Slope of Hope Blog Posts
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If by some miracle the downdraft in the market doesn't terminate after its few minutes in the sun, I think the next stopping point is about 50 S&P points south of here.
There are a few reasons a level like this would make sense:
+ It's a major retracement level – 50% of the entire range from the 2007 peak to the 2009 nadir;
+ It's back to the neckline of that huge inverted head and shoulders pattern;
+ It's right near the ascending trendline spanning from March to present.
If we got down to that level, I personally plan to lighten up on almost all my shorts.
Someone wrote me today expressing concerning that the EUR/USD was getting near the bottom of its channel, which would mean the little bit of bear-love that the market has been providing is ready to, once again, end.
Well, I can understand the concern, which is why I have a large long position in FXE as a hedge. Here's the EUR/USD channel:
I'd like to point out, though, that the correlation between the EUR and the SPX isn't perfect. Sometimes they are in sync, and sometimes they lag. Take this summer, for instance. The Euro bottomed in early June (circled below in green). The equity markets didn't bottom until a month later (circled below in red). There was a big spread between what the Euro was doing and what the S&P was doing, tinted below in blue, and we're seeing that again.
What we could see, as we did this summer, is the Euro "drag" the equity markets down for weeks to come. It's anyone's guess. Until then, I remain hedged – – currently about 25% long/75% short. This will continue to "water down" any gains from days like today, but it'll also mean that an equity rally won't kill me.
That's it from me today. I'll see you Wednesday morning.
The first thing I do when I wake up (wayyyy too early, like at 4:30 a.m.) is grab the iPad by my bed and look at emails and the markets.
I was pleased this morning to get an email from City of London-based Sloper Stephen Wales of RipleyWales Financial Planning. JP Morgan held a "Fantasy Fund Manager" contest, and Stephen came in first! There was a lengthy interview about him, and in it he was kind enough to mention some of his favorite sites to read:
Thanks, Stephen, and congratulations! (Incidentally, he wanted me to send a shout out to fellow countryman Springheel Jack for his fine work here too).