Thankless Thursday – Still Waiting for that Stimulus to Kick In

Perhaps we are just impatient.  We were discussing this topic in Member Chat yesterday as the so-far weak market action we're seeing since the announcement of QInfinity is beginning to make people wonder how we should position ourselves over the holidays.  

Clearly, so far, QInfinity is having much less effect on the market than it's predecessors but, measured over the short amount of time it's been in place – you can see from this chart that it's really not that far off track – yet.  Also, the Fed naysayers fail to take into account that QE1 ($1.25Tn) was much bigger than QE2 ($600Bn) and that Operation Twist ($400Bn) was barely a stimulus at all but more a move to shift the yield curve.  

Now we have QInfinity, where the Fed has committed $240Bn in Q4 and another $480Bn in 2013 and another $480Bn in 2014 and probably another $480Bn in 2015 so it's a huge amount of QE but it's also stretched over a long period of time so we shouldn't expect the markets to rocket on this type of stimulus but we can assume there's a floor being put in somewhere.

But we have gotten a bit more bullish – even as we take quick profits on bear plays, like yesterday's DIA Nov $129 puts, which we picked up for $1.10 in our virtual $25,000 Portfolio and later sold at $1.28 (up 16%) at 2:08, when we decided the Dow had bottomed out at 13,050.  The Dow finished the day at 13,096 and we'll short them again if they struggle but, for now, we're looking to see what kind of bounces we can get off our indices.