After Hours Impressions

Notice this isn't the daily wrap. In the daily wrap I'm trying to bring everything together for you and work from there, but we already know what current signals point to, we know a lot from this one post alone, "Market Analysis / Leading Indicators". For the time being, I'm not sure I can add much to that analysis which was published 10 minutes before the close so it's pretty relevant. The SPX's closing candle today was a spitting image of yesterday's.

I'd say I've been very patient with this stage we are in and I haven't jumped in to many positions which I feel has been exactly the right strategy to take with the signals we have and thus far, price has proved us correct. Sometimes you have to move fast and get in there, sometimes you have to hold through a very emotionally challenging time and sometimes you need to know when it's time to just do your best to not be a busy body and I know that's difficult for a lot of us including me as I'm always looking for the opportunity, but just like with anything else, say surfing, you have to know which waves to paddle in to and which ones to let pass you; if you paddle for every wave by the time the beautiful one gets to you, you are too exhausted to paddle in to it and miss the best wave of the day.

FB came up today and this is one that is catching my attention. For newer members, I believe we were the first ones to enter FB long at a time when EVERYONE HATED FB after that disastrous first day of trade when the underwriters, GS and MS just lost control and FB had been trending down since. We saw something no one else saw, we jumped in when no one would even consider FB long (they called it "Face-Plant" at the time) and the next day, we were rewarded and for some time after that, easily being a double digit move for us. If I understood correctly, FB is now the darling of retail and we may be the only ones to break with the crowd again, just on the short side.

This is a 15 min leading negative divergence after some time of uptrend confirmation so this is an interesting area as a range or maybe an ascending triangle forms, this could give us a really nice short set up. My guess is any short set up in FB would have at least a 65% chance of coinciding with an overall market short, which means I'm not rushing in to FB, I'd like to see if the mini-cycle can bounce us and see what FB does in that atmosphere. The market moves together a lot more than people realize.

USO is also going to be very interesting, with the EIA Petroleum report tomorrow morning, that may give us some volatility that we need to establish a position there. As I have maintained, USO will be choppy and is has been, but it has fallen out of the range, I see two probabilities, both and up with a move higher for USO, one is just inside the choppy range and above resistance, the other would be a very big signal and move for a huge primary downtrend, that would require a breakout above the choppy range and a fail up there. If you recall the 7th chart down from the last post (NUGT) and the Crazy Ivan head fake move to the far left of the chart, this would be almost exactly the same. If you recall (or just go back and look), that head fake above the range that was primed from the head fake below the range previously, set up the largest, strongest and fastest moving decline on the chart, this is what we'd be looking at in USO so very interesting.

Let me say clearly, I am not sold on this cycle AT ALL and that's why I'm treating it cautiously. There are however some shorts that I think are worth a shot here and will be fine as core shorts even if the mini cycle fires to the upside, AMZN is one of those. GS is about 10 points away from being a near picture perfect set up, but in my view, I'd rather have 10 points of drawdown against my short  which could be a 10% move, RATHER THAN MISS GS ,but this is thinking about the trade in terms of months, maybe a year. Still I'll always look for the best entry, I'm just trying to give you some of my perspective.

I think we can get GOOG between $900 to >$920 and I'd be so happy to find that set up, but I like it here as well. One good thing about being the small guy is you can be nimble, you can pick and chose your battles and if one doesn't come to you, there are 10 others waiting in line.

While I'll withhold judgement on AAPL longer term until the charts are more clear, I'd say for a swing trade, AAPL is a thread away from making some moves that would set up a nice swing position there.

XOM is only a few dollars away from a nice short set up and these are all core positions, not trades.

NFLX is driving me crazy, give me 10 points of upside there and I'm 85% certain we have an incredible opportunity.

In fact, the best reasoning I see for a market bounce is hundreds of individual stocks themselves and the vast majority have their own signals to bounce.

