Daily Chart showing the bull-flag (if we take out the last candle - yesterday's candle)
However, the Israeli military strikes in Lebanon changed all that. It seems that the market will get worse before it gets better. Please refer to my 18 May 06 blog posting. Perhaps, this is the trigger that would crash the US market (and the global market). Hopefully, it does not happen but we should be prepared.
The latest Middle East crisis if not tackled rationally could drag Syria and worse, drag Iran to war. Already Iranian President said that any attack on Syria (to punish its support for the anti-Israel militants in Lebanon) is an attack to the Muslim world. It means Iran would be drag into the whole crisis. I cannot help but think that this is the perfect excuse for Israel (with moral support from US) to bomb Iran's nuclear plants. That will "solve" US problem of having to negotiate with Iran on the nuclear stand-off. It seems like everything is well scripted. Iran's involvement would likely increase the oil prices as Iran threatens to choke off the Straits of Hormuz (if it under attack) thus choking off 30% of world oil supplies - thus lead to a dramatic and perhaps a sustained increase in oil prices. This would cause the world stock markets to slide and slide and slide....... and world economy tumble.
Enough of the geo-politics, now how should we play?
Since today is Friday, no sane trader/investor would like to keep a long position over the weekend (anything can happen over the weekend). If they do, they would probably have hedged it. If the crisis escalated, energy stocks should benefit as the oil prices is expected to break new record. Already it broke its record high yesterday and it broke again (US$78) today in the Asian market. To break $80 or even US$100 is within reach.
The rest of the stocks would drop. Close one eye (pun intended) and sell anything except energy (and perhaps gold/metals stocks).
If the crisis showed a promising early end, the market quick reflex would be a rally. Next week, we have a few heavy technology companies which are releasing their earnings. These include AAPL, GOOG and INTC. Their earnings announcement would also move the market.
I have already in position KBH Aug 45 Put and QQQQAug 38 Put (played this yesterday). Both are positive at the moment. KBH was played on 5 July (now waiting for a 100% return - coming soon). Will probably add more positions on other counters later. Of course, playing ES, ER2 or NQ is good if the timing is right.
My XSNX is negative. Will just keep this (very small play) and revisit at end of July.
- PersianCat04 (Millioanaire-in-progress)
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