From the point in June in which we first realized there was to be a market short squeeze (this while the market was still falling) to options expiration when I laid out what to expect for the following week, the theme the entire time has been, "The next shoe to drop will be the most serious". While there are some scattered long trades worth a look, hopefully by now your portfolio has a net short bias with some initial room on your stops and some dry powder.
One of the trades I still like is FSIN, even if you missed our last entry at $7.50 FSIN is still in the zone and one of my favorite trades after making nearly 40% on the last short run.
The ETFs that I have preferred for quick short coverage include SPXU, SQQQ, SDOW, EDZ, FAZ, ERY (added today) and SRS (added today).
Remember though, there are shortfalls to inverse ETFs and advantages to real equity shorts. Read this link for more information.
As for today's dominant Price/Volume relationship, it is easily Close Down/Volume up for all of the averages. There's a dual edge to this relationship, it can be a sign of a serious break in the market and it can be a sign of a serious oversold condition. Since we are so close to the 50-day moving average, we cannot rule out either possibility. The divergences that formed earlier today weren't strong, only on the 1 and 5 min charts with one exception, these are usually little more then a 1-day bounce. However, such an overwhelming P/V relationship in such proximity to the 50-day moving average can set up a nasty bounce up although it doesn't look or feel that way now, we must reman open to the possibility of this happening even if it is remote.
The key thing to remember is how bad the longer term charts look and even if we were to see such a bounce (it would likely be a scary upside bounce with so much selling today), we can't take our eye off the ball and that has been, as mentioned above-since June, the next shoe to drop is going to be very ugly on the downside; just consider the breadth posts I put up a little over a week ago.
Since 2007 when I put out a 5-part video series (before the market fell apart) my opinion has been that we are going to see one of the greatest trading opportunities in our lifetime before this is over. Even if the Fed steps up with QE3, this market is like having nausea and no matter how long you put off the inevitable, eventually you'll have to lean over the toilet and let the poison out of your system before you can recover. I believe by the time that happens, we as individuals will be trading in a secular bear market, something no trader alive has ever traded in equities. I believe the first to adapt and those with an edge will find this to be a very profitable market.
Finally, risk management. I think we have the edge, but an edge is of no use if you lose your portfolio. While we may see some amazing opportunities, swinging for the fences will eventually lead to an ugly end.
My model portfolio which is based on trades taken only after given to you (and honestly I have little time to keep up with it) is ranked #129 of 6759 portfolios.
This week alone it is up 8.16% while the S&P is down 2.98%. I'm happy with that ranking because I know those in the top 50 are making irresponsible trades and they won't remain in the top 50 for long. Sure I could be in the top spot if I put all my money on a single 3x leveraged ETF, but that is not responsible risk management.
Stay focussed on risk, be patient and enter only the trades that come to you and keep in touch with me about questions you may have, I'm here to help you beat the market and learn to beat the market, not just to post updates and trade ideas.
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