HOWEVER, LETS NOT FORGET THE OTHER SIDE OF THE COIN, that's why I took the time to remind you in the post linked above, what the averages look like and they are no joke. Those aren;'t divergences off in the future, those are divergences we are in the middle of right now so now is a time to pick and chose your battles, to be patient and know when to paddle in or when to swing that bat.

I'll check the market over for anything I may have missed near the close and then it's watching futures and seeing what they have to say.

*For those of you who may be trading the Nikkei, so far the futures look like it's going to see a bounce.

GDX / NUGT Update

As you know, I only entered a partial GDX Nov. $25 call position yesterday and looked forward to filling it out, but at the right place with confirmation, so we patiently waited on that one today, I could have closed the position today for a nearly +16% gain, but I decided I'd rather just give it some time being the expiration is November, Theta is not that big of a deal.

I posted earlier today that a 1 min negative divergence had shown up on the GDX chart around 1 p.m. and thought it may lead to a pullback, which is what I'd need to fill out GDX, start a new position, or look in to something like NUGT long.

Here's what happened since then with good confirmation through NUGT and DUST as well. From what I see, the divergences are aggressive, but on shorter term charts and the important positives are fine, my interpretation of this would be that it's a fast pullback. I can't give an opinion beyond that in which I have objective data to support it, but my gut tells me this would only be the case if there were some last minute accumulation (the same thing I'd like to do) before a more significant move up than today's.

GDX

 The 1 min negative developed quite a bit.

*For newer members, if we have a 1 min (intraday, as the 1-3 min charts largely guide intraday trade) divergence (either negative or positive), we have about a 75% chance of a simple consolidation through time rather than through price as a pullback or retracement and that's about all. However, if the act of migration (which is when a divergence strengthens and moves to the next longest timeframe, in this case 2 mins.) takes place and moves to the 2 min chart, we have a 50/50 chance of a consolidation through time or one through price. The stronger the divergence intraday, the more likely it is to consolidate through price which in an uptrend is a pullback and in a downtrend a retracement.

 The divergence is more difficult to see on this 3 min chart because half of the window is taken up by volume, but the 3 min is negative so the divergence did migrate/strengthen.

You can see at first as the 1 min divergence was the only one in play, GDX consolidated sideways through time, but as the longer charts went negative, GDX consolidated through a pullback.

As the consolidation range's support was broken, there was two large volume surges as stops were cleared out.

 The 10 min chart going positive quickly yesterday was part of the reason I entered a GDX call and part of the reason it was a half size position as this was a new divergence and had not proven itself for me to go with a full size position.

Note there's no damage to this chart at all.

Now we even have a 30 min leading positive divergence in GDX, the first started BEFORE the F_O_M_C, which makes me wonder of course about the possibility of a leak, we were long GDX because of this positive divergence and gold going in to the F_O_M_C and took profits that day.

You can see distribution of GDX in to higher prices, this is when and where we exited GDX calls immediately before price backed off. Now of course we have a new positive which makes me wonder about something I'll get to.

NUGT (3x long Gold Miners) or 3x leveraged GDX.

 You can see the divergence today on NUGT as well, here on a 5 min chart and price moved aggressively with the divergence. This is not the typical "reversal Process", this is much faster which is why I suspect it's not a bearish event as mentioned above.

 The 10-min NUGT is undamaged, despite the 5 min being negative and leading at that, it did no damage to the 10 min.

I'm sure there's probably something more relevant than this as resistance, but it seems the whole number of $56 is where resistance became an issue today.

The NUGT 15 min chart has several different concepts displayed such as a Crazy Ivan shakeout at the far left range with a head fake move below first that sent price flying to an upside head fake move that sent price dropping to a new low under the range. This is why I say that these Head Fake moves are not only good timing, but they are used to influence the price action and to create more momentum, just look at the price moves proceeding the head fakes!

