"The Opening Look" 6/20/12

Will this ever get back to being a market of stocks again? Macro, macro, macro! It soesn't seem to stop. From the news wires last nite comes word that China, Russia & Iran are planning coordinated war games in the Gulf next month. This scary triumvirate supposedly has plans for air, land & sea exercises involving as many as 90,000 troops. The good thing is the news emanated from Iran's semi official news outlet Fars which is only slightly more reliable than anyone living in North Korea named Kim. If true it certainly is serious saber rattling aimed at the U.S. And it will be pretty loud rattling, I'd say.  Then last night as the G20 was coming to an end, Putin in his closing remarks, when asked about whether he thought the U.S. would grant trade benefits to Russia, replied "for us, U.S. trade is peanuts". So now Putin mocks us just hours after meeting with our president. Hmmmm. So much for our new found status in the world. With the European dominos still leaning on each other, I guess it's going to be an interesting summer. And you know Mr Kim is getting jealous of all the attention Syria is getting.

On a shorter term note, today we have the Fed. Will Chubby Checker be smiling as we "Twist Again" like we did last summer (Chubby is long size in the Spiders)? Time will tell as we await their announcement this afternoon. The stream has been full of stats regarding Fed day so I'll just bring you one: from Bespoke via @ukarlewitz "FOMC days: $SPX up 68% of time before 12:30p Fed announcement but down rest of the day 67% of time (since 12/2008)". if you're not following @ukarlewitz you need your head examined as the stats you are missing are incredibly insightful.

My take, we are extended, nearing important fibs and levels where supply is expected. Vix has finally dipped, but showed some resiliency yesterday in spite of the rally. Considering how we have come very quickly, the prudent thing is to be light on your feet here. The last few fed days, liquidity seemed to really dry up just prior to and after the announcement, even more so than normal. That's just my observation, not anything empirical. We most likely drift slightly higher, right now ES is +2.00 into the announcement. If you're an option trader, don't let any narrow trade get you to short vol in the weeklys as any intraday time decay will be muted until after a move or two post announcement, then you will get the crush.  Maybe you are the type that likes to load up on a position before earnings if so then here’s another opportunity. Me, I'm not smart enough for that, never was, never will be. My positions will be on a diet all morning as I want to be almost as light as I was when I first hit this business. In the past, like a lot of news events, the first move has usually been in the wrong direction. Fading that first move usually wins, but that play works until it doesn't, and when it doesn't you get smoked! So with liquidity absent, recomendation here is to stay small no matter which path you take. Risk not Thy Whole Wad!