Revisiting Intel and a sudden return to POMO

If you read my post from this morning, you know that I wasn't buying the hype surrounding Intel's supposed "better than expected" earnings report....click here if you haven't already read this morning's post.  I was actually planning on waiting a week or two before posting on Intel again, but after today's action, we have a pretty good set-up that's worth reviewing.


Interestingly enough, despite the fact that the overall markets screamed higher almost all day, it appears that most traders were as underwhelmed as I was with the bogus earnings report, and Intel's stock got absolutely monkey-stomped as a result. 

Click on the chart to see a bigger picture and check out that huge red candle...an outside bearish engulfing candle on significant volume.  That is usually a sure sign of bad things to come for any stock, so keep an eye on this one.  Some November $18 or $19 Puts would be a good play here. 

Here's my only caveat, and it's a big one.  As previously discussed in multiple posts, the Fed has been wholly responsible for this latest ramp in stocks since September, via their POMO activities.  Last Friday was the last scheduled POMO day, and I (and pretty much everyone else) figured that we wouldn't see any more POMOs for a couple of weeks.  It was public knowledge that the Fed would be posting their new POMO calendar, today, October 13th, but typically there is a two week lag between the calendar announcement and the first POMO.  Well not this time.  Our first POMO for the new calendar is this Friday, and over the course of the next several weeks, the Fed has planned to purchase a total of $32 billion in Treasuries across the maturities  and dates listed below.

• October 15: 10/31/2014 – 9/30/2016
• October 18: 10/31/2016 – 8/15/2020
• October 20: 1/15/2011 – 2/15/2040
• October 22: 4/15/2013 – 9/30/2014
• October 26: 2/15/2021 – 8/15/2040
• October 28: 15/2012 – 3/31/2013
• November 1: 4/15/2013 – 9/30/2014
• November 4: 10/31/2014 – 9/30/2016
• November 8: 10/31/2016 – 8/15/2020

Due to this development, we can very likely expect another melt-up across the broader markets as the primary dealers funnel this newly printed $32 billion from Big Ben directly into the index funds, ETF's and traditional mo-mo stocks like AAPL, AMZN, and NFLX.   In fact, buying calls on these last 3, is probably a guaranteed winner, but caveat emptor is all I will say to that. 

So why the accelerated schedule for new POMO injections?  Just speculating here, but I bet that the Fed is concerned about a sell-off and is trying to keep things elevated until their November FOMC announcement, when we will all find out for sure what is planned for the next round of Quantitative Easing. 

Bottom line - go short at your own risk.  I think the Intel setup is as good as it gets from a technical perspective, but shorts have been getting slaughtered since the beginning of September, so if you enter a position, keep it small and don't be afraid to bail out quickly should the tide start to turn.

Good luck trading.