The Market Should Continue Higher This Week - Nothing To Stand In The Way!
Posted by Pete Stolcers on March 8
Major debt problems are brewing in Europe and in many other parts of the world (including the US). Greece was just a taste of what is to come. The market has discounted the news in the absence of “dead bodies”. It actually needs to see a failure or three. When multiple countries start lining up for financial aid (and they will), the problem will be too big to ignore.
For now, the rest of the world seems content to finance the ponzie scheme. Great corporate earnings, solid balance sheets, decent economic news and low interest rates are fueling the market.
This can continue for a long period of time. In today’s charts, you can see the big drop in 2007 and the snap back rally to new all-time highs. It took about a year before the market had the evidence it needed and then the walls came crashing in.
I am not suggesting that we will make it back to the old highs, but if the credit problems take a year or two to manifest – perhaps. The warning signs are there and more and more people (still less than 10% of traders) are seeing the storm clouds. The bomb is massive and the fuse is burning. We just don’t know how long the fuse is.
This will be a quiet news week and I am expecting the momentum to carry the market higher this week. There is nothing to dampen spirits and we should challenge the high of the year. Option expiration could also provide a spark if buy programs and short covering kick in.
We will buy calls on a VERY strong financial this week and I will place a conditional order to buy puts on a weak fiancial stock if it breaksdown. We have a lot of bearish risk exposure since we are trading the long side and I have to place a bearish trade to protect us if the unexpected happens. The higher we go, the more severe the decline will be.
