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If you click the "Thanks" button in the lower right of my post then you wouldn't need to add a new post to thank me that adds length to the thread and prevents people form reading the whole thread.
I think that is because the Chinese Government came in and did a lot of buying today. There is no way they were going to allow a 10-20% crash the day after they removed the circuit breaker. They would have looked even worse and they believe in keeping up their reputation at all costs
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Thinking about this weeks stock market action I kept coming back to August of this year, and specifically what happened when we had two large consecutive down days, especally when the second down day was a Friday.
So this got me thinking what happens when we have a truly terrible week, and we finish the week with a Friday sell off? Thankfully the statistics are no where near as bearish as they were in August. Unfortunately my normal program for doing this analysis is out of action so I had to do it in Excel. As you can see definitely a bearish inclination to Monday, but nothing that severe.
Apologies for cross posting this but I'm posting it in the ES options Selling Thread, ES Analysis Thread & the Homework Thread.
I'm more interested in seeing if this is the start of a larger trend down. So far the only thing I'm reading is gloom and doom in the market and the economy as a whole which seems to contradict what the Fed is thinking. There's nothing to do but watch and see how the market reacts to earnings. My gut says we go back to where things were in August but what do I know .
But doesn't a rise in yields and strength in USD typically lead to a decline in stock values? This all seems completely normal to me as participants wean themselves off the stimulant that was QE and return to 'normalisation'.
Over the long term we will see a flush out of weak hands (zombie businesses surviving just due to low rates/ cheap money) and a strengthening of those businesses who have a solid base from which they can grow as their competitors fall. Once rates stabilise and weak businesses are flushed out, I predict we will see stocks once again perform well as these stronger businesses blossom.
What this has to do with Oil - well I think it is a similar story. With the USD likely to continue strengthening, I think we will see lower oil for longer. The market is flooded at the moment and from speaking to people in the physical market - refineries are cautious to take on new deliveries unless the prices are very competitive, as there is just so much supply and willing sellers. Once again - we need to see a flush out of the dead wood and strengthening of others before the industry revitalises. That said - I think even then $40-$60 p/bbl will be the new range.
NB: Just realised this is not the CL thread. Will leave comment though as I suppose it fits.
Also part of the reason the stock market is down is because all of the energy companies's stock is down because of the low raw product prices. Oil down brings oil company stocks down.
My opinion, there's no point in selling puts until after earnings season. There's too many unknowns right now and the market hasn't had a very healthy start to the year. The general consensus seems to be that earnings will be very "meh" which in the broader context of things will keep the market down. As others have said the S&P is tied to the price of oil and right now there doesn't seem to be a floor in sight. I did run a few back tests over the past few days to see how Ron's spread method holds up given the latest market drop and it's been pretty interesting.
Here's what would have happened had you opened a position just before Christmas with the idea that a santa claus rally was coming. As you can see it got close to 50% before the big drop in the new year but even then the margin holds are not that terrible.
Here's what would have happened if you opened a position in the beginning of January with the idea that the new year would start with a bang.
Again you'd be down but could sleep at night knowing you won't get wiped out in a jarring move down. Either way, if you ABSOLUTELY HAVE to put a trade on, there's better places to do that right now. I just don't know any other markets that well and frankly will not try and pretend I do to make a buck, I've still got my day job . I paid my tuition to the market in August and am more than willing to wait and see how all this shakes out in Q1 before doing anything.