Today, November beans rallied 22 cents off the lows right after the announcement of the plane crash in Ukraine. Once digested, the market reversed and headed lower. Today was a day where it was almost unavoidable to get stopped out. I entered the day wanting to be short the grain rally. We were stopped out. After the gyrations, the model took us from net long to once again net short.
We’ll see how tomorrow plays out, now that we have more geopolitical machinations on the 24hour news cycle. As of this writing , Israel has begun a ground invasion into Gaza. Its any one’s guess how this plays out, but my first reaction will be lower across the board as a defensive move.
I had thought we’d get to 19500 in the Dow and the corresponding 2000 level in the S&P. However, we’ve been moving inexorably higher all year.
A 1000 pt correction in the Dow is only 5 1/2 percent. A 10% correction is 1700 pts and takes us to 15,300.
A 10% correction in the S&P is 197 handles. That takes us to 1780.
Its the percentages that matter , not the number of points or handles.
We are heading into the historically crappy time of year to trade anyhow. Summer markets. In August most of Europe takes that as a vacation month.
With just 10 business days left to go, if you knew you were going on vacation soon, why wouldn’t you exit profitable longs as a defensive move before you “retire” for a month of wine, cafe Au lait, and days at the beach?
Bottom line, tomorrow could be an interesting Friday with a lot of downside risk.
CER