Dear Mi Gusta

 

I would simply load up SPY Oct puts, put a mental stop at SPY 120 and bake cupcakes.

 

 

Some times the market is kind to you.

 

Unfortunately many longs were caught unprepared...

 

 

 

And now for todays follow up..

 

 

Stocks plunge on fears of a 'full-blown recession'

 

Art Cashin, tell us what we need to know!

 

 

From UBS Art Cashin

Panic And Perspective On Wall Street - We’re going to adjust our usual format a bit to try and put yesterday in a little bit of perspective. Having done this over 50 years, I’ve seen a good deal of market history - the Cuban Missile Crisis, the Kennedy Assassination, the ’87 Crash, various wars, and much more - and perspective is essential to survival - at least financial survival.

If you were writing a textbook on the mechanics of finance and markets, you might have a chapter on volatility. If so, you might list a history on the normal volatility of each asset class.

Most volatile would likely be the stock market. Valuations are based on imperfect information and individual assumptions.

Next down the volatility scale might be commodities where conditions tend, overall, to change slowly with the occasional sudden surprise from weather or other natural events.

Next down the volatility scale, would likely be the bond market - much better information and a very large, very liquid marketplace.

In your textbook, the least volatile asset should be currencies. While they historically have had wide swings, as other assets have, but they tend to move incrementally - normally small intra-day moves.

Yesterday, the textbook was thrown out the window. All asset classes saw sudden and sharp moves far in excess of normal volatility patterns. To an old timer, that points to one conclusion. Liquidation. Wide-spread liquidation across asset classes. Currencies, bonds, commodities and stocks all moved swiftly and sharply in a direction that screamed - Seek safety! Raise cash! Get liquid!

I have been lucky enough to build a mildly successful career by seeing and relating the various causes and effects that move markets. Yesterday had many contributors. European banks tottered amid more rumors and, there was a sense that in the U.S. solutions were slipping away as political acrimony grows. Even the old reliable China growth story got dinged. Chinese manufacturing numbers hinted a slowdown if not recession. FedEx added to the China worries by noting a sharp drop-off in Asian technology shipments. There were also reports that folks were having a tough time getting paid by Chinese counterparties.

All of that had a quick and discernible negative impact on markets. But, the selling was far more pervasive and dramatic than simply a conscious adjustment of positions based upon new data. Thursday’s action screamed liquidation - and not all of it voluntary.

That, in turn, brought echoes of 2008. Who were today’s counterparties? Was there an AIG type in the new European crisis? Those are the kinds of unknowns that fuel liquidations. Everyone begins asking everyone else to put up more collateral. It becomes a feeding frenzy for the rumormongers. They can make anyone a victim. With counterparties unidentified, there is almost no way to counter wild rumors. We need a time out here.

 

I guess its been about 16yrs now of on and off active trading. 20yrs really reading up and following everything.
 

Being calm and cool took a lot of practice, Im sure you know how important it is to stay calm under fire.

 

You need to have a plan attack and then execute on it if its going your way. If things are not looking good, bail out and wait for a better opportunity.

 

Im think that everybody has the whole weekend to relax, the media has time to spin some BS bullish stories and hopefully rally this market early in the week. As such, I am planning to play the upside with some calls (took home small SPY call position).

 

If the market sells of hard on Monday, then I was wrong in my assumptions or I was just early. I will wait to see how far it goes and reevaluate. I will be stuck in small position that will be losing money, but Im ok with that.

 

You will find that out of 10 trades, you can be wrong 7 times, but as long as you keep your losses small, the 3 times you are right will make up for the smaller losses.

 

 

 

Im going to keep a running log of the headlines I see cross the wires relative to where the market is.

 

This evening we have a sweet one from Forbes!

 

 

9/23/2011

Is It Time to Get Out of the Stock Market?

 

http://www.forbes.com/sites/financialfinesse/2011/09/23/is-it-time-to-get-out-of-the-stock-market/

 

 

 

Thanks for your kind wishes. I used to be a very active short term player, so this a big change for me

 

 

 

Everything is looking wonderfully bullish again! Hooray!

 

Im interested in seeing how we do in this area here, if we stall out, its hello SPY puts once again!

 

 

 

 

Todays Fast Money recap
by thestreet.com




Dennis Gartman said on CNBC's "Fast Money" TV show that any effort to enact a European rescue plan will be difficult because it will require the approval of 17 countries. "It's not going to happen."

Tim Seymour said private bondholders are angry about the haircuts they will have to accept under a deal. He said today's market action shows just how fragile the markets are and how this situation may gone on for sometime.

Guy Adami said the market tested the upper end of the range today and sees it heading lower Wednesday.

Joe Terranova said there is a lot of uncertainty in a market that he characterized as not too bearish or bullish. He said investors should trading by using yesterday's low as a point of reference.

Melissa Lee, the moderator of the show, said metals were on fire today, with silver jumping more than 6% and big gains in copper and gold.

Gartman said today's rally was triggered by a change in margin requirements Monday night. He said the short-covering rally won't go much longer.

This trading reminds of the weeks around Lehman . We all "knew" that the banks were in big trouble, but news kept on coming out about how everything was contained, and everything was going to be ok!

We rallied on some key days, but at the end reality sank in and the market headed lower!

Will this all be a repeat?