Philip Davis'  Instablog

Good morning!

We've got to respect $3.5Tn and let's use our Futures lines as bullish jumping points. They work out to roughly Dow 13,200, S&P 1,400, Nas 3,075, NYSE 8,250 and RUT 840. No point in over-thinking it, it's MORE FREE MONEY and really, if all these guys (because none of this is set - just rumors) do what the MSM is trying to convince you they will do - That's over 6% of the ENTIRE PLANET'S GDP in additional stimulus and then we're on our way to Dow 1,600 and S&P 1,600.

So the DDM trade from last week, our last 10 bullish trade and a few more will be appropriate - IF we hold these levels but, IF we fail them - then what can possibly stop the market slide if $3.5Tn in new QE promises isn't going to do it?

That means that, this morning, despite the bullish turn of events (which we anticipated last week) we're more inclined to cash out our bullish trades into the excitement and press our bear bets and TOMORROW, if we're still over our levels - THEN we will scramble to add some aggressive bullish trades to our virtual portfolios.

Again, I cannot stress enough that CASH is my preferred position because this market is tough to call and you need to be very flexible and very nimble to trade it. Since most people are not - my general recommendation is to stay in cash until a more obvious set-up presents itself. This is more like an inflection point, where we could go up or down in either direction - very quickly and for no particular reason.

It's very hard to trade this way but if you want to buy low (bullish) and sell high (bearish) then you have to learn to take unpopular stands against the crowd. You also have to learn when to quit, which is why we set these lines (generally our 7.5% lines on the Big Chart) where you take your loss and walk away - until we get to the next cross that we think may be rejected. Keep in mind that, if true - there's no possible way to fight a $3.5Tn injection of capital. If not true, all the gains we're seeing this morning and the rest of the week can be erased in a day.

Our DDM play last week was the May $70/75 bull call spread at $2.10 for the Dow over 13,200 and you can sell puts against anything you want to own for $2 to drop the next to .10 on the $5 spread with DDM now at 70.24. This trade isn't going anywhere - there's no rush. It's easy to get more bullish if the move isn't BS. What's hard is getting these cheap entries on bearish positions when the market is jammed up in the morning and the VIX is below 15 - these are the opportunities to buy low, not chasing bullish positions.

Did you all catch StJ's AAPL vs Tech sector chart this weekend? Don't forget those Tech earnings INCLUDE the AAPL partners who are also doing great. They INCLUDE PCLN, NFLX, BIDU, LULU and all those other "great" momentum stocks who, as a group, are DOWN SIGNIFICANTLY in total earnings from last year.

(Click to enlarge)

This is every all theater and nothing more - as Shakespeare warned us 400 years ago:

Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.