Daily Wrap

Well one thing about not being a guru is being able to say, "I'm not sure", but you can be darn sure I'm going to pay attention until things become obvious.

I was thinking this week we'd see a strong short squeeze and then some, maybe we still will, but you saw me open a lot of put positions today and fill out a lot of core primary short positions. What I did I did based on signals in the individual assets, you may recall I specifically posted that of the 3x leveraged ETFs, FAZ would not be one of my choices, when things changed and the signals became more clear, I posted again that FAZ looked to be in the clear.

My gut feeling is that some of the short ETFs may be a very short trade, but some of the longer term core positions were simply where I wanted them to be, they looked good and I figure if need be I can always close some of them down for a small loss or I can close some down booking a s,mall gain, the main point is, they were in the right place (such as AMZN >$282.50 which I have been waiting on for what seems like 2 months) with stable signals.

A member sent in an email question and sometimes I'm just jumping from one thing to another, trying to take advantage of opportunities where ever they show up, no one particular trading style, just finding the right tool for the opportunity. The point is, sometimes I probably assume everyone is one the same page and this was a good email question so I thought I'd address it to everyone...

"Brandt, I notice that sometimes you prefer to short equities and sometimes prefer Puts.  Is the primary reasoning that you prefer puts for short term moves down and equity shorts for longer term moves to the downside?"

My answer doesn't just apply to Puts and shorts, but calls and longs as well. Basically I'm NOT a lover of leverage and of you are newer to the site, that may not sound truthful, but I'm a big believer in taking what the market offers and often to do that, it's just like anything else, there's a right tool for the job.

If I see a trade that looks pretty certain to fire such as the way the averages turned late today...

 IWM 3 min


QQQ 3min

SPY 2 min

Now I can't say what happens for sure yet, but just as Friday's positive divergence left off and Monday we opened higher, that's usually the way of things, I suspect tomorrow we open lower or move lower. This wouldn't be worth a short trade with just these charts alone, it doesn't give me enough reason to believe it would be lasting and worth putting money in the market, yet they are good short term signals, the only problem is the profit potential, with leverage like puts I can take advantage of the signal and make the trade worthwhile with the profit potential.

I think if you live by the sword, you die by the sword so if I don't need leverage, I'd rather not use it. Most of the core shorts are set up or have charts suggesting a primary bear market, I'm happy just to ride that trend and spice things up with some leverage on counter trend moves.

That's basically the answer. If I see a trade that looks like it has a week to it, I might choose a 2 or 3x leveraged ETF, the less leverage I need, the more comfortable I am in managing risk and giving a trade a chance to work.

Now as far as what I expected, those are expectations, if something changes and a lot seemed to change this week, I will go with the flow, to me the market looks like it's going to put in at least a tradable move to the downside. The F_O_M_C is known for knee-jerk reactions, sometimes hours, sometimes days, but the original knee-jerk move is almost always the wrong move in the end.

As much as the USD/JPY "tried" to keep up with the market, it couldn't today and I don't think the market can run much further from the only marginal risk driver.

The USD/JPY does not look good for supporting ANY near term additional upside.

The longer term 15 min JPY and $USD still look good for a significant move higher, that hasn't changed, apparently the F_O_M_C and the rumor/counter rumor has taken control of the market running up to tomorrow's policy statement.

Volatility is high, the Dow has had 6 days in a row with a triple digit gain or loss, this is why the hit and run leveraged method has worked so well for use, we aren't in any one place too long while still making longer term plans / positions.

Near term risk sentiment indicators turned sour today.

I think the reason I'm having such a hard time getting a reading on the VXX is this...

If you look at the VXX vs the SPY, it should be lower and even today it should have been lower on the day, I believe long positions are being hedged and thus creating a lot of noise in the VXX the last couple of days, this should clear up tomorrow as the need fades and the trades /protection may be taken off.

Yields which are like a magnet for equities are also for the first time recently, leading equities down.

I'm not saying this is a big move down of days or weeks, but it seems to fit well with out late day positions.

Whether I understand the complete big picture or not after two days, this chart of High Yield Credit supports out late day positions as well.

Credit leads, stocks follow, today is as clear as can be. This is why we look at so many assets and try to put the odds in our favor.

So I think we continue to do what we have done this week, be patient, wait for the signal to strike which came quickly as we are seeing insane volatility and soon things will clear up again, but eight now, we take it one position at a time, patience pays.

If anything changes in overnight Futures I'll let you know, but I don't think it will matter much, I think we get the move we prepped for today.