As I said I'd talk about above, I'm wondering in the pre-F_O_M_C positive divergence is part of a larger single divergence with the current one, which if that were so, would mean we have a head fake that is helping the current divergence accumulate even more.

The outcome would be a much larger, stronger, longer lasting move to the upside.

 DUST (3x short Gold Miners) or 3X short GDX. *For the GDX and NUGT signals to be confirmed, we'd need to see the opposite signals in DUST.

 Recall the 1 min negatives above, this is a 1 min leading positive so the intraday charts are confirmed.

Recall the 3 min GDX / NUGT were negative, DUST is positive so we have more confirmation.
 

Recall GDX / NUGT are still positive on the 10 min, DUST is clearly still negative on its 10 min. so we have confirmation here as well. I'm using the circles as 2 pairs, the first pair starts from the left and I'm using them to show relative comparisons between where price was at the circle and where 3C was so you can understand the divergence,

For instance at the far right (last two circles) we have a 3C leading negative divergence and the first circle (left) is around $30+ and 3C moves in to a leading negative divergence from there, then the second (last) circle is at the high or $36-ish, yet 3C is at a lower high, this is bad news for DUST and the move down already started.

As I said, I think this will give us a chance to add to or start new GDX calls or NUGT longs, the correction in DUST is a retracement, but as we are able to enter GDX/NUGT, DUST should continue lower, for DUST this is a simple "counter trend correction".

Of course we have to wait for the move to finish and then verify accumulation in to the move lower as that is what the move should do, THIS IS EXACTLY HOW WE STALK OUR TRADES LIKE A WOLF-PACK RATHER THAN SIMPLY CHASE AFTER OUR PREY LIKE AN UNTRAINED DOG CHASING A RABBIT.

Nice imagery huh?

Market Analysis / Leading Indicators

In last night's Daily Wrap I made the argument several times with charts that the market "mini" cycle was still fine, but interrupted on the outperformance of the most shorted Russell 3000 names (I use the top 100 heaviest shorted Russell 3000 stocks for this Index in my new custom indicator), I just call it the "MSI" or "Most Shorted Index" as I took all 100 names (which is obviously a fluid list) and created an equally weighted Index with these.

In one part of last night's post I said,

"like sentiment indications all suggest this mini cycle (up) is still alive and well, it was just the Russell Short Squeeze today that threw timing off track."

So I wanted another look at Leading Indicators because as I have been pretty clear about this entire time, this "mini-cycle" (is what I'd call it) does not and has never looked strong like normal cycles, even mini ones. While Wall St. almost always completes a cycle once they've invested in to it, on the other side of the scale of this mini cycle is a VERY nasty looking market; so I'll show you what we have, but remind you that there's another world out there beyond intraday trade and the current cycle we may be positioning trades for.

First, CONTEXT's Model for ES/SPX Futures is almost at dead even, maybe negative 8 points or so and I attribute most of that to the rally in Treasuries.

The SPY Arbitrage...

"could" be used to help move this cycle, it is improving, but to really improve and help the market, TLT needs to come down, VIX futures need to come down and High Yield Credit needs to advance. 

The logic is very simple, the computers read an advance in HY Credit as "Risk on" and a fall in the VIX as traders not worried about seeking out a hedge or protection and the fall of Treasuries as a rotation from the "Flight to Safety" trade and in to the "Risk on" rally trade, that's how these computers that can make thousands of trades a second (micro-seconds now) read the market.

I did say that I thought the Inverse H&S, a popular and recognizable technical price pattern for even novice T.A. retail traders, was not there coincidentally, that it was there specifically because the market is so under-invested in this mini-cycle, they are actually counting on retail to do some of the heavy lifting.

If the SPY Arb can join, it's better for a move up and TLT was looking like it may come down as you know from a recent position opened.

 I can't make a strong case for HYG, I think that's because institutional traders are the ones who use it and they don't want to get caught without out in the open, but HYG would help the market if it went up, the only case I'm even going to attempt to make is the equal lows vs the SPXs lower lows.

