So we had a feeling of something working its way in to the market in the form of a bounce late Tuesday, the intraday charts were sloppy though in the very short term. Today those intraday charts cleared up and made it look like we'd see a bit of a pullback, but the charts in the range of 3 to 5 mins that looked like a market bounce was forming late Tuesday actually strengthened today so a bounce looks even more assured, plus if we get any intraday weakness as the 1 and 2 min charts were looking as they finished the day, that can be used to enter some very short term and very speculative long positions.
I started throwing long ideas out to you only 20 minutes after the open, early ideas included MCP, AAPL, XLK and TECL (either call options or long positions). I opened a number of these positions today (as well as closed out some puts)...
Opened...
AAPL Aug. $460 Calls
SPY Sept. $165 Calls
GLD Aug. $126 Calls
FSLR Aug $40 Calls
HYG Aug. $90 Calls
IWM Aug $103 Calls
MCP Aug $7 Calls
URRE Long Equity position.
Pretty much any of these could be opened using leveraged ETFs, for instance: UPRO/SSO; UGLD/UGL; FSLR (long equity); HYG (long equity); UWM/URTY; MCP (long Equity) and URRE long equity). *There's a good chance that many of these will still be available during a narrow window tomorrow.
I also mentioned (above and beyond the early Tech names) a long USD/JPY currency trade that could also be played short the FXY (Yen ETF) or some of the leveraged Yen ETFs (although volume is VERY thin in these), SLV long was mentioned and is still probably a decent long position and of course MCP and URRE long were mentioned several times as well as positions opened there.
THE THING YOU'LL NOTICE ABOUT ALMOST EVERY POSITION IS THAT A STRIKE OF AUGUST WAS USED, THIS REFLECTS THE SHORTER TERM NATURE OF THE BOUNCE EXPECTED, I believe we have more than enough time on the options, while being able to hopefully score a bigger net return with this month's strike. If I felt this was going to be a swing rather than a bounce, ALL OF THE OPTIONS WOULD HAVE BEEN SEPTEMBER STRIKES.
Also as I mentioned today, I threw a lot of ideas your way and
I have to track them, but I don't expect that you'll take every position and I don't blame you if you didn't take any positions, the real beauty of this situation is IT'S A MEANS TO AN END, BEING ABLE TO ENTER SHORTS AT A BETTER PRICE POINT, BETTER UNDERLYING TRADE AND LESS RISK, AS I SAID TUESDAY WHEN I FIRST SAW THIS, "THIS IS A MARKET GIFT".
Some positions were closed today because they were (in my view) giving all that could be had and even in taking a loss, it's better than taking a complete loss and the money can be used to enter positions that should pay off very handsomely for a very short term outlook.
Among the closed positions: HYG Aug $93 put, VXX Aug $14 and $15 Calls and QQQ $74 puts.
Here's the P/L on those positions...
The P/L came to -64.5% or a -$2500 loss
The P/L came to nearly flat, a loss of -$30
The P/L came to +53% gain or about a $3600 gain.
However, even with taking some losses (which had to be taken now or else they would have been worse and it allowed me to redeploy the assets in more favorable positions), the overall Options tracking Portfolio gained just over 9% for the week, GIVING US A RANK OF 19 OF 676.
As far as the daily wrap goes...
Today was the 3rd day of market losses and the second day we have bounced off intraday lows after coming down early on heavy volume to form small intraday (1 day) bear flags for the second day in a row.
The Dow formed a small bullish reversal hammer (DIA a bullish reversal Star), the SPX almost formed a very small bullish reversal hammer while the SPY formed a bullish reversal Doji Star. The NASDAQ 100 formed a tight bodied bullish reversal hammer that almost looked like a long legged Doji Star and the Q's formed the same. The R2K's candle was a typical down day with a -0.75% loss while the IWM formed a large Star which is more bullish. Finally the Dow 20 was down 0.72%/IYT down 0.80% and that's about -3% since the short IYT/Transports idea was mentioned at the exact top. Not coincidentally, IYT had just made a very strong 1-day +3.25% gain that crossed in to head fake territory when we called the top, it was a head fake move and a GREAT signal / entry.
The VIX (after having seen bullish action in VIX futures all week) was up 2.20%, however, inline with our bounce theory, TODAY"S VIX FORMED A BEARISH DOWNSIDE REVERSAL SHOOTING STAR CANDLE, of course these are short term reversals as we expect the move. The VIX also hit resistance at the 20 day moving average as it typically uses the 20-day as support and resistance.
