So far, So Good

There's a really delicate balance between getting a great entry that also substantially reduces your risk and gives you a much higher probability trade, and getting lost in the lines as I call it-essentially being so myopic that you miss something really good over something so miniscule.

However in most cases like this, it's only after some time has passed do you realize what a great entry you actually got. Our short in BIDU earlier this year was honestly about the best entry you could ask for, I think most people wouldn't even believe it. We did this with a number os positions, by far the majority and I don't think we took anything that was more than 5 or 6% off the local top.

In BIDU's case it travelled sideways for a bit longer, the entry was still as good as you could get, but we had to wait a few more days than I'd prefer. Other positions we entered on May 1st which was the last day before the market started down. This is one reason I prefer to phase in to positions, you look back a month later and a few percent here or there makes absolutely no difference.

Any way, I've had a gut feeling since we first expected Trend #1 that trend #1 would dovetail in to trend #2 (act as a momentum primer) and this is pure gut feeling, but that the reversal would be fast.

If you have been around a while, you know that I almost always talk about any reversal either up or down in terms of a process and not an event, a "U" rather than a "V". I don't know why, but I have felt strongly that trend 1's reversal would be a strong first half of the day, one that has people talking (although we kind of already got that with the IWM new high) and then something just as strong , but happening in a very short time (I wouldn't be surprised if it was intraday).

In last night's Daily Wrap, I noted the following...

"As for the 1-5 min charts of the averages, the IWM looks the best right now, I'd call the 5 min chart a positive divergence, the QQQ have a positive looking 1-2 min but negative 3-5 min,"

As you probably know, the IWM outperformed the Q's today, but the IWM and Q's flipped places on the 3C charts. In fact I'm going to show you something later in the IWM leveraged long and short ETFs toward the end of the day.

The other gut feeling I had that was more recent, today in fact was that the earlier downside wouldn't hold yet and we'd see a move to the upside, but as that move went up, leading indicators would head down as well as 3C charts, they'd see worse divergences.

As far as we got today in the afternoon run, there is more weakness in Leading Indicators: Commodities came off the highs of the day, disconnected with the SPX and weren't too far from closing at 0%. The SPX moved up WITH the dollar, that tells me there's manipulation of the market, but I'd be shocked if there weren't. HY credit performed worse today than yesterday and sold off in to the close as the SPX went the opposite way!!! Hurrah! Yields hit another new lows since their negative divergence, the Euro appears to be done with it's move and finally, while it wasn't what I hope to ultimately see, HY Corp. Credit and Junk had trouble with their end of day performance vs the SPX, so that's another strike.

There were some other things I liked and there's a lot I haven't seen or been able to scan until the EOD stats are in.

I'll probably have a closing wrap a bit later as I am going to Skype with my wife who is still in Budapest for just about a month now and then I have a meeting at 7 p.m. until about 8:30.

I'll also be positing at least 1 long position that I really like as well and I think you will too, so hang in there, bear with me and we'll have it out tonight.