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The Setup

Disagree with the so called market reversal following analysis of Bernanke baited breath comments.  Everything was tanking with no bids and miraculously, everything got 40 basis point bid increases at precisely 10:05:11 am Friday morning.

Why?

I wrote on Jan 15 of this year that the SnP500 would max at 1360 on April 10, flatline until early May and then drop thru June.  The market would then spike up with sufficient force to present a juicy target to do a classic rulling elite rug pull using the now familiar themes of "European Debt Crisis", "American Debt Crisis", "China Slowdown" and the ever popular boogie man "Double Dip Recession"  and that August would see a drop to 1185.  Well, the peak was 1370 around the end of April and the panic selloff bottom was 1125 in early mid August.

Now we get the absence of any "real bad news" and just the standard ignoring of poor economic data that accompanies the current runup this week.  Monday was gangbusters (Barron's with its absence of bad tidings as opposed to their thematic presence of bad tidings at the end of July), Tuesday saw yet another PPT style intervention in the am following news that apparently a few people in the USA with money do not feel all that good.  Did you notice how we got the closing spikes in place for both Monday and Tuesday?

Ok, now Wednesday comes and guess what?  Flatlining with a rock solid mix of gainers and losers on the market will set the tone for "an easing" on Thursday and then the motor mouths on CNBC et al will be blabbing about the inevitable profit taking on Friday "ahead of the long holiday weekend".   An ok time to reset certain positions if you took advantage of the goosing over the last few days.  For example, SPY's will probably drop back to 117 Friday, and notable jumpers like CAT and DE will drop back below their 90 and 80 levels respectably some but not to bottom of 80 and 70, say more like 85-86 and 75-76.  Also IBM will finish around the 170 mark.

Now what comes in September?  Da Boyz need to rattle the chains some so that whatever they "discuss" on 20-21 has "backing".  There will the inevitable talk of 3 year anniversary of Lehman etc and we should get another swift kick in the britches, enough for the inside track to again have polished off closing Sep call contracts at a good profit and having set up their puts.  We have the post Labor Day shortened week and then the week of the 12th.  My bet is that Obama job promise gets the SnP500 limping back up to 1225 that week and then gets clobbered during the week of the 12th, since our anniversary talk sets up and Da Boyz need the setup.  I figure a 3 day drop to 1145 is enough to do the trick.

Then the September meeting comes and goes but nothing concrete.

Why?

The last guy the ruling elite wants as president is Rick Perry.  So how do they stop him?  Ease the market back to a very small gain on the year, say 1290 and then rock and roll for the spring, giving the Obama train the juice that deprives Perry of oxygen in the critical early primary season and then sets the tone for the runup to say probably 1420 by late spring early summer with the profit taking more closely managed pending the post election hello.

Thus, we will see an October drop of some amount but nothing grievous, just not a lot of jumping all the way thru the end of the year.  No November announcement.  No, "The Word of God" will be delivered at the FOMC Jan 24-25 with enough leaking before to get some traction.  Ain't it great?

So hope everyone enjoyed August.  It was a great time to sell bottom puts and layer in near the money short term calls and Feb/ Mar 2012 out of the money calls.  In fact, I sold 300 put contracts and used the proceeds to buy the calls.  Guess unless the end of the world is coming, time to settle in.  Keep the eyes peeled for this Friday and next week's perkup and then the small rug pull ahead of the Sep FOMC bs.  Also, some day in October, not sure when, probably more toward the end after sufficient CNBC bleatings have been heard about how the non Double Dip did have some impact on corporate earnings.

It's fun isn't it?