Watching QID
Possible Call Play
“Things Have Not Yet Bottomed Out. They Are Probably Going To Get Worse Before They Improve. But This Is A Big Step Forward Toward Making That Improvement And Putting People Back To Work.”
- Presidential spokesman Robert Gibbs
Dear Bottarelli Research Member,
It feels like President Barack Obama has publicly spoken every day since his inauguration, and this week is no exception. Later today in Denver, he’ll sign into law the most sweeping economic stimulus package in decades, which is aimed at reinvigorating job creation, consumer spending, and public optimism. If Wall Street’s early reaction is any indication, there’s some major fear that this package will not work. If it proves unsuccessful, we’ll have a global economy in terrible shape, combined with an unprecedented national deficit. This could spark a market wash-out that sends shivers down my spine.
Now I admit, I’m no economist. But in my opinion, creating jobs is an important aspect of economic recovery — but it falls third on my list of top priorities. Priority #1 is fixing the U.S. housing market. Priority #2 is fixing the credit and financial markets. Then comes job creation. Therefore, I feel that this new economic package is attempting to address the third most critical issue, which is why it’s getting met with skepticism and doubt on Wall Street. Now, President Obama plans to unveil another aspect of his economic recovery effort tomorrow in Arizona which zeroes in on the housing markets. It’s rumored that this plan will help millions of homeowners fend off foreclosure, and this could be met with market acceptance (unless, of course, this announcement turns out to be another vague and directionless plan. See Tim Geithner).
Whatever happens, it’s clear that we’re once again faced with a market that’s being led completely by the leash of Washington. Therefore, it’s plausible to expect even more major price swings. So on that note, I’d like to review the current status of the Dow, S&P 500, and NASDAQ 100 by looking at their respective Ultra-Short positions. As you’ll see, we could have a really strong opportunity shaping up on the NASDAQ.
First up, take a look at the UltraShort Dow 30 ProShares (DXD — NYSE) and the UltraShort S&P 500 ProShares (SDS – NYSE). As you’ll see, both DXD and SDS have broken aggressively above their 50-day moving averages.
Keeping this in mind, now take a look at the UltraShort QQQ ProShares (QID – NYSE).
As you’ll see, the QID has yet to break above its 50-day moving average, which could indicate that the QID has a lot of room to move down compared to the other major market averages.
I admit, companies like AMZN, AAPL, GOOG, and RIMM have all proven to be resilient in this market, but if conditions continue deteriorating, we could see dramatic sell-offs in all of the technology names. If this occurs, we could see the QID aggressively break above its 50-day moving average, just like the DXD and SDS. As a result, I’ll be carefully watching the markets — and any hint of a full-on breakdown will warrant a new trade on QID March calls. When it’s time to act, you’ll be the first to know. But until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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