GS Update

GS has been an excellent Bellwether asset for the overall market, it has been, up until recently, a strong stock.

In addition to a GS update, what I'm also trying to get across is that some assets will make for better trades now than all of them turning at once with the market, there is rotation among sectors and individual stocks, but the most important thing is a high probability entry and a low risk position that is timely.

Yesterday I showed how TECS (long) a couple of weeks ago was the best entry even though the broad market had not flipped yet.

As far as GS right now, I already have an open core short equity position that doesn't have much room to add to, however I would not be opposed (in my particular circumstances) to a GS PUT position "If" it was set up beautifully which it is not right now. However if I was looking for an equity (not an ETF) financial short (This would be the reason I'd prefer an equity short over an inverse ETF for a longer term position, "Making More Than 100% in a Short" which is something you can't do with an inverse ETF as it is actually a long position), I would not be opposed to either entering GS in this area or better yet a phased in entry in 2 to 3 positions if the transaction costs and your time do not make that impractical.

*Before entering any phased in position in which the idea is to add at better prices, you MUST account for this entry in your risk management BEFORE ever entering the first share, otherwise you are just dollar cost averaging which is never a good idea in my view.

The reason I can withstand a GS short equity position over a leveraged Put position right now has more to do with timing, but for an equity short it also has to do with pretty minimal risk at this stage.

 Intraday (1 min) something changed rather quickly in GS, from an intraday positive yesterday suggesting GS see some higher prices which is one of the reasons GS hasn't been presented as a short position or put position yet, to something pretty ugly, but still VERY near term on a 1 min intraday chart.

The GS 2 min chart shows the same thing so the 1 min chart doesn't seem to be a random fluke.

The 3 min chart shows the same positive divergence yesterday, but has less damage today than the faster 1 ands 2 min charts, this is why I haven't put GS out as a specific trade or position as of yet. It may be the 3 min chart just hasn't seen migration from the 1 and 2 min charts yet, however I suspect that those were more of an intraday move and GS still has a decent chance at some more upside which would make for a better entry.

 The 5 min chart shows a little of that accumulation yesterday afternoon, but it's nowhere near as strong on this more important chart so it does look like a short term upside move which is what we are looking for as far as higher probability short positions.

The stronger distribution in red may also already have the head fake move in place, although with the positives from yesterday GS has just about enough gas in the tank that it could challenge that last high.

However even if GS were to challenge thAt area, the risk is still fairly limited, MAYBE 5 POINTS OR SO which is about 3% or so position risk and much less than 2% portfolio risk so long as you use some form of halfway decent risk management. THIS IS THE REASON I'M FAR LESS OPPOSED TO A GS EQUITY SHORT HERE RATHER THAN AN OPTIONS PUT.

The longer term picture in GS had been too strong to seriously consider shorting, but now it is in that range where it is definitely worthy of consideration as the 10 min chart leads to a new negative low for this entire cycle.

Jumping to the much more important 2 hour chart, you can see a larger accumulation area to the far left, a much smaller one at the June 21st area, a distribution area to the left and a much stronger leading negative divergence to the right. Clearly GS has seen dramatic deterioration which is what we have been waiting for.

I'll try to keep on top of this one, but the overall market, the arbitrage assets, leading indicators and sector performance will also have a lot to do with timing in any individual asset.