Kudos to MMs

1450 is certainly out of whack as a realistic medium term target (1-2 months?). it is 10% away.

two examples to illustrate what I mean:
1. GS has 1450 target but it is their year-end target (7 months away)
2. with the current VIX ~18 even after today's jump implies: 68% likelihood that the magnitude of the S&P 500's 180-day return will be less than ~10% (up or down)

so your model is much more optimistic than GS (who maintain one of the most optimistic forecasts out there) and the option folks. it could still be right and, in that case, it would be a really nice prediction.

BUT

the model has expected 1400+ for ~2 months (?)...
 
Quote from shortie:

1450 is certainly out of whack as a realistic medium term target (1-2 months?). it is 10% away.

two examples to illustrate what I mean:
1. GS has 1450 target but it is their year-end target (7 months away)
2. with the current VIX ~18 even after today's jump implies: 68% likelihood that the magnitude of the S&P 500's 180-day return will be less than ~10% (up or down)

so your model is much more optimistic than GS (who maintain one of the most optimistic forecasts out there) and the option folks. it could still be right and, in that case, it would be a really nice prediction.

BUT

the model has expected 1400+ for ~2 months (?)...
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Yep. You are 100% correct. In its defense, the parameter inverted almost two weeks ago and that always means watch the downside and don't just look at the "FV" number. Agreed though, that even with this inversion, "FV" is still at 1485 as I write this....
 
I am beginning to form a theory of a certain psychology of markets.

One thing that I have noticed is that news sometimes lags markets, and sometimes leads it. Knowing which regime we are in could be very important, as markets are some sort of hyper-evolutionary environment in constant change, and anything that helps map out a strategy of action for different regimes helps.

Here is my proposition, that when data leads the markets, we stay in ranges, and when not, we have trends. That may not seem like much of an insight (even if true), but think about how it could help in trading volatility or options in general, for example. Keep track of it over the years, and if it works more often than not, it can enrich our understanding of price dynamics.

Technical support/resistance levels become more important in ranges, and less important during trends [?]. Another interesting insight [that would follow if the above is true] is that somehow, options are more valuable in news generating environment. It would be interesting to also do a study on how skew dynamics change as a result. Does skew lead or lag this environment, etc...Is skew efficient in the face of regime changes? How fast does it adjust?

The FED has made it easier for us to become better traders, because by making interest rates zero, we can finally see markets react with one parameter frozen (shifting the uncertainty to inflation did not happen). Then as that parameter is again allowed to fluctuate, we can see price dynamics mix and complicate again. The last two years may be the most educational market environment ever.
 
As expected, 1315 would not hold. Now you need to do some soul searching where to get long. Note that it is not if, but where. Extreme discipline requires us to get long somewhere near 1302. Granted, the cautious trader will get long there, but only on a momentum higher, or in other words, on a cross of 1302 from below.

I would just get long an unhedged 50 delta call option near 1302 and let the market make me right or wrong, then following the strategy outlined above on a break of 1296...
 
The 1300 - 1302 support will be broken on the open. Imo we must buy this. If you must be conservative, wait on a cross of 1300 from below. If you are further scared, use a 30 delta call or do a call spread.
 
BTW, parameter still inverted, but now mildly so. I have no intuition on it because I have no where near the data necessary to form such intuition, but it does appear that it is about to stabilize.

If this jobs event had happened before, the markets would be rallying expecting no end to QEII and even talks of QEIII. What a difference a day makes.

Frankly, the jobs outlook is surprising to me. I honest to goodness thought things were getting better. Now, I am hugely uncertain...
 
There is a Metra train accident near Union station downtown Chicago....

I doubt this is anything more than an accident, but FYI. If this is a terrorist attack, SIFs would implode.
 
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