This week is going to be probably one of the weeks that will be remembered for years to come. Here is my brief take on the key events ahead.
In what form Uncle Ben unleash QE3, how Greece defaults (possibly) on its debt and a proposed “Buffett Rule” for Millionaires.
No one knows what Mr Bernanke will bring to the table during Sept FOMC meeting. However, basing his logic from QE2, it seems he might, again, focus on “wealth effect” via “stock market”, or sort of. Broadly speaking, same stuff but packaged differently for it’s going to be challenging for him to sell the same story without repackaging it especially after a failure (arguably). But whatever it maybe, expectations are already factored-in. If it is, fine, it isn’t not, expect a meltdown. I’ll play it via a possible straddle or back ratio; I shall post later.
ZeroHedge presents a case that Sept 20 might be the day when Greece defaults. Whether Greece default on this date or not, I am sure Greece will continue to feature amongst top “reasons” for the market volatility. Oh by the way, if you haven’t been reading ZeroHedge, you’re missing an excellent source of good financial information. I shall highly recommend visiting it often.
Warren Buffett said ““Stop Coddling the Super Rich” or aka Tax Me More and so here it is; Based on the weekend News, President Obama will be proposing new tax rules for Millionaires called the “Buffett Rule”. Whether this rule is accepted or blocked, it sure is going to create some turbulence as well. Whether the millionaires would like to book profits now at a lower tax rate or they keep the money to benefit from the QE3 remains to be seen.
As of this writing, US Stock futures are already trading 1.5% lower. Stock market participants just don’t want to keep, as it seems, positions beyond a day or so. Day after day, Dow has been swinging sharply by hundreds of points. “Volatility is here to stay” is heard almost everyday; well, I think it matches well with “uncertainty is here to stay”.
During the past week, NFLX and RIMM fell pretty hard. We did a speculative trade on Gold, which returned nice short term gains. (Watch out- Gold is not something that can be traded by retail traders easily). There are so many big stake holders that they can throw little Johnnies out of market. The speculative NFLX also reached it’s target quickly.
We are heading into challenging times, so stay focused and don’t take unnecessary risks.
Profitable Trading, OP