Back to normal

After the recent weakening correlation between the euro and US stocks, this morning everything was back to normal. The euro as well as indices sold off big on the news that S&P would likely downgrade some EU-countries today.

Because of the bearish news this morning, we started with a gap down. After some chop up and down, indices went lower. The Tuesday gap up got filled before price bounced. It was a decent bounce that retraced to the morning highs, but that high now acted as resistance (for Dow and S&P, tech and small caps lagged and didn't reach the morning high at that point). So we went down again to make a higher low.

The last hour of the session began and we touched the morning high once more. And the third time was the charm, through we went. But because we already made a nice run from the low and the close of the session (and the week) came near, not much happened above this resistance. Also, with a 3-day weekend coming, no one wants to take any risk here.

5m-chart SPY:

Daily charts DIA, SPY, QQQ and IWM:

Metals and oil went lower, some follow-through from yesterday. But oil and copper recovered good while gold and silver couldn't find buyers.
The euro sold off big on the S&P downgrade news, down 1% and making new lows!

Trades
I sold my remaining half of GLD just above breakeven in premarket (@159.07, I was long 158.75).
I sold my SPY as well, also in PM, just under breakeven. Luckily I sold a weekly 129-call and bought a weekly 129-put yesterday towards the close. I acted too early then, and I also covered too soon this morning, but still a decent hedge to hold on to the unrealized profits from yesterday. I forgot to mention the option-trade yesterday, but here's the proof ;-)

A few articles to end the workweek:
S&P Downgrades Coming
A Fat Pitch in the Euro
Debt Talks Greece Falter


Have a great weekend!

Euro dropping under 1.30, dragging down indices

The euro dropped big right at the opening of the session, going under the 1.30-level. The currency lost over 1% before the bleeding stopped. Indices went down together with the euro, losing over 1% (small caps even close to 2%). Silver once more reacted extremely bad, down about 5.5%.

The daily charts for Dow Jones & S&P500 are resembling an evening doji star-pattern, a strong bearish reversal pattern. The candles on Nasdaq and small caps are not looking hot either (not for the bulls anyway).

5m-chart SPY:

Daily charts DIA, SPY, QQQ and IWM:

Metals went down together with indices, but copper once more outperformed gold & silver.
Oil dropped to 99.50, still eying that 100-level.

Articles for this evening:
When Sentiment Turns Ugly
Cracks
2011: The Year in Financial Blogging
The Give and Take of Volatility
The Fifth Habit of Creative Traders: Experimenting with your Ideas

Futures

Indices are down moderately, but metals are feeling the heat again.
The euro is trading under 1.30 for the first time since the beginning of 2011.

Back in Business

Back in business after a long absence due to circumstances. But I will try and post daily messages from now on.

The indices are going up, almost parabolic it seems, closing in on the highs of the year with Nasdaq clearly the leader of the pack. But the longer this rally lasts, the deeper we might fall.

I tried a long-position in TZA (in 31.47, out 31.38) because of the big gap up this morning. But with the euro reversing higher and different positive newsitems (including ADP and jobless data), the market couldn't even fill the gap. So the bulls knew to keep control for the eighth day in a row. Let's see how much longer this story continues, but I'm guessing we're near the end of this run.

We have two possibilities now: sideways consolidation or a pullback/correction. I expect a pullback after such a big run up, with todays gap up being a possible exhaustion gap.