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Data released on May 7th shows that Sentix Investor Confidence in Europe is now at its lowest level since July 2009, as shown on the graph below. Economic pessimism is accelerating.
Since it's a "leading indicator of economic health – investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity," this can only mean that economic conditions will worsen in Europe.
When I reflect back on the very best trading days of my life, they almost all have one thing in common: they started off as completely normal and, often, hum-drum.
In other words, it's not like the opening bell rang and it was obvious that the day was going to be a bonanza. It might start off with a small profit – or even a small loss – but, tick by tick, accrue into a terrifically profitable day.
On the other hand, when I think a fantastic day is forthcoming, it usually ends up lousy. I have a feeling today is just such a day.
Yesterday afternoon, I was having a terrific time at the San Francisco Zoo with my little girl. The most peculiar part of my visit was in the afternoon when I was, in the span of moments, watching the Euro plunge on my iPhone while observing a hitherto cute baby gorilla engage in the acts of (a) making a huge puddle of urine on the concrete; and then (b) slurping it up.
There's got to be a parable in there somewhere.
In any case, with the ES down 19 points, the Euro down about a full percentage point, and gold (my long) holding up decently, I had big dollar signs in my eyes as I went to bed last night.
Well, this morning I was in for a rude awakening:
(1) The Euro has recaptured almost all of its lost ground;
(2) The ES and NQ had dispatched with most of their losses (and, as I am typing this, the ES is well into the green);
(3) Precious metals and the miners were weak, and those constituted my long positions;
(4) One of my short positions, Vertex (VRTX) was up 60% pre-market, which I covered at a nasty loss. (I will note that my individual shorts usually count for less than 1% of my portfolio, so even train wrecks like this aren't that damaging – – but that doesn't take away from the suckitude). Just to add salt to the wound, the regular-hours trading was up "only" 40%, so I shot myself in the foot by trading before the open. Ugh!
I have beat a hasty retreat back to 50% committed (all in shorts; the rest in cash). I am, at the moment, down 0.6% on the day versus a flat market. A manageable loss, to be sure, but all the same – – I can pretty much assure myself that my dreams of a Monday bonanza have gone the way of the dodo.
Oh, to close on a somewhat positive note. As some of you recall, I re-opened my options trading account a few weeks ago, just for the hell of it. I am pleased to say I am up over 50% on that with what have been very straightforward trades. The latest was a block of FXE puts, which I sold this morning. Perhaps the tiny size of the account makes my disposition toward it more "pure" as a trader.
The elections in Greece and France over the weekend were interesting, with that clown Sarkozy replaced by a socialist with a clear mandate for bigger government, higher taxes and deficits, and also a mandate to try to steer Europe in the same direction. The two main greek parties, in coalition, will also no longer have a majority and their ability to deliver on their commitments to the ECB and IMF is very much in doubt. The stage is being set here for chaos in Europe and a summer pullback on equities. The question here is whether that summer pullback has already started.
I think not, on balance, though the failure of some very nice bull patterns last week on multiple indices is a serious warning signal. I might be mistaken though, and on SPX I'm watching the key 1340 level to see whether it holds this week. If it doesn't then the answer might be yes. For today the lower bollinger band on SPX is at 1355 and I'd expect to see some support there:
