The collision of global markets and social mood

Thursday, March 7, 2013

Blood In The Water

First order of business today is to take off 2/3 of the Nikkei position (EWJ) now that the index has reached 12,000. Nikkei 225 futures closed above 12K while the index closed just below 12K after exceeding it during the day.

This EWJ position since December 2012 was only good for 11%. I say "only" because FXI (China) was up over 30% and VNM (Vietnam) was up a stunning 50% in less time. Both have since corrected, so it may be time to add more shares.

Part of the news associated with the Nikkei was that the BOJ rejected a call for an immediate start to open-ended asset purchases in Governor Masaaki Shirakawa’s final meeting before a new leadership takes over at the central bank. Some think this means concern over too much yen weakening.

This dovetails with the ECB decision not to cut rates today, rather significant given the situation in Spain. As a result, both Europe and Asia are mixed.

Another sideways market occurred yesterday on the S&P. There is room to correct lower without getting below the 1530.94 breakout level, but I'm not seeing it. At the most, there was a small engulfing on the VIX daily chart in which price got below the previous day, above the previous day's high, and closed just above the previous day's close.

The big drama is Friday's NFP number. I never trade these and am not smart enough to know exactly what the market will do or why, but perhaps there may be an opportunity for an emotional flourish to 1550. I would sell that. Here's why . . .

. . . a quick read of open interest on the quarterly SPY options expiring March 22nd appears to have a Max Pain level of roughly 151. There is an immense number of 155 and 156 calls open. That's blood in the water.

Speaking of blood, Bill Ackman is bleeding badly on JCP. Vornado just dumped 10 million shares at a $200 million loss just to get out of it.

And since Ackman told the world that he shorted 20% of the float on HLF, sharks like Icahn have come circling.

In the Gulf Stream, the trick is not catching a big game fish. There are plenty of those.

The trick is to get it onto the boat without the sharks getting it first.

Wall Street is a blood sport. Grab a rod, go fishing, and learn a ton.

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