Mopping Up

Earlier today I closed half of the remaining UNG position, I saw a few things I didn't like very short term so I went ahead and took another half of what was a full size position after having already taken some off the table as it was an oversized position, the gain on UNG was +12.25%, but this is largely to do with averaging up, for instance the ooriginal position was probably near a 35% gain, then more shares were added and more shares were added so the original position if left at say $5,000 would be up 35% or so, but after adding several times as the trade worked in our favor (You want to average up your winners and never average down your losers unless that was part of a phased in plan before you entered), the dilution caused the overall position's gain to be lower, but all in all for the portfolio, money that wasn't doing anything was earning 12% or whatever the amount would be, so while it may seem like adding made the overall gain less, it didn't, the overall gain of actual profits in the portfolio would have been much higher with $22k in shares at 12% than 5k of shares at 35%($4800 in profits vs $1750 in profits).

The SCO position gained a paltry +5.29%, but I see other services blowing the horn over a 5% gain so I  guess it's not that bad, the important thing was to reduce risk in a volatile and near term, uncertain situation. I chose SCO so I could ride out corrections and follow the trend rather than using USO Puts, however it just seemed to me at this point, why risk anything here.

I put out a lot of options trades today, but I'm not a fan of options, it may not seem that way, but that's the truth. Right now the Equity tracking portfolio is being used to set up the longer term equity shorts (that have an advantage over Bear/Short ETFs) as you can see by this article I wrote probably 6 years ago, "Making More Than 100% in a Short", as most people think a short position's profit is limited to 100% and that's if the stock goes to zero, this article shows that is absolutely not true and shows you why and how you can make more than 100%.

The point is, as I have warned as we keep moving forward for months and more specifically since this week's nasty Key Reversal Day, Volatility will be very high.

As a surfer there's something called, "Going Over the Falls", typically its just missing a wave you have paddled for, but being so close that you can't back out and as the wave has crested and is breaking, you literally can be 10 or more feet above the smooth water in front of the wave and you are turned over and in to this white water monster as you go "Over the Falls" (sometimes you actually caught the wave but just lost control very early).  This is very intimidating to look down and see a 10 foot drop that you are about to become a part of, it's when a lot of surfers get hurt badly and as an example for the market, traders as well.

Wall Street wants to put as many traders as possible in to the situation of going over the falls where you are tossed around like a rag-doll in this huge circulation of white water, you have no idea which way is up and even letting your body go limp and hope to rise to the surface as you can literally swim toward the bottom thinking you are swimming for the top, won't work as the force of the wave and the circulation have you in a situation in which you have no idea which way is up. *As a side note, the worst is when this happens and before you can find the surface for air, another wave runs you through the entire process again. I've been in this situation in which there's been a half of a second of air between getting knocked around in tight sets of waves and the next wave coming-this has happened to me with probably a half dozen waves consecutively.

The point being, Wall St. is setting up the same situation. I don't like leverage and most of the longer term trending trades that we are setting up or have in place, have no leverage at all. However, I'm a believer in taking what the market gives so long as you do it responsibly and sometimes you need the right tool for the job. With this volatility and moves being very short and extreme before they are thrown in a different direction, options allow us the profit potential that would otherwise not be there on a great trading signal.

So today I offered a lot of these trades, but they are just a short term tool for the situation at hand, not a reflection of anything changing other than volatility.

Today being where it is as the global stock markets are hammered is a tough enough situation, add Op-Ex pins on top of that and Carbon based traders leaving early today fro a long holiday weekend and we have a very unique situation. I believe computers were used today to do some basic tasks that would otherwise look more familiar to us as traders can make decisions on the fly that computers running a program can't.

I might figure out exactly what happened today and how after looking at a lot of charts, but it seems to me that the Friday Op-Ex pin was in place, usually by about 2 p.m. or so most contracts are closed and the market can start being itself. I notice in a lot of areas that there seems to be intraday (market maker/specialist or an HFT) 1 min or so negative divergence to run prices down in to the later afternoon hours and as that happens we see accumulation of a larger nature around the same time.

I have several examples and I know VXX and TLT (2 of 3 SPY manipulation/Arbitrage levers) played a part, exactly what , why and how is not clear yet, but they didn't want to use the third asset, HYG, it was steady and seemingly under constant accumulation all day.

I won't lie, today was a strange day like I haven't seen, at least not to my recollection, but I think the signals are the same, even though how we got to them is still unknown.

GOOG

 GOOG with a tell-tale flat range where we most often see accumulation or distribution depending on the preceding trend (accumulation in this case). Smart money places orders to be filled with the market makers or specialists that represent that stock and they try to fill right at VWAP, this is one of the reasons we see such a flat range as the middle men work the market to accumulate in a particular range.

 2 min chart showing accumulation all day

1 min chart shows a stronger divergence once GOOG broke support on a head fake move, something I posted I wanted to see as to see the result, here it is, increased positive divergence on the head fake.

Most tellingly, the size and timeframe of this divergence-10 min and developed fast in a day, says there was some heavy underlying trade.

SLV

 SLV heading lower off an intraday negative divergence

 The big picture though is a leading positive 15 min chart, this is why I chose AGQ long rather than options.

HYG

Look at HYG's typical movement over recent weeks.

Today's flat range is not at all the normal character for HYG, an asset that would need to rise to help the SPY rise through the arbitrage relationship.

Again, we keep seeing these 5, 10 or even 15 min 1-day leading positive divegrences, 15 mi's leading positive like above in a single day represents heavy activity.

 10 min chart confirms as well.

And the intraday gets a boost as HYG finds the lower end of its range in the afternoon.


 IWM

Another 15 min positive, it doesn't look like it, but look at all the movement for today only.

Here's a closer look, something is going on here.

Look at the 1 min chart with the biggest 3C move of the day  right as many support areas were broken throughout the market and after op-ex pins wouldn't matter.

AMZN

 Another leading 10 min

And look how sharp the confirming 5 min is.

AAPL

AAPL even saw a late day uptick in the 30 min

Also seen at the same time on the 10 min

And look at the dip in AAPL around 1:30, again one of the strongest 3C moves of the day.


More coming later or over the weekend, I have a lot to look at, but I think we are on the right side of the trade, at least for this short term trade.