As expected, the overall securities market drifted down today ahead of important data points scheduled for Thursday and Friday. The only sectors that showed broad strength were oil and gold. Oil was up thanks to a lower than expected inventory number and gold was up because it always is – Gold was up against the falling dollar and the expectations of more QE.
If GDP, Jobless Claims, Manufacturing Index and the words uttered from Ben tomorrow are positive, even at all, I expect gold to sell-off in the near term and equities to fly. I still believe we’ll see gold much higher, but an opportunity to enter a few positions may present themselves on pullbacks soon. However, if the reports are generally bearish, then gold should continue its march up against the backdrop of increasing odds that the FED will work to devalue the dollar.
For tomorrow, I plan on being up early so I can absorb the sentiment in pre-market once the Jobs and GDP numbers are announced. I can’t predict where the market will go, so I’m heavy in cash right now waiting for the direction to show itself. Of course, the big hedge funds want to finish the month with some window dressing, so they’ll likely fight to keep the market up tomorrow. If it’s obvious they can’t, we’ll probably see increased volatility as the move their money into shorts and reallocate risk.
Another factor playing into tomorrow’s action will be the FED’s POMO scheduled for 10:15 (during Ben’s speech). I’ve probably made a little too much of POMO lately, but I think it’s something to keep in the back of your mind when managing your risk. POMO activity generally props up the markets… especially at the close. It may not have much of an effect tomorrow with all of the other news likely drowning out much manipulation.
Despite today’s declines, there were some great trade opportunities – GMXR, MNKD, CPE , NANO, etc. – all mentioned in the Boom Factory at BullsOnWallStreet. Even in flat markets, there are always moves for intraday traders.
Stay nimble tomorrow, I expect increased volatility and some significant moves that we can book profits on. The market direction? Who knows, but I’m ready. The SPX indicates a down day, but the news will move it where it wants to go. For the next two days, don’t get caught up in the what if or prediction game… it’s fun to talk about, but it can destroy your portfolio. See which stocks are garnering interest in the morning, wait for Ben to speak, and then move in and out of stocks like a seasoned trader. We’ll clean off the table and do it all over again Friday.
Quick look at the SPX.. everyone has seen it and there isn’t much I can add to the commentary floating around. The hedgies know you’ll go long over 1150 and short under 1131. They’ll profit either way because they’ll likely want to boost the direction – overdone correction or breakout. That’s all we need to know. If we get through 1150 tomorrow, I’m long and strong even though this chart shows that we’re top heavy. The chart will be meaningless intraday tomorrow if the trading ranges are breached with volume. The risk trade will be on. Get out your popcorn.