousted and a new puppet government would be formed. So by the same logic, today’s action was bullish bias in my opinion.
Portfolio Value: $124,700