July 28, 2011 - Welcome to the Funny Farm

Featured Trades: (WELCOME TO THE FUNNY FARM), (SPX)

1) Welcome to the Funny Farm. I promised you a roller coaster for the financial markets this week, and that is exactly what we are getting. The on again/off again talks and the finger pointing that follows seems to be generating round lot moves of 30 points in the S&P 500. The high frequency trading algorithms are running wild.

Keep in mind that what the republicans in the House of Representatives are trying to pull off here nothing less than a Coup '?d Etat. Their machinations are a blatant attempt to expand the power of the House while they command a majority. The debt ceiling has never before been used in this way.

They have taking a normal housekeeping matter and to turn it into a political weapon. Now that they have set the precedent, you can expect the democrats to behave just as badly next time they are in the driver's seat, making all our lives permanently miserable.

I have traded markets like this before, and there is only one way to do it. Close your eyes and stop thinking. Become a robot yourself. If the market is up big, sell it. If it is down big, buy it. It is impossible to predict how the next headline will read. Stocks are really operating independent of the though process. Try an analyze this, and it will just blow up in your face.

Using this twisted, but functional logic, the thing to do after a 50 point sell off in three days is to buy. Just write the damn ticket. If you are mercifully mostly in cash, as I am, then you have plenty of dry powder to do this with. If you don't, you're screwed.

Oops, There Goes My Position

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