I inverted the SPX (flipped it like turning a page up so it's the opposite of price action) and then compared it to a normally placed VXX (short term VIX futures), VXX need to come down to help the market move up, again I'm not going to make any more of a case other than the weak performance of VXX as the SPX made the second low to the right, VXX should have shown more fear and been at least as high as the SPX.

Sentiment was discussed last night, how it was strong all day, but especially in to the EOD, today it's more of the same, more strength so again as an effective leading indicator, it's sending us a short term bullish message for the market.

 I told you about this last night in the Daily Wrap, High Yield Credit making higher, consecutive moves and being up and closing well in to the EOD, it's making higher highs and holding well today and this is a skittish asset because of thinner liquidity, so it looks like some institutional traders are expecting a short, near term market pop to the upside.


The Carry Currencies "Could" help if they were to rise against the Yen, even if the Yen rises, along as they have better relative performance.

 Improvement on the 15 min Euro

3C improvement on the 15 min $AUD.

And perhaps the Yen to take a break, that would not mean the Yen is in trouble, but as it took a break, while the Yen is away, the S&P will play.

Rotation from Safety to Risk... Treasury Futures

 This is the 10 year Treasury future on a 15 min chart, seemingly showing distribution.

You know what I did earlier with TLT, well the 30 year above is as close to TLT as you get and it has similar signs.

Now as a reminder of the other side of the coin...

I mentioned Yields last night and how they move and pull the market toward them. This is the 15 min 5 year Yield.

 As I described last night, the higher highs and lows in Yields eventually pulled the market up, now have lower highs and lows so you can see exactly why I want to sell short in to any price gains that set up good entries.

As a reminder, just a longer look at some of the averages.

 DIA 2 hour

IWM 15 min

QQQ 2 hour

SPY 30 min.

Just to keep things balanced.

New Position TLT Short

I feel it's a little premature, but as an equity short I feel comfortable with TLT and with what I plan, November $108 puts, I feel comfortable as well.

 Longer term resistance was broken today, not any exceptional follow through on the break, again if there's a rotation to risk on it will largely come out of "Risk off assets" like TLT furthermore TLT needs to move down to help the market move up via SPY Arbitrage. I still like TLT as a long, but would like to establish that around $100-$102.

 TLT 10 min breaking above the intraday highs from yesterday along with longer term resistance.

The 15 min 30 year Treasury Futures look like a pullback is in the cards.

This is more of a trading position in my view so I think it needs some leverage, the only problem is any of the ETFs are very thin liquidity. I suppose TLT short would be worth 5-6% or you could look at TBT (2x short 20+ year treasuries) long as an alternative with some leverage.

Starting a Trading Position in FAS long (long 3x Financials)

This will be 1/2 the size of a full size equity long for now.

FAS 15 min leading positive, a nice timeframe for a swing trade os several days and here we are in that right shoulder.

I may add to the position, but that would be at lower prices so risk management will take that in to consideration before any entry.

WMT vs. SPX

WMT down 2+% today on news that they're cutting orders as inventory piles up.

WMT (red)

FB is stating to look interesting as a short too (thanks Stef.)

Gold Miners / GDX / NUGT (3x long ) Update

Yesterday I started a partial GDX Nov. $25 Call position  , I decided to do so because of a head fake move below a bearish flag that was meant to draw in the shorts as well as a very large, fast developing 10 min positive divergence that suggested a large chunk of accumulation had taken place quickly, it was "partial" because of the size of the head fake move and set up, I'd gladly add to the GDX long or even a NUGT long position if the circumstances allow for a high probability entry.

GDX (Gold-miners ETF)

 We have the F_O_M_C "Knee Jerk " move that I ALWAYS warn of, "Most of the time with F_E_D related events, the initial knee-jerk move is the wrong move and often quickly faded within a few hours to a few days", this is a perfect example and its market wide.

