Pure Speculation

Today's move has me thinking that the S&P could be tracing out a falling wedge. I think the triangle formation has been nullified, and that my hunch yesterday was wrong.

If this is a falling wedge formation, I see two scenarios at this point: one is a hefty bounce back toward 1320 before a retest of today's lows. The other is a shallow bounce, a break through today's lows, and a close well below current levels.

I did not buy more calls yet. I've got enough, and they're bleeding. But my risk is well contained. If we can bounce to 1305 I may add a small tranche of SPXU so as not to bring up my basis in the remaining SDS. But much over 1305 would have me thinking about a test of the upper trend line at 1320.

Given where we're at in the chart above, my tendency is to stand by until either trend line is reached. As Ashraf Laidi says "If you trade the noise, you become deaf." I love that quote.

Meanwhile, Bloomberg is doing all it can to convince the public that everything is okay in Spain.

March 10 (Bloomberg) -- Investors are becoming more discriminating about European creditworthiness, increasing bets that Greece, Ireland and Portugal may restructure their debts while Spain and Italy survive the euro region’s deficit crisis.

“Spain has skillfully managed to navigate itself away from the sick list,” said Georg Grodzki, London-based head of credit research at Legal & General Investment Management, which oversees more than $500 billion. “If Spain continues structural reforms, especially in the labor market, it could start moving towards the core.”

Traders are betting Spain will avert an EU bailout as budget cuts and growth help repair its balance sheet. The nation’s credit rating was cut today because the cost of recapitalizing the nation’s savings banks will be higher than forecast by the government, Moody’s said in a report.

Please note that only at current levels of optimism and with continued growth does Spain look better than its weaker peers.

Growth and optimism are ephemeral. One is based on Spain's previous ability to borrow at the same rates as Germany, while the other is simply the feel-good result of such borrowing. Both can quickly disappear.