The real story behind the market weakness is what few probably picked up on, it's not the 3 days of red closes, it's the closure of the last of the carry positions by bidding up the Yen (you may recall last week they lifted the market overnight and held it for a day using Yen weakness and USD/JPY strength, but that quickly failed). The Yen/Carry trade being completely closed out is the news that few grasp, it's MUCH BIGGER than recent market weakness,
These are the Index Futures tonight.
Still the story is the JPY/USD and the JPY (Yen) has been up +3.6% over the $USD over the last 4 days which is the biggest 4-day yen momentum move in 2 years.
This hasn't been helpful for the Nikkei 225 futures which in terms of points, are similar to the Dow-30, since Friday highs, the Nikkei has lost 800 points! That would be like the Dow losing 800 points.
Treasuries, specifically TLT has been up since we picked it up at the lows last week, I'd expect them to give ground on a market bounce, but their behavior has been strong, I'll be holding that TLT long equity Core position.
Intraday today I was watching HYG, I figure the SPY arbitrage (HYG up, VXX/TLT down) is going to have to kick in to support a bounce and the Yen will have to take a break while the $USD gains some strength, on that note...
HYG's price diverged a bit from the SPX at the EOD today, that is part of what I was looking at when deciding on the last 2 positions, MCP and URRE longs...
TLT outperformed today and it is acting well, I suspect it comes down as 1 of 3 of the SPY arbitrage assets, it falling helps the market to bounce, but just like I want to use price strength to enter shorts like AMZN, I'd like to pick up more TLT on any dips. I don't feel the same about all treasuries and I showed you the difference in 3C between the 10 year that doesn't have the strength that the 30 year has, thus TLT is what I'd stick with for a longer term position. I can't wait to find out how this plays out and why TLT looks so good.
VXX underperformed a bit today and I suspect as the 3rd of the SPY arbitrage, it too will come down a bit on a market bounce, but that will only provide a buy or add to opportunity.
Commodities are in line with the SPX for the second day in a row, but diverged at the EOD vs the SPX, however I opened a GLD long/call and like SLV for a bounce as well as oil so I think commodities which were severely underperforming the SPX last week are showing they'll be part of a bounce just by catching up to the SPX the last two days.
However, we must never forget what our real objective is and not think on such a small scale, look at commodities over a longer period.
Before the borrowed Yen can be repaid (and at 10 to 200 times leverage, the moves of the last few days in the Yen have likely cost many carry traders a lot of money), the assets bought with carry funds have to be closed out, this is exactly why we watch commodities as a leading indicator, for the carry trade, to know how the economy and the Chinese economy are doing and to see when the stock market is thin and unsupported.
THIS CHART SPELLS MAJOR MARKET TROUBLE and this is why we can't take our eye off the prize, even with small bounces that can be quite impressive intraday or day to day, but looking back you won't even be able to pick these days of bounces out.
As far as the bounce (I'm calling it a bounce because I see it as less than a "swing", but Wall St. doesn't do anything without a reason and we will be seeing volatility rise higher and higher so a bounce is more about time than intensity), I was very happy to see our sentiment indicator for smart money moving the right way and in proportion with the kind of move I'm expecting.
So once again, the yen has been strong on the carry being closed, this is a big deal, it's like someone is cleaning out their desk as the job is done. However the Yen should take a break and the USD should gain, this should move the market.
Example...
The Dollar should gain in this scenario...
And there's the 5 min $USDX with a positive divergence...
I mentioned Gold and Silver as being short term bounce candidates, here's the 15 min Gold futures (and Silver looks similar), thus I opened a GLD call today...
As for Thursday, nothing has changed. If you want to hitch-hike on some assets on a market bounce, take a look at any I opened today, if the short term charts posted this afternoon HERE
then you should have a chance to get involved if you like.
However, market weakness is VERY apparent in the market, I felt it Monday and spoke quite a bit of it, but if you are thinking the closes of the last 3 days are the weakness I'm talking about, then you are missing the picture completely. The Carry trade unwound, the damage in commods, Credit and other assets are what I'm talking about. I'm not looking for a 10 or even 20% market correction, I'm talking about something "Wicked comes this way".
However we all know that the market won't move in a straight line, they'll be lots of distractions like this WHICH WE CAN MAKE MONEY ON, but it's more important now than ever to Keep your eye on the prize.
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