The bear flag tells technical traders that price is consolidating or taking a break, but to expect price to continue on a new leg lower that is approximately the same size as the preceding trend before the flag, so this is incentive for shorts to enter on price confirmation which is a break of the flag's lower trend-line support, this is also where I wanted to enter on a suspected head fake move.

This is GDX just a few minutes ago on a 1 min chart, a slight consolidation, maybe pullback.

This is the set up yesterday for the GDX call position started, first a break below the flag which drew in the shorts, but look at the positive 3C divergence at that EXACT area.

When you go short, you are literally "selling" the shares you went short so the accumulation signal means someone on the institutional side was buying those shares or supply that were being sold short. The importance of a head fake move and using technical analysis against technical traders was that the shorts would enter on price confirmation which creates more volume or supply for institutional money to accumulate as they need supply.

 The 10 min GDX chart as mentioned above with a very strong, very fast developing divergence, that was the only head fake move and thus the only high probability entry with low risk and good timing, if it had been larger, I'd have entered a larger position and still might.

NUGT (3x long Gold miners ETF)

 This is just a cornucopia of great candlestick reversal patterns.

A and B) are the concept of strength and the next day, "Follow Through". 

B & C) together form a bearish reversal called "Dark Cloud Cover" although the second candle could have closed lower in to the first candle's body.

D) is a 2-candle bullish reversal pattern called, "Harami bottom" or Japanese call it "Mother with baby" and this one can be bullish or bearish depending on the preceding trend.

E) is a 3 candle formation with a Doji reversal candle  in the middle, the 3rd candle is the bearish Confirmation via a Bearish Engulfing candle.

F) is the bearish engulfing candle that is a reversal itself, but added with the previous Doji Reversal, it just made the reversal that much stronger.

G) is another Dark Cloud Cover,  which came on a lack of follow through after the F_O_M_C knee jerk higher.

1) is the same as "G"
2)  is a head fake move below support with a bullish "Star" reversal 
3) is just meant to show the increased volume in the area, this is all supply Wall St. needs because their positions are much larger than anything we can imagine, they NEED that supply that's available and breaking support is a great way to produce it whether it be longs selling or shorts selling short, it's all supply and it's cheap supply. THIS IS EXACTLY WHY I SAY, "DON'T GET LOST IN THE LINES" AND "ABOVE ALL, PRICE IS DECEIVING"

On that day of the break it probably didn't feel good to be a long in this asset, but the story wasn't finished, you were just seeing the start of a bigger picture this is why I trust 3C to keep me from panicking if it's showing accumulation on that first break, wait a bit longer and a much more bullish picture emerges. This is also why I say that I ALWAYS "TRY" to make all decisions based on objective DATA, not emotions, not fear.

 NUGT 15 min, all the same concepts, the F_E_D knee jerk and fade of the move, a break below support, if you look close at volume on the break of support, it increases as price moves further below support, this is multiple levels of stops being hit, but it is also the "Snow ball effect",  which is essentially the weakest longs are going to sell first, as price moves lower, the slightly stronger hands are going to sell and price moves down further, then the strongest hands will sell; if this snow-ball effect is followed through its conclusion on a larger basis, this is how a capitulation day is formed, that's when all hands from weak to strong all sell at once as they can't take it any more.

The "Snow-ball effect" is an essential part of understanding "How, When, Where and Why" when it comes to head fake moves.

 Like GDX, NUGT's mid term 10-min chart saw VERY strong, sudden accumulation in a huge leading positive divergence, this is confirmation between the two different assets and although price is correlated, there's nothing that says volume will be correlated and 3C depends in large part on volume so that's why there's confirmation between highly correlated (price) assets.


Gold Futures

 This is a 30 min chart, there's accumulation just before the F_O_M_C move, leading negative distribution in to it and a recent positive divergence.

