02
Nov
2010

Government Turnover Tuesday – Time To Blame the New Guys

Government Turnover Tuesday – Time To Blame the New Guys

By Phil of Phil's Stock World

SPY 5 MIN CHART

Kick over the wall

Cause government’s to fall
How can you refuse it?
Let fury have the hour, anger can be power
D’you know that you can use it?

The voices in your head are calling
Stop wasting your time, there’s nothing coming
Only a fool would think someone could save you

In these days of evil presidents
Working for the clampdown
But lately one or two has fully paid their due
For working for the clampdown

– The Clash

Investors were very excited yesterday about the bloodless coup that is planned for later this evening, when the Republicans plant to take back the wheel of this nation after taking a 4-year break from their last turn, which ended up in a massive collision that caused a 40-nation pile-up on the global economic highway.

Now they promise they’ve sobered up and learned their lessons and are expecting the voters to welcome them back with open arms and Wall Street could not be happier to welcome the new boss, who is the same as the old boss that let them operate free of rules and restrictions and not only bailed them out when their made gambling spree lost them $4Tn, but now wants to make sure they continue paying as little tax as possible as they reload for FCII (Financial Crisis II – I want to coin this phrase early).

We have simply been enjoying the ride (see David Fry’s chart above of yesterday’s wild action) and making money off the chaos.  After all, if we are going back down the road that almost wrecked the Global economy just 2 years ago, we are likely to get another fantastic buying opportunity so we stay in cash and do our hit and run moves like yesterday, where I sent out an Alert to Members on the SPY weekly $118 puts, which came in better than we expected at .70 and made a near double by the afternoon, topping out at $1.39.

Why do I say better than expected?  Because I called that trade at 6:03 am, 3.5 hours before the market opened saying: "Obviously, the move is to go short off the gate, using a line like 1,190 on the S&P as an on off switch. "  This is not about my ability to call a market, this is about how pathetically obvious the market is to call (and take full advantage of) as we move back to the blatant, obvious, fearless manipulation that wiped out Trillions of dollars of middle-class equity before this country had it’s brief flirtation with hope and change.

Today we have another oil pump, after yesterday’s failed run at $84, which has been tough resistance at roughly $36.50 on the USO ETF.  USO also has weekly options we can play and the $36 puts bottomed out at .50 yesterday and topped out back at .70, which is a nice 40% intraday so, if given a chance to get back in at .50, we can use the $36.50 line as a stop and look for a 20% gain as a quick play and we can leave a little on the table if things go well as tomorrow’s inventory report or any election disappointment (any possibility of regulation or fiscal/monetary restraint would disappoint commodity pushers) can easily make this a double.  Oil futures can also be momentum traded short  off the $84 line, of course, using the same logic.

Will the elections be enough to take us out of our trading range or will they prove the top?  It is still all about the dollar, which peaked out yesterday at 77.60 as the markets tanked but is now back below 77 in pre-market trading so, of course, the futures are loving it.  Only, not so much as usually such a major debasement of our currency would be more widely celebrated than a half-point bounce.  Still, copper is over $3.80 ($3.82) and oil is over $82.50 until inventories and gold is $1,350 so we have to respect the technicals.

Today will be a day of uncertainty but anticipation is reaching frenzy levels – not for the election but for the very much unelected actions of Mr. Ben Bernanke tomorrow, who will continue to tax us without representation as he takes away the value of our savings almost as fast as we can add to them so we’d better keep finding our daily doubles – it’s the only way to stay ahead of the game as we hyperinflate our way back to FCII.

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Ilene, Phil's Stock World