Today’s Action

by Dan June 28, 2011 7:04 pm • Commentary

The SPX closed on its dead ass high and barely had a down tick all day….this is obviously positive action in the face of crude oil’s impressive performance bouncing off important support at $90 and now trading above $93……with gold also up today we are starting to see the risk trade come back on which could catch some legs if we get a palatable near term solution in Greece in the coming days.   The rally today was broad and on good volume and was very similar to what we saw yesterday as speculative tech continued to outperform but also saw oil names turn around and show impressive strength, while the financials just gave up…..GS and JPM made new multi months lows while Citi, Bac and WFC continue to hold decently off the lows they made earlier in the month….The fact that the market has rallied in the face of the bank stock weakness is also pretty impressive.  GS’s breakdown below $130 (a support level that looks fairly signifigant on a chart dating back to 2009), and how it reacts could be a telling sign here for broader financials….

3 Yr GS Chart Provided by


Personally I am almost getting to a point where I want to be contrarian in the name….especially as we head into their Q2 report in late July…..estimates have been coming down dramatically in the name and if there is one thing I know about GS is that they are very likely to perform better than their peers.  If they could just get some of this other stuff settle with the feds the stock would be trading back above $150.  If they beat and raise and the stock still sells off it tells you one thing, that large holders are only worried about one thing…..the feds taking some punitive action and possibly breaking the sucker up.  When the time is right I will look to buy aug call spreads and define my risk…..If they put up big quarter in the face of low expectations, got rid of some of the higher ups that the feds want to see out and made some settlements with some of the outstanding investigations this stock could see a short squeeze of epic proportion.  Additionally at what price in the stock do we start to hear rumblings of the partners taking the company private?

MY TRADING: The last few days has been very frustrating to me as many of you know I have been bearish and remain positioned that way….I went from being very right for the last few weeks to very wrong in the last few days……this sucks the life out of you and frankly can make a trader a bit disoriented….I havn’t had any fresh trade ideas on the site in the last few days because frankly I lack any with conviction….Tomorrow’s reaction to the Greek vote will be very instructive in my opinion…if we open up strong on a passage and hold gains then new highs here we come…..but if we fail and it is a sell the news then we will be back to watching those same boring levels in the SPX 1263 and 1250……

ALSO, We are heading into earnings season and this is a very challenging time for many and is an easy time to piss away money on an event that may or may not yield movement.   While we can use the options market to help predict the potential magnitude of the movement and look at positioning and open interest to give us a sense for how people are positioned, there is no magic bullet and most pros try to do everything in their power to just avoid disasters during earning season….As I think about earnings events and my directional trading I like to place my chips where I feel I have some sort of edge either quantitatively or qualitatively….I will look to thread the needle a bit and listen to what competitors, suppliers and customers have to say and try to relate it back to the company that I am looking at….and most importantly try to interpret what the market is telling me….