Dow Futures have been spinning around in a 300 pt trading range here. Fluttering with every news conference from Washington DC about the sequester. Sequester, Smeshter.
The market is at its top. It can either pop higher and take out another 1,000 pts on a ten percent rally. The upside risk is probably that, with 15,000 the next “magical target” that CNBC will be able to tout.
We are 150 pts away from taking out the old high. That’s a given. MSNBC will be running around saying “the recession’s over” long live the Fed, long live Obama. My guess is that the moment the President takes credit for the new highs, either directly or indirectly, that will put us within 500pts of the high.
How would you feel about a 30% haircut from here? That’s a 4,200 point slap down.
If I was long a ton of stocks, I’d have some S&P puts and some Dow puts on to protect against a flush like that.
A 1,000 point rally is easy to swallow. New highs are fun. Especially when you are long.
A 4,200 point break, down below 10,000… Suddenly not so fun.
I’d protect that down side, and hope I lose every sent I pay for those S&P and Dow puts.
That’s the smart way to play this rally if you are long a lot of stocks, either personally or with your IRA.
Bon Appetite.
CER