I added a bit by scalping ES from the short side. My options position leaves me short quite a few deltas. (1530-1470p spreads and a few 1500p's outright) I'm looking for quite a bit more. Who knows if I get it. My work has excellent support on today's lows. We've seen a plethora of weak Friday's followed by in your face strength on Monday's. I'm gingerly fading that tendency. I believe longer time frame participants will enter the market next week as sellers. I also think a -1000 day is a magnet. Monday after Oct opex is a historically reasonable time to be biased short. I've discussed here before the old school axiom of single prints on the way up being single prints on the way down. Look at a daily of $NDX. Those gaps, runaway day's, ect. could be blood to sharks. Very often there's no support coming out of such strength. This is an important (not random) closing level. Think agile.
Well, a while ago I said the S&P might be in a big trading range. That's pretty much what is playing out so far. Perfect fakeout and reversal at the prior all-time highs - the S&P went up 20 points beyond, and that was it. Now it's puking back down 70 points and counting. I would look to cover in the 1485-95 range on Monday, if possible. That's a near 50% pullback of the 1380-1575 rally. It's also the level that the rate-cut rally began at. It's just below the round number of 1500. There are definitely going to be stops at or just below 1500, and it will make the bears overstretch on the short side too. The VIX is not sky-high yet, but it has spiked a bit and a down Monday will probably send it to 30. That is pretty high in most cases - there is no real major fundie news driving this selloff, unlike in August, so 30 I think is high enough for a cover. Then go long if & when you see capitulation followed by momentum to the upside. Even if you lose and the market goes down further, you will be able to get out at breakeven on the subsequent bounce. For a move to the August lows with no bounce in between, the VIX would have to go up to like 50-60. There's no way the S&P can puke 130 points from here with only 10 points added to the VIX. You have to ask, what is going on right now that is worse for the market than August? Answer = nada. We have a dovish Fed that cut 0.5%, housing is now priced in pretty much. The chances of a crash happening now are IMO way way lower than the chance of shorts getting cocky, longs getting scared, and the market putting in a low. I find it really hard to believe there won't be another chance to short at say 1530. Crashes historically happen after a move to new lows and then keeps going, not in the middle of a range. There has been a nice move, and today's price action has made every long nervous going over the weekend. It's the perfect setup for a capitulation Monday. That would create a very nice short from the highs, and I think that profit should be taken very soon.
Oh yeah - one very nice trade today was the 1525 puts. You could have had them for $1-2 several times in the last few days. That to me was crazy - even if I was a bull, I would have bought some as a hedge.
Recap of the 2 blue ribbon trades this week: tuesday afternoon IBM shorted @ $119.60 next day ==> IBM -$3.90 to $115.70 IBM biggest $ loser of all big caps wednesday thursday afternoon MMM shorted @ $94.73 next day MMM -$8.10 or -8.6% to $86.63 MMM biggest % loser of all big caps friday Think it's easy to go 2 for 2 on shorting big caps? Anyone want more of these blue ribbon trades next week? My goal is to go 5 for 5, but only if the good traders of ET want more of this golden info..
You don't want any longs now, do you? (not that I could produce em) Going long anything between 10/19-10/29 is a losers game!!
Unfortunately put spreads (in this case with 1 month left) are poor vehicles in a rising volatility environment. Yea my 1530's are pumped. But they ain't anywhere near as pumped as those 1470's I'm short. Hence grabbing a profit on the spread is a poor do. That's one reason why I own 1500's outright. I needed some outright long gamma more than the additional short deltas that came with. As far as lack of "news." I made the following point to friends back in August, true crashes don't telegraph themselves. The woes of July are still upon us though and ya know what? Central Bank's are impotent in sanitizing it. All of you should look at most of the 20th century on a year to year basis with this resource: http://theoptiontrader.com/HistoryCharts/DJX_DAILY/DAILYHISTORY_DJX1969.htm Those failed Dow attempts at 1000 were all made in a p/e environment much like today's. (high but not euphoric) The breaks then didn't come on "news" either. Just on the general 70's malaise that the best day's of the U.S. were fading. I sense that tide shifting back once again. The Brazilinization of America continues......
We're so on the same page bro (always' have been) it ain't funny. Although if a crash scenario does not develop early next week I can build a technical case for a bounce into the first week of Nov. I really don't see a bona fide reason for futures to facilitate trade above 1544 again. It's all on the back of tech though and I'm quite cognizant that the glamour stocks in NDX are yet to turn down. That could either be failed window dressing before next weeks plunge or a harbinger of NDX once again making new highs.