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spy

I’ll start getting interested at the breakout level, $140.oo. That is the natural support level. I’ll watch that level very carefully should we trade around those levels. Until then, I’m not overly interested one way or t’other.

I would actually rather the market blew through those levels down to the $100 level. That would be a much more interesting level. You would have some really scared people. At that level I would be a big buyer.

Could we get there? If China blows-up, we could. If China blows-up, whether the Federal Reserve buys bonds or not, the market falls and falls hard. Only if the POMO crew stepped in and directly bought common stock would the market not fall.

What then are the odds of China blowing-up? They are good. The Chinese banks have been lending to build and build, but, half the stuff they have built probably earns little to no return. The building boom in China has been epic. Booms built on credit, turn to busts…always. China is well overdue the bust. The bust, like the boom, will be epic.

Western markets are not going to escape unscathed. If China tumbles, US markets are going to get hit hard, which makes the $100 level on SPY very reachable, or possibly even below the 2009 lows. Now that would be something.

I am nicely set up for an epic move in either direction. When markets bust, the move is usually with a much higher volatility, which also suits my positioning.

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