Appreciating The Classics

Yesterday was a classic Turnaround Tuesday.  It was also a classic example of Turtle Soup, a trading set-up taught by my 70-year old mentor.   It's basically a failed breakout from a daily perspective when momentum and trend players add to their positions in accordance to their models only to be trapped as price quickly reverses back inside the range.  The last time I really nailed one was in February of 2007 when there was some bad news out of China.  I had bought some OEX puts the day before the news based on the wave pattern.  Even though they were well out-of-the-money, they went from 40 cents to $7.80 in 2 days.

Nothing like that happened yesterday.  I suspect, so far, it is the reset I was looking for.  It can change quickly.  There are many options for the market to take.  One could be a shallow pullback and a continuation to 1430-1440. One could be a pullback to 1250.  There are many more.  Until I gain more conviction, I'm content to just play day by day.

One interesting thing about yesterday: volume appeared.  All the way back to the lows of 2009, the market has been confirming (in volume terms) that there is consistently more conviction on down days than up days even though the S&P is over 100% higher. Obviously price trumps volume, but it's why I still believe there will be hell to pay.

Elsewhere, Spain's Minister of Economy Luis de Guindos said "there is no room for further cuts in spending."  Spoken like a true politician.  That's all we're gonna do, folks, but you're gonna pay more taxes.

This is the same guy that said "there can be no limit set" for the ECB to take "unlimited steps" to buy sovereign debt to help Spain reduce its refinancing costs and eliminate doubts over the euro zone's future.

Have some soup, Mr. de Guindos.