All Eyes On Bernie - Makes It or Breaks It

bernanke fed meetingMy fast from shorts was finally broken today as I began to make some small moves. Actually, most of the moves I made today were in anticipation of tomorrow's big FOMC meeting. It is sure to cause a lot of noise in the markets and I thought I'd try to take a run at it.

Today's trading was much as I expected. We saw mixed trading in the morning, flip-flopping from red to green. Once again we saw huge spreads on the FAS/FAZ combo, which may have weathered good for some of you day traders (if you went with FAS of course). News of an uptick in housing construction helped flush some confidence in market towards the middle of trading. They spoke of this increase like it was the end of the housing crisis. Well, considering January is usually one of our worst selling months for houses, it is not surprise that February happened to perform slightly better. Media loves to put their spin on things.

The buying really kicked into gear towards the end of the day, where we saw the Dow settle at 7395. Supposedly, having a close above 760 for the S&P is a strong technical move and should mean there is some momentum heading toward the 800 level. I believe it was, once again, anticipation of things to come, which really caused the market to rally at the end. Tomorrow, The Fed meets to discuss any rate changes (which I doubt there will be any) as well as the new possible plan to buy up bonds from housing authorities such as Fannie and Freddie. The bill is expected to be around the $600 billion range, and with the added discussions of buying US Treasuries and corporate bonds, the number could reach over $1 trillion. That's right, one trillion dollars.

Of course news of this degree would cause for huge cheering in the markets. The question is, will they do it? I don't see how they would announce something so quickly, yet so big, without "rolling" it out, as they've done in times past. Indeed, they may report of the possibility of such action, but I believe an announcement of "possibility" will be disappointing to investors and may put the market in a tailspin in afternoon trading. However, if by chance a significant announcement is made, a 4-5% rally could be bound. All eyes are on Bernanke at 2:15 pm Eastern to hear the results.

crashmarketstocks podcast
To prepare for the fireworks, I went in and bid on some $50, July expiring FAZ call options. During the last 20 minutes of trading, I was able to get the price from the ask of $14.90, to my bid of $12.90. There definitely were some nervous traders before close wanting to dump their contracts. As a hedge to this, I also went in and bought some SSO, in case of a bigger rally. I am placing a 5% stop loss on SSO, so that if we indeed see an afternoon tailspin, my losses are minimal. Hopefully, at that point my call option profits will far surpass my losses, for a nice quick profit.

If we see a rally, I will enjoy some strong gains with SSO, while holding onto my call options. Considering the expiration is in July, I have plenty of time to see the downfall of banks to see FAZ strengthen again. I was glad I was able to get in.

So, that's the game plan. It should be a very interesting day tomorrow, one of which could spawn some more moves on my part. I almost pulled the trigger on some SRS today, but tomorrow's announcement held me off for the time being. I am hoping that I don't regreat that and am hoping for more green in my Zecco.com account tomorrow.

Today I posted a new podcast for you subscribers, which you can listen to here. If you are wanting to subscribe, CLICK HERE. I am anticipating an exciting day tomorrow and hoping for the best. We continue to move as planned for the bear market rally. I just frequently remind myself of the crash around the corner. Happy Trading.

7 comments:

  1. denis Says:

    keep up the good work, the podcasts are excellent.

  2. Wen Says:

    Good post today sir. I am a new visitor that was linked by a fellow on my forum. What is the difference in the podcast? Can we get a sample of what is it like?

  3. Finance Fanatic Says:

    Much appreciated, Wen, there is a free trial for 7 days... Give it a try

  4. boogy Says:

    FF,
    Have you changed your position on buy FAZ and SRS in the current bear rally ?
    I know you bought options on FAZ, do you have a solid entry point yet ? Thanks

  5. Penny Stocks Says:

    It's really a great work. Thanks for this excellent creation...

  6. Mark Norton Says:

    I like this types of informative post. Thanks...



  7. QUALITY STOCKS UNDER 5 DOLLARS Says:

    This whole thing is a nightmare.