It Just Doesn't Stop-Right Through the Close

I'm pointing this out because we've had some tough decisions to make this week and in many cases, we've had very little time to make them so I want you to see what I've been looking at so you can add these tools and concepts to your own tool box so if you are in a pinch, you don't just make an emotional or arbitrary decision.

Wednesday was crazy, we had already picked up short positions, Puts and some longs that go up if the market goes down, so when Wednesday came along, we had a bunch of great positions.

Here was the problem with Wednesday, we had all of these great positions and most were at impressive gains especially because we had only had them for a day or two in most cases.

Looking at the daily SPX chart and looking at this week to the right, on Tuesday we had a "Hanging Man" downside reversal candlestick, the next day we had a move down of almost 1% in the SPX and a VERY impressive -2.45% in the Russell 2000. Keep in mind that our shorts and Puts in most cases were at significant profits and this was looking a whole lot like 2 weeks before on a Friday/Monday and the market headed lower over the next few days, it really felt like the market was heading lower the next day, but what did we do? We closed ALL of our Index Puts, most everything that would make money with the market going down like UVXY and we took some significant profits off the table, but also took the ability to make even more away should Thursday be another down day.

When we closed all 7 of those trades, this is what it looked like... (click the link). Our P/L for those trades:  +42%, +59.5%, +36.8%, +86%, -7.2%, +1%, +1.4%,  and +7.2%. 

We  even opened two new trades, Long Calls in GOOG and IWM and the next day (Thursday), we had to make a fast decision and we closed those two 1-day positions that were held less than 4.5 hours total, we made +53% and +73%.

Thursday was REALLY tough because we had some VERY negative signals showing strong distribution so normally we'd have entered some puts, but I looked at all of these very small inconsistencies in the market (I called them red flags) and decided we better not take any short positions, in fact none at all, lets just stay flat until we have a high probability trade in front of us. There were so many small red flags (any one by itself would have made no difference, but altogether and I had a pretty long post showing you all of them last night, "Daily Red Flag Wrap" (click the link of the post to view).

Good thing we held off, because today was the next day and had we opened shorts or more likely leveraged PUTS, we'd be in some trouble today. However today presented its own difficult decisions, we had plenty of distribution signals as I believe we were seeing distribution just as I posted earlier in the day from a post of what to expect from earlier in the week, it went like this...

"Here's my rationale: Ever since this move to the upside got started there was one thing I wanted from it, that was to short in to demand and higher prices, that is the same reason Wall Street set up this move, but even with a new SPX high, they have not been able to do what these moves are designed to do (and this is not Jonny-come-lately speaking-I told you the EXACT same thing before the move up even started). I told you the purpose of this move is just like a countertrend rally, it is to be strong, impressive, to change sentiment from understandably bearish to bullish, that is what is needed to get retail to buy so institutional money and us as well, can sell short, initiate new shorts or fill out partial positions. The riding the move higher or lower here and there is just extra money off good signals, but if I had to act in accordance with my main mission statement, it would be to wait for the market to put in a strong enough performance that retail turns bullish and starts buying on increasing volume, then I'd be looking for my opportunities to sell short in to that and all of this for the primary move expected DOWN!"

and...

"You will know when they have succeeded when you yourself emotionally are full of doubt and emotions almost or do get the better of your decision making process above objective data, then you know they have achieved what they set out to do."

All of that was from this post trying to set expectations so you knew what we were looking for, here's the original post.

And guess what? That's exactly what we got today, even the signals were as expected, but again we had to make another VERY difficult decision, was this the moment we were looking for or were we close, but no dice just yet?

All day I've updated you with the information and showed you the concepts, how the market is manipulated, how currencies play their part and credit and treasuries, volatility, yields, all of it.

I even said I thought they might send the market a bit lower, dragging in shorts and then throw the levers of manipulation so that actually happened and here's what it looked like in to the close.

First the SPY Arbitrage telling us whether 1 or any of the 3 assets used to manipulate the SPY was being used, guess what?

Just as the SPY made a move higher and then lower toward the close, they had to halt that move (you probably remember why I thought they would, I had predicted it a couple hours earlier.

And...

We can see at the closing minutes, they flipped the levers of manipulation with the green spike and did the same earlier to lift the market just before the close as predicted.

How did they do it? Well there are only 3 assets...

 This is the 3C chart for HYG - High Yield Corporate credit, one of the three assets used for manipulation of the SPY according to the Capital Context SPY Arbitrage model. Note the HEAVY leading negative distribution in HYG today, that was giving the market trouble holding highs all day as HYG slid lower, but wait...

This is a 5 min chart of HYG today, notice the very last 5 min bar, after low volume all afternoon, that last 5 min bar saw volume jump and HYG gained a VERY MARKET SUPPORTIVE 0.10% in 1 5 min bar. Just for some perspective...

 The asset used to support the SPY with moves like that only closed up by 0.17% and 0.10% of that was the last bar of the day alone!!!

I drew in a potential closing candle for Monday, you know what we need to see for this to happen and for us to back up the truck and load it full of positions. In this case, as I said earlier in my "Thinking Like A Crook" segment, I said, "If it were me, I'd be looking to close the SPX over $1600 (that was said earlier in the week as well as yesterday) and do it on Friday so the entire weekend it will be plastered all over the news and the entire reason for this move will have come to pass as retail places their limit orders and heads off to their 9-5, that was mentioned earlier in the week and I copy and pasted it above. Just as a reminder of why all of this is necessary...

"I told you the purpose of this move is just like a countertrend rally, it is to be strong, impressive, to change sentiment from understandably bearish to bullish, that is what is needed to get retail to buy so institutional money and us as well, can sell short, initiate new shorts or fill out partial positions. "

While I can't be sure, one plausible theory is that retail places those limit orders and heads off to their 9-5, market makers mark those orders way up in pre-market, really making retail pay for doing something as dumb as placing their orders with market makers and specialists who know exactly where you'll buy and where you'll sell, making it really easy to take your money. That would give us the big gap up represented by the red candle on the chart above, if the things that we need to happen, continue to happen, we can enter our positions and a big bearish engulfing candle like that will have sealed the bull trap created above $1600.

After all, as I said, to do this right and get retail to buy...

"You will know when they have succeeded when you yourself emotionally are full of doubt and emotions almost or do get the better of your decision making process above objective data, then you know they have achieved what they set out to do."

I think we made good decisions this week, based on objective data, not fear, not hype, we didn't chase and we had a lot of great money making trades. I think we stay the course, every one of you knows EXACTLY what we are looking for and when we see that, we load up the truck.

Until then, have a FANTASTIC WEEKEND, YOU ALL EARNED IT.

I will have a special post out for you this weekend.