I got bullish a bit early on equities last week as the Euro bounced and it felt like panic was in the air on the day of the German trading bans. Still the pattern in stocks looks constructive for the short-term with a target above S&P 1150 (SPY 115).
The chart for SPY bears a striking resemblance to a double bottom pattern with momentum ebbing as the panic low from two weeks back gets retested. Also, as Bill Luby points out options traders seem to be getting ahead of themselves pricing implied volatility trading above what is being observed.
I am only playing through upstrike call options (where implied vol is less dear), so my downside is limited. Momentum players may still have stocks to dump so I have positioned for a bounce but kept the risk low.
If we do manage a rally here it is easy to imagine the news coverage shifting to discussing the liquidity enema eminating from central banks as equity positive.
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