We covered our short position in the E-mini S&P yesterday, just before stocks broke out on the close. Now, the goal is to be flat or long until such time as the futures serve up another fat pitch. The last one came on March 7, when we shorted the June futures within a single tick of a multiyear high. Our downside objective was 1159.25, but yesterday’s rally negated that objective. Even so, by covering the position at 1183.50, anyone who held it would have racked up a gain of 64 points, or $3,200 per contract. Not bad, considering we risked a mere 1.00-point stop-loss at the outset.

It’s impossible for me to tell at this point how far the rally will go, but it was the first in a while to have made steady headway from the opening bell till the close. Moreover, in the final minutes, the June contract pushed above the highs of the last three sessions, daring shorts not to cover. We did, though, even if we remain convinced that the rally is a phony. Clearly, the market has been unable to rally at all when it is not being pushed by nervous shorts. But just because there are no bullish buyers doesn’t necessarily mean the S&Ps can't go higher. And they probably will, assuming Da Boyz can feather back on the selling this morning, allowing the futures to waft, like a hot air balloon, above last Tuesday’s 1193.75 peak. That would make me nervous if we were short. We aren’t, though, except for some June 34 QQQ puts that we bought well and which are still trading 50 percent above their purchase price.  

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Go, Citi!

Meanwhile, if the lunatic fringe takes over during the next few days, we’ll party with them by way of some Citi calls we bought the other day, when the stock looked so …lugubrious. Assuming Citi’s world-class handlers can manipulate the stock effortlessly higher, just like in the good old days, they’ll have widows, orphans and pensioners begging for shares at $48 or higher, three bucks above yesterday’s close. That kind of action would allow us to turn our long May 45 calls into a no-risk calendar spread – one for which we will have received more in premium for short April 45 calls than we paid for the May 45s we own. Sweet.