The 60 min Silver Futures are showing something very similar.

For now, Gold miners are well correlated to gold, gold is fairly well correlated to silver, this all bodes well for GDX/NUGT long.

If I see another entry area, I WILL post it. It looks like we may get a chance...

 I showed a negative divergence forming at the top of this post in the earliest capture, it was only 1 min. Now we have intraday negatives like this 2 min out to the 3 min chart.

Not to worry though, the 5 min is holding fine and the 10 min looks as good as ever, so if anything, this should be an opportunity to add to the GDX call position, open a new one or NUGT long.

Quick Market Update

The charts of XLF and FAS in the last post showed a pullback to form at least a right shoulder for an Inverse H&S bottom formation, the first half of the right shoulder (a rally to the neckline) is already in place, the second half which completes the right shoulder is a decline that is typically symmetrical with the left shoulder's size. There is a chance there's a complex Inverse H&S as seen more clearly on the FAS chart, that's two left shoulders and typically these patterns are symmetrical and if as I suspect, they are not there by coincidence, then probabilities are high that the creator of the price pattern will likely want this to look as textbook as possible which means as symmetrical as possible.

To create these shoulders r finish them, the market needs to pullback and this update is to tell you that all of the major market averages have an intraday negative divergence EXACTLY where it is needed, for instance, exactly as FAS approaches the neckline, but before it can break out.

Look for some market downside, I'll be putting out ideas  AS LONG AS I THINK THEY ARE WORTHY OF THE RISK, IF NOT, THEN I THINK IT'S BEST WE MANAGE OPEN POSITIONS AND WAIT FOR THE REAL WORK TO BEGIN OF ENTERING CORE SHORTS AFTER A MARKET BOUNCE.

Financials, XLF & FAS

I was considering an add-to XLF call if XLF broke below the psychological level of $20 (a very even, magnetic number for stops to be placed at or just under); otherwise, I prefer FAS for the position.

 I had drawn two trendlines I expected XLF to break below, the first was easy which was a former low/support at $20.11, the second would be harder, but being it's such a psychological magnet, I was pretty sure we'd see a shake-out of $20, which is where I wanted to open an additional XLF call position. However, the move below $20 only lasted a few minutes and that was right at the end of trade yesterday and very early this morning. Even with equities, I never use limit or stop orders, I also don't show people my cards when I play poker.

It appears we have an inverse H&S bottom in place or nearly completed, if so, then <$20 shouldn't be seen again. The volume pattern for the price pattern is not confirming so it appears to me to be a "plant" (specifically placed there via the work of the market's middle men) as it's a widely recognized price pattern, but as far as naturally occurring, the volume is wrong; so it appears it is there on purpose to attract longs.

 As I said earlier, I'm not "Blown away" by the 3C divergences, they are there, but fairly weak, this is a 15 min. which is a decent timeframe, but as large as this pattern is now, it should reach 15 min, it's just now leading vertically so to me it's mediocre at best.

If we don't get good downside momentum to reduce the premium of XLF calls and a break of $20, I don't want to chase premium for XLF calls, I'd likely enter a FAS trading position (3x long Financial ETF). In this case, I think you can buy a breakout of $71.50, but be ready for a shakeout move, it wouldn't be uncommon even though they seem to be inviting longs in so I doubt they'd want to scare them too much.

In any case, it's a quick long position that is worthy of some consideration. I wouldn't chase much beyond $71.50 which is also a clear psychological level and exact resistance for FAS, again, I doubt very much its coincidental. It appears with such limited Wall St. involvement (evidenced by the weaker nature of the 3C divergences), they are counting on retail to help in the lifting process as well as the SPY Arb and any Carry cross they may be able to get working. I haven't checked the last two yet, but you get my point., just don't get greedy and hang around past your welcome.

