Flip to Long

This rally looks to hold. A lot of positive chatter from money managers that this is real relief in the way of international intervention. MS gets another investment look from a Japanese bank looking to inject 20% equity. Everything was cooling off the initial spike until that news hit. That was potentially a big issue.

Brian Shannon drew a graph at the beginning of the day that has played out almost perfectly.

I closed my IWM, SPY and EFA puts for a double instead of a triple. That's the difference between Friday and Monday. Live and learn. Next time I smell government officials meeting I'll sell my shorts early.

I flipped after the afternoon dip (also predicted by Brian) and bought the NOV/DEC SPY and QQQQ atm calls for a 500 - 1,500 point run to the upside.

"The Fly" says we will back and fill tomorrow and then smoke to the upside on Wednesday. He's often off on timing a few days but not the direction so I'm going to hold my calls inspite of a retreat tomorrow.

There's still dangerous headline risk so I'm cautious about holding too long. I'm not 100% long like I was 100% short. We are, after all, just hitting a snap-back rally in the middle of a catastrophic bear market. Brian showed a graph of prior declines where the rally on average retraces 75% of the decline. I don't expect that here but I do expect another 1,000 points to be reasonable before a retreat.