I couldn’t say how many “fixes” we’ve had over the past two years but there have been plenty. Each has proven ephemeral but each new effort has become more assertive. This current plan now comes with wide global support. We have to remember these governments have skin in the game for their own economies. BRIC countries have plenty of “stuff” to export to a healthy euro zone so they’ll be supportive. Bernanke is also determined to be a player rumored to be adding $100 billion in aid to Europeans. Also in support were the ECB, the SNB, the BOJ and the BOE. I guess you could say; “it takes a village”, eh? – David Fry
Bears should know they can’t fight the Fed and when the Fed brings all of it’s buddies along with their various economic weapons – it’s probably not the best time to stand up to them. We still need to hear the word on QE3 next Wednesday or all these gains will vanish in a puff of smoke but, really, what are the odds that all this leads up to a Fed meeting where they say: "No more free money"?
In our current environment, any whiff of the European financial crisis abating seems to send the markets higher. "Somehow we’re back to a risk-on trade again," says Custom Portfolio’s David Twibell, but the problem in Europe is very serious, and if there was an easy solution, we would have already solved the problem. "The market is being a bit Pollyannaish right now," he says.
We went risk-on on Monday as we bet on the manipulators to manipulate (seemed reasonable) and today is the day we take those profits off the table and use some of them to hedge for the weekend. I laid out the trade ideas from our Monday and Tuesday morning posts on Wednesday and it now looks like FXE will finish above $37 for the full 1,100% gain so we’re off to a good start already!
XLF is an Oct spread but on track and the Short FAS $8 puts for October are already down to .30 (up 70%) so there’s no sense waiting a month for the last 30%, is there? Certainly not after we make 70% in a week! VXX is well below $45 so that spread should make…
