The collision of global markets and social mood

Tuesday, April 16, 2013

Rough Business

Europe and Asia are mixed while India's Sensex is up for the second day in a row, closing over 2% higher. Risk is bouncing: gold, yen, S&P.

And why not. Yesterday's sharp S&P decline got to a large 38% Fib level at 1553. The decline certainly surprised me. I was expecting another leg higher. Still, it was gratifying to see the puts I bought Wednesday morning rocket higher. That trade was like staring into a gun barrel. I was glad it didn't blow my head off.

These more than paid for the smaller number of much cheaper 159 calls I bought later Wednesday afternoon, even without getting top tick yesterday. I also have tranches of 158 and 156 strikes.

Today's bounce should target 1570-1573. Below 1539.50 from 4/5 would open the door to more bearish interpretations that hopefully don't need to be covered just yet.

John Paulson and David Einhorn lost over $600 million in the gold rout. There was a rumor of a fund in liquidation-only mode yesterday. Redemption requests must be on their way. Rough business when risk is not respected.

I was a year early showing this chart in which I mentioned the potential for a falling wedge.

Here's the update. Maybe a retest of the lower boundary, but I don't think it's over yet.

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