Wednesday, August 12, 2009

I'm Ready for a Sell Off

Stocks did not pop on the Fed's announcement. In fact, the really began fading prior to the announcement and began selling off when the announcement came. The financial world watched but there were no fireworks as we have come to expect. The Fed will keep buying up GNMA and Treasury debt (nothing like a banking cartel owning our country)and interest rates to the Fed's crony banks will remain at 0 to 0.25%. I want to be a bank!

My Boeing calls did not get sold and despite the lack of market follow-through, I purchased additional shares of DXD to protect on the downside. My only evidence that the market might be weakening is the three day activity. Notice how DXD (the double down ETF on the Dow) appears to be basing and is poised for a break out to the upside. That could only happen if the Dow sells off. But now is as good a place to add on to positions as any. Anything can happen in the next couple of weeks. As we have seen in many charts, we are moving in a pennant formation with no definite direction to either the upside or downside. As such, I want to take chances for the downside move when prices are at the top of this pennant and take some shots on the upside when we are at the bottom. I think that it's smart to hold a hedged position such as this. As I've mentioned on the Boeing options, the decreasing volatility makes options cheap but the potential market movement once we have a breakout can easily absorb any losses you take on options that are on the wrong side of the market.

More to come later this week when the Fed tells us what is really on their mind. I don't think that they like to break news when we expect. They are experts at shaking the market, which is why I've shied away lately from playing with bonds and notes. I'm tired of living in fear of the FED.

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