A Polite Market

• Posted by DynamicHedge
• on June 4th, 2012

Be polite, be professional, but have a plan to kill everybody you meet.

General James N. Mattis

You can take shots on the long and short side but everything is a trade until there is some certainty in the EU.  In the absence of certainty I’d take a catalyst — anything to move things along.  Right now, the trade is to sell because no one knows anything.

Before the long weekend I mentioned that there was historical precedent for higher prices.  Given how fluid the news has been there there was good reason to be cautious.  I recommended using the recent swing lows in $SSEC as a decision point.  Those lows got taken out on the Friday before the long weekend and then more on the holiday Monday.  We’ve been selling ever since.

This index has a small bounce but is now trading around 2300.  Caution is warranted until the market starts acting constructive.  The historical patterns are no longer useful because the market is taking a different path.  We’re breaking lows and knife catching is a dangerous and expensive game.  Note: Lines are drawn from closing prices because closing prices are all that matter.

I will continue to monitor the $SSEC as a tell for our markets.

Follow the Shanghai Composite here.

Read the only thing you need to know about the Euro crisis here.  Strong words and potentially dire consequences.  Remember, the world hasn’t turned to ash yet.

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