The way to make money is to buy when blood is running in the streets, even if the blood is your own. - Baron Rothschild
What a tragic event.
In a very odd coincidence, the above quote was discussed yesterday morning in our Member Chat, well before the attack in Boston turned it literal. We were discussing our strategy for the day's anticipated sell-off but, to be honest, when there was actual blood in the streets of Boston, we kind of lost our appetite for buying in the afternoon.
We did cash in some of our shorts and got more aggressive on some longs but that was at what we thought should have been the bottom around 2pm. As it turns out from the Futures, that was the right call and the markets are back around there in the Futures (8am) and we were fortunate enough to call longs on /ES this morning at 1,550 and the S&P Futures are already up over 1,557 – good for $50 per point per contract but up a whopping 20 points from yesterday's low ($1,000 per contract).
It's one thing to say we should buy when there's blood on the streets but an entirely different thing to actually do it. As you can see from Dave Fry's S&P charts, despite all the excitement, not a lot of technical damage has been done yet and a strong bounce off the 1,550 line after failing 1,600 would be 40% of the 50-point drop or 1,570 and a weak bounce to 1,560 is what we bet we'd get with this morning's Futures play.
A weak bounce doesn't mean anything and even a strong bounce isn't a recovery until it breaks so, with similar logic on the other indexes, we'll be looking at the following levels today:
- Dow 14,660 (weak), 14,700 (strong)
- S&P 1,560 & 1,570
- Nasdaq 3,320 & 3,340
- NYSE 9,010 & 9,070
- Russell 915 & 930
- Transports 5,960 & 6,120
- SOX 425 & 428
Anything less than strong bounces on the day will keep us on the bear side although, as I said, we lightened up to a more neutral stance on yesterday's violent pullback. The VIX ran up form 12.50 on Friday to 17.50 yesterday, up 40% in just one day! That one will bear (oops, don't say bear!) watching as will TLT,…
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