XLF / FAZ Financials Follow Up...

Friday I closed a partial FAZ long position, Closing FAZ Long,  and decided just to leave it at that for the time and decide after I see how the charts play out, whether to add a short term FAS (3x long Financials) or XLF call position.

I'm seeing a lot of confirmation in multiple assets in different industry groups that look a lot like my expectations for the market this week, I believe there's a strong probability of a bounce, but until I see the charts looking stronger than they were Friday, I can't justify adding that FAS position and  really the bigger trade or higher probability position is XLF short which would be a fantastic entry with a bounce.

I just want to show you the trouble Financials are in, why I'd absolutely consider them a short and what I'd be looking for to enter a short term long like FAS long or XLF calls, it's basically nearly identical to the overall market expectations, but again looking as bad as Financials do, I can't justify entering a long bounce trade unless there's significant improvement that will likely only come on an intraday pullback.

 XLF Daily chart has seen strong distribution from 2013, but the last couple of months have been very strong.

I had been waiting to add to FAZ long on a break above the XLF range (head fake move), which never came, however, with the break below the range, this often provides the short squeeze momentum to make a move to a target such as the one I was hoping to get just above the range as it draws in new breakout longs and shorts cover providing plenty of demand smart money can sell in to, that's ultimately where I'd like to re-open the FAZ long/XLF short.

The XLF 15 min chart has a positive divegrence, the probabilities short term are for a bounce, but probabilities are not the same as high probability low risk trade. 

There's a strong 2 min positive in XLF which is a good start, but not yet a high probability/low risk trade (for a bounce).

 FAS (3x long XLF) has a similar 3 min leading positive, but not much beyond, I usually look for at least a 5 min chart looking like this for a trade.

 5 min FAS isn't there.

This is why I would like to see a pullback to strengthen the 5 min charts as accumulation takes place in to weaker prices and heavier supply.

As for the FAZ position closed Friday, it was a partial position and I think protecting that position was the right thing to do, but entering a new trade and putting those assets at risk is a lot different from protecting gains or the position.

I see the same pattern in XLK, the major averages and numerous short watchlist stocks such as AMZN covered earlier. I'll continue to be patient, if the right signals for a high probability position don't materialize, then I'm content with just waiting for the next trade set up which is to short assets like XLF in to price strength/3C weakness.