Politically charged

What a week.  The markets (and much of the world) hung on the words of Obama, Boehner, Reid and others as they waxed poetic about the impending cliff...and with just minutes to go before the close, extreme volume rushed in to the SPX based instruments.

The markets overall had a 'good' week and thus there is cause for celebration by the perma-bulls as they are roaring for a steady strong ramp into the close of 2012.

We are 40% in the market (net short) and the rest in cash as we await the next move up or down.  The primary gauge used here is the $SPX.  The 50 DMA for the S&P 500 is 1421 and this week the index topped out at 1420.  Our short position will be confirmed by the index pulling back next week. Best case in a market recently characterized by making lower highs and lower lows, this market declines over the coming weeks and makes a lower low from the mark of 1343 hit in mid-November.  Support will likely be found around the 200 DMA at 1384 and that level will be watched closely for a bounce.

Given next week will likely bring more of the same (knee-jerk reactions to politician news conferences), we will keep stops very tight and will look to cover our short positions if the S&P moves much north of 1422 next week.

The VIX did briefly hit a 14 handle this morning, bottoming out at 14.89.  Ultimately a lower VIX print would have been better received but anything initiated to the short side when the VIX is in the 14s has historically done fairly well. 

Here are your closing numbers:

DJIA    13,025
S&P       1,416
Nasdaq  3,010

updating the FB picture and more....

So half the FB position was covered at $20 and the rest was covered earlier at $25 when it gapped up (our predetermined stop) and we quickly covered based on the fillable gap that we did not want to ride to the upside.

So now that we have logged out of FB, it is time to discuss the broader markets.

The VIX is close to reaching the golden 14 handle (that some use as a resounding 'sell' or 'short' signal and the markets (SPX/DJIA/Nasdaq) have reached, are reaching or will be soon reaching (from the downside) their 50 or 200 DMAs which just happen to be downward sloping at this point in time.

We are doing research on which stocks and indices to short if the markets find their moving averages to be resistance.  The stops will be tight and if the markets break solidly thru their moving averages to the upside and the VIX does not drop solidly into the 14s then we are out and will re-evaluate our stance on the market, likely then taking a near term bullish view and using the 50 or 200 DMAs as a stop based on support instead of resistance.  Trade nimble and trade quick.

Month end is tomorrow, the markets often go through a 'window-dressing' experiment on the last day or last days leading to a month or quarter end so as the close of tomorrow's trading day looms, we will evaluate how the market has reacted to key levels on the S&P of 1420 and 1430 and we will trade accordingly.

Keep your friends close and your stops closer.  All for now - carry on.

Catching the express train downtown

To miss earnings or say things on the conference call that analysts and investors don't want to hear and then have your stock price violate a long term upward trend channel is never a good thing. For Express Scripts, this exact scenario played out over the last few days.

Based on comments made by management after third quarter results were announced, the stock was hit hard yesterday and thus we initiated a position to the short side, our stop is the high of the day: $56.17.