First here's the P/L for yesterday's positions opened, QQQ May $84 Calls and URTY long...
With the QQQ Call cost basis of $2.32 and the fill at $2.83 the P/L for less than a day's worth of exposure came to +22%, note how quickly the premium evaporated between the screen capture and sending the order. This is why I try to set up option trades (and exits) in a very particular way, I'm not looking for home runs, I'm looking for a tool to make a good looking signal a worthwhile trade. I know some of you were at +80% when you closed these yesterday and at least one person in the triple digits.
As for URTY (3x long the Russell 2000) also opened yesterday, with a costs basis of $75.36 and a fill of $78.59, the P/L came to nearly +4.3% for a few hours in the market, I intended to hold this one for a longer period, but I really though=t I'd just look in to re-entering at better prices given what I was seeing in the market.
Here's what I was seeing on the Futures/FX side...
Index Futures...
This is the ES 5 min chart, we already expected some pullback today from yesterday's closing signals, a 5 min negative is to be taken seriously , at least in the context of what our expectations were by the EOD yesterday for the market averages.
I saw the recent negative divergence on an ES chart out to 15 mins so I took that seriously given the non-confirmation in the averages and what I saw in FX/Currencies...
The ES 60 min isn't as strong of a timeframe as the SPY 60 min, but it's still strong enough to tell us the short term story and that appears to be a short (perhaps intraday) pullback and the bounce we are looking for should still be on track considering this 60 min positive. This is not the only evidence for a bounce case by far, it's just a quick view of the case for a bounce.
NQ / NASDAQ 100 Futures has negative divergences on 1, 5, and this 15 min chart, considering the calls were in the QQQ, I took this serious as well. However, even the negative divergence this morning is still small in context of the larger accumulation that has been taking place, thus leading me to still believe we are looking at a SCBO (Second Chance Buying Opportunity) before we get a bounce ,
basically exactly the same as yesterday's late day expectations, only the overnight action didn't allow for a gap down.
TF/Russell 2000 futures were also negative on a 5 min chart, this is stronger than simple intraday, but not enough to ruin the work that has been put in, it's along the lines of what we were expecting for today as of yesterday afternoon.
FX/Currencies/Carry Trades...
The USD/JPY (green/red bars) is shown here vs ES/SPX futures and it has had a decent correlation as I mentioned earlier this week, the FX/Carry Trade correlation algos seem to be in the "ON" position, however as you can see, ES fell out of bed with the USD/JPY early today , right around the open and with some softness in the $USDX and Yen charts, I thought it was safer to just close those positions and regroup.
I checked the EUR/JPY (above) and AUD/JPY for correlation with ES and although EUR/JPY looks to be the closest RIGHT NOW, recent action suggests the USD/JPY is still the carry pair of choice.
Thus... since we don't get great signals on the FX pairs and we didn't have anything interesting, I went straight to the single currency futures that make up the pair we are interested in...
This is the Yen 1 min intraday since about 10 p.m. last night to present, this suggests that the Yen see some modest upside which would pressure the USD/JPY as well as the Index futures and the market averages to the downside, along the lines of a pullback as we were expecting yesterday so this seemed like pretty good confirmation, why stick around and let those QQQ calls evaporate to a loss when the gain can be taken and a new position can be taken when we have solid data saying, "Time to buy again" as we nearly hit the exact bottom yesterday buying QQQ calls.
The Yen 5 min is in line on the downside which is in line with recent market action, however to the far right there's a slight leading positive which is in line with the intraday pullback scenario.
As for the other currency in the pair, $USD, this is a 1 min chart showing no confirmation on some early strength this morning...
The 5 min chart showing confirmation of the Yen's 5 min positive with a 5 min negative which again would pressure the USD/JPY and that would pressure the Index Futures as well as the market averages, likely to the pullback scenario from yesterday.
What may have bothered me the most was the 15 min $USDX chart as you see above with a negative a little larger than I'm comfortable with, especially holding calls, so that was that.
From here I just want to be careful, the real prize is shorting in to market strength so longs at this area are really opportunity that's a bonus, but it's not worth putting portfolio finds in serious jeopardy when the main theme for me is preservation of capital to be used to enter those short trades in to market strength, thus if I miss the upside move (I don't think we will), I'm not crushed at all, I'd rather miss it than take any unnecessary risks with dry powder that's meant for a larger trade. The real trade is with the 3C trend and that's short.
I'll be keeping close tabs on what's going on, we are approaching what will be a Holiday shortened week and you know those Wall St. types, always taking a 3-day weekend and turning it into 4 or 5 days at the Hamptons, so I'd expect liquidity to be dry at times which may facilitate even more volatility, WATCH THE VOLUME OF ANY ASSETS YOU ARE LOOKING AT, I've seen some pretty wide(r) than normal bid/ask spreads.
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