S&P 1200 Scenario Likely Playing Out

ES futures moved strongly away from Friday's close last night and this morning, and it seems we're setting up for a test of 1200 on the S&P cash (1197 ES).

Friday's action felt like an expert pin job on the OEX which closed mid-strike as I had feared. I replaced the remaining OEX 535 calls that I had with SPY Nov. 119 calls, and traded around the OEX position until the close, letting them expire worthless but at little real cost. OEX weekly options are pure volatility, and with Friday's dull action feeling like a prelude to a classic late afternoon short squeeze, I was quite willing to roll the dice for a possible 3-4X return. Overnight action shows I was wrong on timing, but correct on direction and mangitude.

This morning I'm noting the breakout in the NZD, which has rallied strongly to just above its October high. The GBP is knocking on 1.60, and the JPY might soon give me my long-awaited fill at 79.997. Thus I'm still expecting the USD rolls over here for another low, but I will most likely be a buyer, QE2 or not. These feel like ending moves.