Time to Go Short?
I had a plan in place to get positioned for the drawdown in stocks I expect to provide cover for QE 3.0 discussions. I wanted to enter in SH, DOG, and DXD last Friday but I both had no chance to open the spots and I was gun shy after so many V shaped rallies off any kind of weakness over the past year or so.
Today was a bit more of a dangerous move down as buyers did not show up after lunch like usual. I am not looking for an usual 1-3% blip to get involved. Here is where charts are helpful but sometimes you have to make a call that lies outside the lines sort of speak.
It is no secret I think markets will take a large hit after the FED makes their move to end QE 2.0 next month. With a few FED speeches that were from the usual wimps being exceptions, the FED seems really determined to get out of the markets this time. I am surprised. This makes me even more confident a shake out in on the way to act as cover for QE 3.0 trial balloons. Add to this a nasty market downdraft will apply pressure to the debt ceiling debate which the Treasury wants solved like last week. The story makes perfect sense.
Below is a chart on what I am looking at right now in regards to the S&P 500 (click for bigger view):
You can see today's move down has only brought the S&P closer to the 1307 level, a first stop on the way down. At this point we could just be right in the same trading range shown by the lines, 1307 to 1365.
If, and this is a big if, the move down now enters into the lower bracket I would be more interested. This range is the 1307 and goes down to 1260. A halfway probe down will be my trigger. Say 1280. At that point I would be ready to go short the broad markets via ETF's.
For Ben Bernanke to get the kind of panic he will need for QE 3.0, I think a 10% move down is going to happen. I placed a green box at the 1180 or so mark to show where I think support will be trotted out by the FED. Clearly this a a LONG way away and the box is not meant as a time prediction, that is as far right as I could place it.
The new market eats bearish ideas for breakfast and it will take the 1280 level for me to put this trade on. If I do make the move I will leave it until the S&P is around the target area of 1180, the FED starts trial balloons for QE 3.0, or a rebound happens up to 1360 again. This is not a quick move but a placed bet on an outcome I think will have to a happen. It would not surprise me too much to be way wrong here, but this is the play I have in mind going forward.
My man Josh of The Reformed Broker fame points out a cool new game to try, Chart Arcade!
This program allows you to play markets from years gone by using basic indicators to see how you would have done. This is going to be a huge time waster for me. If you are thinking about investing yourself, why not play around with this program a bit and see how you do?
Chart Arcade is a Blast
The program itself:
US Programs You May Not Have Heard Of
Another TRB post got me thinking about a few things.
Project West Ford
Project West Ford (also known as Westford Needles and Project Needles) was a test carried out by Massachusetts Institute of Technology's Lincoln Laboratory on behalf of the United States Military in 1961 and 1963 to create an artificial ionosphere above the Earth. This was done to solve a major weakness that had been identified in US military communications.WOW!
At the height of the Cold War, all international communications were either sent through undersea cables or bounced off the natural ionosphere. The United States Military was concerned that the Soviets might cut those cables, forcing the unpredictable ionosphere to be the only means of communication with overseas forces. So, a ring of 480,000,000 copper dipole antennas (1.78cm long needles, 25.4μm  / 17.8μm  in diameter) was placed in orbit to facilitate global radio communication. The length was chosen because it was half the wavelength of the 8 GHz signal used in the study. The dipoles collectively provided passive support to Project West Ford's parabolic dish (located in the town of Westford) to communicate with distant sites.
Related write up at Damn Interesting. Some of the needles:
In the nuclear testing era, it was a certainty that some one would try to send a man hole cover into space via nuclear explosion:
During the Pascal-B nuclear test, a heavy (900 kg) steel plate cap (a piece of armor plate) was blasted off the top of a test shaft at an unknown speed. The test's experimental designer Dr. Brownlee had performed a highly approximate calculation that suggested that the nuclear explosion, combined with the specific design of the shaft, would accelerate the plate to six times escape velocity. The plate was never found, but Dr. Brownlee believes that the plate never left the atmosphere (it may even have been vaporized by compression heating of the atmosphere due to its high speed). The calculated velocity was sufficiently interesting that the crew trained a high-speed camera on the plate, which unfortunately only appeared in one frame, but this nevertheless gave a very high lower bound for the speed. After the event, Dr. Robert R. Brownlee described the best estimate of the cover's speed from the photographic evidence as "going like a bat!"Scientists!
It did have some application for the idea of space propulsion from nuclear explosions, the Orion Project comes to mind. One word, ablation!
Have a good night.