Wednesday
Aug 26, 2015
1-855-RWT-0008
Prepared by the good people at Random Walk, LLC. (and Scott)
Great Morning!
Closing Prices From Yesterday
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Today’s Number(s)
Yesterday and Today
Yesterday
It was NUTS.
The market had a bounce like it should. The news came from China that they were cutting their interest rate to help their stock market. Cutting interest rates certainly helped our markets. But this didn’t help China or maybe it did. China still sank 8%, but the Heng Sang and other Aian markets bounced on the news. That was enough for our futures to start running higher.
In the middle of the night (between Monday’s close and Tuesday’s open) the E-minis were up 40. This is a huge number, but half of the bounce came from the fact that in the last 10 minutes of trading the E-minis fell 20 points (on Monday after cash closed). So in the end the 40 point bounce was really 20. Still good, right?
At about 6:00am news came from China they were cutting rates. It was then that the E-inis climbed an additional 20 points (up 60) and managed to be up 70 right at the open. This is a HUGE move higher and would be about a 600 point advance had it not been for the 4:00 ā 4:15 pm decline of 20 SPX points in the futures. Instead we got a 400 point open, but that is great too.
You see, Ronald Reagan was bright enough to know that you don’t need leadership, rather just the appearance of a āwise old manā controlling things ā not playing golf, forcing politicians to sign off on the worst deal America has EVER made (Iran nuclear deal), etc.
But I have HOPE so I sent POT students home long deltas for the first time in 3 days. I have HOPE that China’s leaders are brighter than ours and will do something to stave off the selling.
Below you see the linear progression of the selling since last Wednesday’s Fed meeting. You know the meeting. The one where MOST of the requirements for a hike were NOT met, but they almost hiked (despite their own requirements). āHey Moe…give me a 1/4%ā
Then near the close people lost confidence in the rally. I don’t blame them. Most āVā bounces off the bottom dont jump up and sit all day in boredom. There is follow through to the upside and we close at the highs of the day.
Sellers saw this and came back in. As is often with the case in situations where there is a lot of fear, selling begot selling. It fed on itself. When the Dow looked within 100 points of unchanged people wanted to sell before we got there. Once we got to unchanged things fell apart as many felt trapped in a āsuckers rallyā.
BONDS sank like a rock, which was expected. If they don’t go up in a flight to safety when the market is ācrashingā they must be being sold by people.
In the end, the Dow and SPX lost another 1.3%. It was a waste of a day UNLESS you sold out things at the top.
TODAY
I think yesterday’s sell off was BS. It had to happen because we normally don’t bounce from a bottom overnight ā we get a sink hole and then a bounce the same day. We also don’t get market that runs up 400 points and sits there for 4-6 hours without moving. A real bottom would have been made as all the shorts keep chasing the market higher and higher.
ALSO, China is getting a little overdone for now. I have hated their market since last year’s bubble began. I felt like an idiot for not riding it higher, but I knew it had to come down. Their economy is a paper tiger of BS.
Random Walk may lose a couple clients when I say the next thing, but I have to speak the truth. China does NOTHING better than the US other than manipulating its currency so it can take jobs, STEAL intellectual property, and bribe American politicians to look the other way. They stink and their market is coming back to reality.
That said, the sell-off is a little overdone. The programs they are instituting to prop up their markets are HUGE and will make a difference. I am almost tempted to get long it via the FXI today. Put 2-3 days of higher moves in China and we will see our markets go back to Dow 16,500 by the end of the week. A week more of stability and we will get up to 17.000.
A Separate Update is Coming ā OBVIOUSLY
It was a VERY, VERY productive day. We came in LONG. When the Dow opened up 350-400 points we started selling everything in rapid fire. We started by selling a $25 ATM call spread for 12.50. We sold out some premium via calls in Sept 1. We took our SPY call spreads and condor them off. Any long delta we had was sold. We then bought put spreads near the close ā not at the highs of the day, but when the Dow was up 200. It was NOT perfect, but for not taking any risk it was wonderful, wonderful, wonderful.
TONIGHT
We will be having one of the MOST informative POT classes in a while because we have a LOT of trades to discuss how they reacted to a 10% move in 4 days. DON’T MISS THIS ONE as we talk about BLACK OPS, yesterday, etc.
POT is held each Wednesday night at 7:00pm eastern.
Contract the office at 1- 855 ā RWT ā 0008 for more details.
Too True To Be Funny
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Attorney Stuff
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