What can Fed do tomorrow?

As far as I understand POMOs are over and any proceeds of POMOs should strictly go to govt expenditures in this uncertain state. So, POMOs are out, how about TOMOs? The securities lending out of SOMA is slowly rising. However, there is not enough short interest to engineer a squeeze. People bought calls into the decline today, although our poll is diabolically weighted by the fully shorts. Tomorrow may be the escape of the market below 1287 and perhaps bears best chance to raid the market on a weak GDP. Please chime in with your tradig ideas or positions, I went short into the bounce despite the extreme oversold conditions, now stops are at break even at least, but I really do not see how this market can rally here because; (1) there is no POMOs, (2) there is no heavy short interest, (3) the uncertainty is barely start to sink and people started to look beyond the parody in Congress, (4) 1300 is now broken... Fed needs to ask other central bankers to support USD, but Fed cannot inflate, the most they can ask is to sell USD and support stocks, but this will not bode well since Treasuries will be under pressure and it is the reason this market is so weak. So, instead of a bond collapse, we are getting stock market sell off... Perhaps NYSE MCO prints May 2010 type extreme tomorrow, I am mostly betting on a gap down and some sort of selling exhaustion for a bounce, but I really think that the bearish pile up is still ahead... Very Best...

You would think it's harder to make money than shorting based on the incompetence of congress to come to a debt agreement and having the market dump.

You can always bet against the market if its faith depends on US Congress, this is not the first time we expected them to act swiftly and they dragged their debate much more than anyone thought, remember $800B in Oct 2008? I think when they were done the market was already lower or crashing, but I vividly remember that they caused a lot of volatility with their back and forth. This time, they could not be any farther apart from a solution. House spent an entire week, ONE WHOLE WEEK, for absolutely no progress and they already knew that their effort was fruitless. I mean can you see the disconnect? Are these the people we are hoping for a last minute save for what they were supposed to do months ago? It will take a crash and more damage than they were already planning to cause (by reducing the govt spending in a depression) to get them move... I don't know perhaps I am too cynical, but it doesn't look anything like they are achieving anything yet...

our poll is diabolically weighted by the fully shorts.

I saw that as soon as I voted.

I don't know, if you observed or not. Our poll recently has been accurate most of the times in the last 3 weeks, weekly or daily. Unfortunately, for Mark who is posting the daily fade, the day is starting with reverse of our poll results but tilting in our favor by the end of the week. Seems to me we got wiser in company.

Edited by DrSP, 28 July 2011 - 08:56 PM.

Seems like nothing will be resolved until the consequences of their non-action are realized. Typical political stuff.

I'll say this again - Treasury (Paulson, Tim's mentor) learned how this works in 2008 - Treasury is going to inflict pain on the market until Congress does what it wants.

I covered my shorts from yesterday's highs to down around high 1280s and low 1290s, I guess it may shoot lower on GDP, but I could not risk since they may decide to save the market anyway... The market closed with positive net calls and this means there is no short for upside fuel, but I just could not refuse ~20 points in profits. I did not go long, I will just go to sleep instead.

BTW, the main reason was TF and NQ are underperforming ES.