Thursday, May 10, 2012

JPM Takes It On The Chin.

Although I am normally critical of the constant negative reporting of ZH, today I have to say kudos to them.  They do bring out the dark side of the Wall St like no other. Two of their reports stand out today.

·         The going on of JPM and
·         The impending bond default of Greece.

My only point is: do not get caught up in headlines or conspiracy theories while trading or investing- pay attention to risk management. Stock market is not economy. Wall St. is a giant casino and the house always wins.

After six days of red, today DOW managed a tiny green but that was compensated by red Nasdaq.  Even mighty Apple was marginally green. Markets are closed as I write it. Let us see how the world market reacts to the JPM news. The memory of Lehman may not have been forgotten yet.

Euro did show some bounce in the morning but gave back all of it by evening and there is serious risk that it will cross in the range of 1.28. AUD is nearing parity. US $ have crossed all important level of 80 and would likely do some serious damage in the next few days.

The carry trade favourite AUD is moving in sync with SPX and with AUD losing ground and demand for safe heaven $ shooting up based on headlines, things do not look so good for the “Risk On” trade. But again, please do not get carried away.

Readers know that the model portfolio is not much dependent on major indices. I have not touched anything remotely connected to DOW or S&P 500 or Nasdaq. The reason being I do not believe that the powers that be will allow any meaningful correction in the Indices. So I have targeted sectors where there is definite weakness. But I am glad that we have a short position in financials. Again, be ready to bail out of the short positions quickly. I am fairly confident about the short positions in commodities. If you remember my commentary few days back regarding Crude, I said that if it breaks below $97, the next stage is $ 93 and after then $ 70. Today, Jamie Saettele, an excellent currency analyst has this chart for us;

If we really get past $ 93, there is only air below that. Isn’t that something!

It is going to be exciting next few days. So far as SPX is concerned, unless we see a good close below 1330, we are playing out last year’s tape.

Thank you for reading . Hope you are benefiting from my two cents worth of blabbering and passing it on to someone you think might benefit.