What a drama. TNX and VIX is not convincing the bullish move of equity market. The good buying should not be in such a hurry. Bought August ES 1120 put again when ES traded at 1123.
8-11-2010 Sold my August ES puts when ES traded below 1100. I am waiting of retracement to short again. Given the situation of recent currency and bond move, it is very likely this down move in equity will lead to retest of 1000 (SP). I will continue to short bounces.
8-12-2010 I've closed 70% of my short position at openning yesterday and closed all remaining short position at yesterday's market close. The 70% position were August ES options and I was concerned about time decay. Although I am convinced there were more downside, it is not easy for me to capture the whole move. The position management, is challenging part in trading. I was tempted to go long when ES traded below 1075. Originally I thought it would retest 1091/1097. However, the move below 1075 was very quick and I missed it. The bounce had hard time to close the gap (ES1085), which implied the weakness. It looks to me that ES is in the middle of nowhere, there is not enough bounce to re-short for new entry and not low enough for bargain hunters. I'll wait to see how it develops.
8-13-2010 I went long NQ at 1830 at close yesterday expecting some short term bounce. I close it at 1839. ES tried to get above 1090-92, but failed. I had to say it was not a good trade for there was not much edge on the upside at this level. I went short with Sept ES put again last night when ES traded near 1087-88. The flat pattern for yesterday and today implied the weakness of the market. The buyers who are expecting bounce might be disappointed this time including trapped bulls above 1100. After this flat distribution, there most likely will be another down leg again. I will watch for price action/reaction when it approaches 1065/1060/1050. It is not impossible that this time it could break below 1000 (SPX). SPX has been consolidating near/below its simple 50 day moving average for two days now. In my opinion, it most likely will breakdown soon for it had not made anticipated bounce to the upside for two days now.
8-13-2010 1095-1097 was the level I was watching for re-enter short. I still have the Sept ES 1085 put and added today when ES traded near 1096-97. EURO looked like a nice bearflag to me and 1.25 is the potential target. I am waiting for ES to test 1050-1055 area.
8-19-2010 I bought back one of the puts when ES was traded at 1069. Many who were waiting for 61.8% retrace to 1106-1107 to short, might get disappointed. It was just like every one was waiting for ES to go 1130-1150 to place short last week. The 6 day distribution near 1120-1125 is quite significant. Such price action often implies at least 10% down based on historical data. The bounce is also getting weak and weak from both time and price. It is used to be 61.8-100% and now it becomes 50% or even less possibly in future. My potential target for ES is still near 1050 as first down leg. In my opinion, the probability of retest 1000 is getting high now.
8-20-2010 There is potential falling wedge forming on SPX. I bought back my sept ES put. My other concern was that NQ is not moving in synch with ES. I am looking for re-entry for short. If SPX bounce here, I would re-enter short near 1080 level (NQ near 1830).
8-23-2010 Short 1077 and covered at 1063.5. It is possible that we will have another 1-2 day consolidation before resumed down move. The divergence between ES and NQ has been eliminated by the market close today. Now they are in synch again, and this might not be a good news for bulls.
8-26-2010 I covered all my shorts at near 1060 thought there might be some retracement before more down move. However, it went straight to 1040. I bought a Sept ES 1050 call when ES traded at 1048 after bouncing from 1044 quickly on Tuesday morning. It looked like some responsive buying at the time. The morning downthrust on Wed within first 60 minutes trading since open had another responsive buying and closed >4 pts above Tuesday's 1044 low. I noticed that VIX didn't make corresponding high yesterday morning when all three indices made intraday lows. It was negative divergence implying temporary bottom is near or already made. I went long one contract of NQ at 1781.5 a few minutes ago. I plan to hold it 1800/1830 based on price action when approaching these levels. I would exit all long if ES close below 1044 today.
8-27-2010 8-26's close was a bit low only 1 pt above 1044. If it goes another down thrust, the 1037 won't necessarily hold. However, the selloff right before close also could be a markdown before big gap up (utilizing GDP news tomorrow). I don't really have good read at this point so I closed my NQ long position at 1073.25 for 8 pts loss. I am trying to avoid big loss if it gaps down tomorrow. However, it was not so bearish at Asia market tonight. Actually Nikkei had nice reverse tonight. Euro is also holding well. I decide to keep the call ES call option (small position). When ES is spending a little more time between 1045-1050, it is not necessarily a bad thing for Bulls. However I would expect it to start to go above 1068 within next 1-2 trading session, otherwise, it most likely will move lower to search for buyers.