The Easiest Way in My Mind to Fade This Rally Is to Short the Banks
The SPX is up almost 18% in a straight line since making new intra-day 52 week lows 20 days ago……Enough is enough……Since covering most shorts Oct 3/4/5th I have added a few on a tactical basis in front of events and believe it or not even added some longs……At this point, equity markets are acting irrationally and I think this could set up to be a great opportunity to get short in front of the second Euro Summit (Wednesday) that is very likely to disappoint….
There is no doubt that it appears that our markets are rallying for the reasons they should be, healthy US corporate earnings…..and CAT‘s report and outlook this morning might have been the nail in the coffin for the bears…..
But away from Tech and Industials, the banks are now extended, there I said it, and I think the rally off of the lows this month could be shaping up as a great near term opportunity to short a space that will get destroyed if Euro leaders and finance ministers can’t enact a solid plan to contain their debt contagion…..
I wan to look at MS and GS…GS because in my opinion it trades very poorly off the lows, and MS because it has acted so well off of the lows….
GS vs stock at 103.20 I am buying the Oct28 weekly 100 puts for 1.00
MS vs stock at 17.07 I am buying the Nov 16 Puts for .69
Both names I will look to leg into Put Spreads as the stocks start to go lower…..