SPX Candlestick

Remember the "Daily Wrap" yesterday in which I posted several SPX charts regarding possibilities or different configurations that I thought to be most probable? The chart from the post in which I drew in yesterday's closing candlestick and then drew to the right of it, what I suspected today's might look like, was this chart with the following comments about the chart as well.

" I drew in several different bullish reversal variations for a daily candle as the downside is losing momentum and T.A. traders are going to expect a test of resistance soon. The next candle to be a bullish reversal confirmation (look for increased volume) can be a star which is the first from the top and to the right of today, the second is a Doji star, it is essentially telling you there is equilibrium between bulls and bears that's a change of character and usually a good reversal candle. The third down is a bullish hammer, it doesn't matter if its body is filled or open, as long as the lower wick is at least 2x as long as the body. The last is very bullish, it's a Bullish "Engulfing" candle and opens at a gap low and closes near its high, swallowing the previous day's candle.

Note in every example I drew a small yellow trendline representing today's lows, probabilities are high that intraday trade breaks those lows as I have depicted in every variation, that's our head fake shakeout."

Thus far this morning, we aren't far off from the general concept of those possibilities, here are just a few of the possibilities we can create from here for a bullish reversal candle.

The first concept that has already come true was the most important one for a reversal that I laid out in bold print last night, 

"Note in every example I drew a small yellow trendline representing today's lows, probabilities are high that intraday trade breaks those lows as I have depicted in every variation, that's our head fake shakeout."

That has already happened so from here we can still make a bullish hammer, a sort of bullish Engulfing candle or even a plain doji star would work, the point is, the ROC I mentioned yesterday (downside momentum fading) is all a part of the reversal process in creating this sort of true parabola (like a ladies long necklace rather than the parabolic move).

I'm still not impressed by the charts for the most part, although they do lean toward the probabilities we expect, they still remain the weakest of all recent cycles I can recall, it's the price pattern and the amount of confirmation if anything that looks to solidify the probabilities. I have made no secret that I believed we would see this and that we will continue to see this as true "Risk taking" is very hesitant now to commit to anything significant.

However, the larger view (rather than intraday) is coming along thus far. Whether there are assets strong enough to hitch hike a ride higher before abandoning them at a small gain and entering core short positions for the super-cycle or not is still up in the air. It's never a matter of probabilities, it's always a matter of high probabilities, low risk, an excellent entry and the best timing possible, THAT'S OUR EDGE, NOT THE PROBABILITY OF UP OR DOWN.

P/L: XLE, XLF, FAZ, & IWM

Yesterday's IWM Put is a perfect instance of seeing a strong signal with VERY high probabilities of a move down, but very little profit potential in an IWM short or even the 3x leveraged SRTY (long). The use of options made great sense here, they offered the leverage to take a great signal and give it the profit potential it had been missing while remaining a short duration trade which would suffer very little in the way of Theta (Time ) decay. In fact, the IWM put yesterday was in my view, the perfect tool to make the trade work while negating all of the negative aspects of using options such as time decay and the position was at minimal market exposure (I judge market exposure to be market risk as well).

I need to post the IWM P/L, but I realized I had not posted the P/L for yesterday's closed positions: XLE, XLF and FAZ.


FAZ

At a cost basis of $29.38 and a fill of $28.90 the P/L came out to a loss of -1.6%. This is the position loss, as a portfolio loss with regard to the 2% rule, it would have been approximately one twentieth of one percent and well within the acceptable loss.

IWM

At a cost basis of $2.07 and a fill of $2.49 the IWM puts that were only open approximately 2.5 hours came out to a gain of +20% 

XLE

I must have forgotten or erased the screen capture of the position so I had to go back and look up the original fill for the 20 contracts of XLE October $86 Puts, which had a cost basis of $2.93. At the fill of $2.74, XLE puts came in at a loss of  -6.5% or about -$380.00

XLF

At a cost basis of $.38 and a fill of $.29, the P/L came to a loss of -23.6%, since data was down that say, the dollar loss would have been $1027.