Rattling Snare Drums

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Equity markets always seem to have an obsession. There are myriad choices, including:

+ Whether or not a certain war is going to break out;
+ What Cisco's earnings will be (that was so eleven years ago……);
+ Whether the debt ceiling will be raised;
+ Who is elected President;
+ What kind, and how much, of stimulus the Fed will enact

The obsession these days is obvious: whether Europe can put together a credible, sustainable, impactful plan to save the Euro and her economies. There seems to be a very strong upward bias during the past several weeks, with even disspiriting news being brushed off. My hunch is that there are two general possible outcomes:

(a) a plan will be announced, and the market's recent patience and resilience will at that point take the form of a mega-rally, pushing the S&P to perhaps as high as 1330, or

(b) some kind of "flop" will take place – – such as the plan will announced but fall on its face, or maybe even an agreement won't be reached – – in which case the ES will re-enter the Range From Hell. The fact that we're above this range now makes me wonder if we can actually get to the other side of it anytime soon (that is, beneath it), but a disappointing plan would surely clear the way for the ES to lose, say, 70 or 80 points from current levels.

What has astonished me is how forgiving the market has been. The repeated delays, delays, delays, delays, and more delays have had no real impact on the Euro. The market seems to have rock-solid faith that something is going to fix things. As I am typing this, the Euro is absolutely unchanged – – not even a single pip! – – so one can almost hear the snare drums rattling with anticipation in the background.

The announcement, and the market's reaction, could well determine the fate of all asset markets for the rest of this year.


I just punched up the ES chart, and again, as I'm typing this, the change is 0.00 (this is the equivalent of an "Is this mike on???" moment). As much as I'd love to see the equity market get its face blown off, this is not the time for bears to be celebrating. The ES is exactly at the sorta-kinda breakout point of 1224. The farther it can erode below this line, the more meaningless the breakout will become. If it shores itself up here and starts pushing higher, well, what we saw today (Tuesday) might simply have been the market getting a breath before cracking above 1260 and upward.


The market has shown itself to be very treacherous, even for the bulls. Looking at the longs I entered last week, two of them – – which, thankfully, I exited – – have utterly blown up (FSLR and NFLX). I managed to scalp a few hundred bucks out of NFLX today, but this stock seems so broken that I don't think it'll find solid support until the low $40s.

The 1,000-point rally on the Dow was awful, but the good news is that it has created some astonishly gorgeous short setups. I am just about 50% committed to the market right now, and I will remain light until we get some Euro-visibility. Indeed, i just read that tomorrow – Wednesday – which was the latest Big Announcement Day – has already fizzled into another no-show. So this circus is going to keep going until the clowns pack it in. In the meantime, I am shorting what I see as the best-of-the-best in my Bear Pen watchlist and will be nervously watching every tick of the Euro in the meantime.