On the Brink

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UPCOMING EVENTS

On the Brink? Seems like things are coming to a head today over in the Eurozone while the US markets idly watch.  We see that Bloomberg notes:   UPDATE: *EU FINANCE MINISTERS' TALKS WITH GREECE OVER FOR TODAY, GREECE SAYS WON'T TAKE ORDERS ON BAILOUT   EU President Jeroen Dijsselbloem had some words to say highlighted here:   *DIJSSELBLOEM SAYS MINISTERS WERE DISAPPOINTED BY WEEKEND TALKS  *DIJSSELBLOEM SAYS BEST WOULD BE EXTENSION FOR GREEK PROGRAM *DIJSSELBLOEM SAYS EXTENSION WOULD ALLOW FLEXIBILITY FOR GREECE *DIJSSELBLOEM SAYS EXTENSION WOULD INVOLVE COMMITMENTS *DIJSSELBLOEM SAYS WOULD NEED AGREEMENT TO ROLL BACK MEASURES *DIJSSELBLOEM SAYS WE STAND READY TO CONTINUE DISCUSSIONS  *DIJSSELBLOEM SAYS IT'S UP TO GREECE TO DECIDE ON EXTENSION *DIJSSELBLOEM SAYS COULD BE EXTRA EUROGROUP ON FRIDAY *DIJSSELBLOEM SAYS WE HAVE THIS WEEK, BUT THAT'S ABOUT IT   I think the "deadline" was just extended by 40% if my math is correct!   Clearly, the EU is worried.  Why would they not?  What does Greece have to lose?  They seem to be bargaining from a point of weakness really well.  They know that the EU cannot afford to provide a model for future governments to pull the same gambit or the EU faces the very real possibility that whatever is providing coherence in their economic "union" will have about a many teeth as a three-month old child.   But, this is just political banter right?  I know the markets were for all intents and purposes closed over here in the US, but those that were forced to man the desk had some fun for sure:   I won't even bother to show you a Greek Bond chart!  At any rate, I think we have some fireworks to look forward to this week!   Trade well and follow the trend, not the perma-bull OR perma-bear "experts."   Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. Read Past Issues of Larry's Newsletters at TradeWithLarry.com

Leading into the holiday weekend, the markets ended up being fairly flat on Friday. The major averages not only finished in positive territory, but achieved all time highs in the SPX and E-Mini S&P 500. It is fitting that volume and volatility were light for the day. Hence it provided the perfect storm to allow the SPX to grind it's way on up. As some would say, we are back to normal. After the extended weekend, I expect some choppy conditions for today. We could drift a bit lower in the markets, as the 2100 in the SPX should provide somewhat of a barrier for now. Look to the downside for the session, but we could end up chopping our way back up. That is the markets as we know it the last 2 years. Chop and grind, chop and grind. Read More

TECHNICAL DATA ES 2091.75/2086.25 POC 2088.50 YM 17,992/17,958 NQ 4370.50/4353.50

How do we determine what strike to target when putting together a directional signal for earnings? We can use two pieces types of data to achieve this. First, we can look back at the historical performance over a period of time. We use two years worth of data. What is the average move? Also what is important to gauge the predictability is how tight of a distribution are these earnings. You really cannot use an average of a distribution that is all over the place. But if we see a consistent move up or down of 4% to 6% as an example, it is perfectly valid to expect an average 5% move. What are the option prices suggesting? This is very helpful because it gives the opinion of people who actually have skin in the game and will end up having to act on way or the other after earnings. Now that we have our "prediction target" estimated, we now have to pick what strike. Weather we are trading a straight directional play like a vertical, or one with an IV-regression component to it like a calendar, you want to have your targeted strike be your short strike. This is because you want to maximize your long strike while minimizing the effect of your short strike. Read More

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