Trading Portfolio Positioning and VXX / UVXY

As mentioned, over the last few days I've been slowly adjusting the trading portfolio to account for worsening signals in the market, I doubt I'm quite done yet, but as of now it stands like this...

Short Exposure: SQQQ and SPXU

Long exposure, but not necessarily market correlated. market correlated: MCP / IOC

I like MCP as a longer term trade and keep it as a core position, as a trading position I'd like to keep it unless I really see a short term opportunity that is too great to pass up. IOC I'm going to go through shortly, but the main exposure and leaning is bearish with SQQQ and SPXU.

I have mentioned the this week that if I were to add to an already open VXX call position, I'd do so with UVXY long which would go in the trading portfolio and would lean it even more bearish. I haven't made a decision on this yet, I want to run through my watchlist and see what might look better. There are no options trades in the trading portfolio, only equity/ETF positions (It is set up not to allow any options trades).

As for UVXY which is just the 2x leveraged version of VXX, it looks interesting here, especially as the actual VIX futures are seeing some very positive action.

 intraday VIX futures with a leading positive divegrence, 5 min VIX futures are also positive as we have seen them go from negative last week to in line to positive now.

VXX 1 min intraday also is leading positive right as it makes a move under support, essentially the "Chimney" area which is typically a run on stops that ignites momentum just before a reversal.

 The 2 min chart shows where we had opened our last put position at the negative and the recent positive

 The same is seen on the 5 min chart which is now in an attractive position, only a higher leading positive would make it look better and I suspect that is coming.

This is where and why I consider UVXY long, it has also seen positive accumulation on a 10-min chart, this is where we just started seeing some 10 min negatives in the averages yesterday like the Q's.

And even a 15 min chart is leading positive.

I wouldn't begrudge anyone who liked UVXY long here, it's in a good cost position and a stop can be placed just a bit under the lows (away from any obvious technical levels or averages) making it a lower risk position as well and we have the run on stops which is a good timing indication.

SQQQ Charts

I mentioned yesterday SQQQ or QQQ short was one of the stronger looking short term plays. You'll see when we get to a 15 min chart the obvious difference between the deterioration in the Q's vs a BIDU and why I consider BIDU a better pullback/long play and SQQQ (long) / QQQ (short) a better short term bearish play.

Remember SQQQ is a 3x leveraged QQQ short) so it trades and gives signals opposite the QQQ. Often the 2-3x leveraged ETFs seem to get signals earlier than the averages although that's not the case with QQQ, it's 15 min chart is quite negative too.

 Intraday 1 min leading in a flat zone looks like a decent entry area.


The 2 min has a relative positive divegrence trend, it is also leading.

 I'm not the best artist, but hopefully the idea comes across.

 The 5 min chart from negative to downside confirmation to a leading positive divergence.

This is where SQQQ is more interesting than say as BIDU, not because of the leverage, but the 15 min chart, that's leading positive and matches the QQQ 15 min leading negative.

Closing URTY (long) Ultrapro Russell and Opening SQQQ (3x short QQQ) Trading positions

I'm switching the trading portfolio's positioning from the long stance it had as I have been doing slowly and putting it in a more short stance.

BIDU Update

BIDU's charts are pretty much negative for the short term, I was considering it as a short play, but it still has strong intermediate charts and there are better looking (more damaged) charts for a short term play.

 3 min positive and leading negative  so short term doesn't look good for BIDU.

The 5 min also leading negative.

However here's where it's stronger than some others...

 10 min is posiitive at a larger base and still in line with no deterioration.

As is the 15 min chart.

BIDU is more ideally suited as a long pullback play, let it come down and once the charts out to 5 min turn positive (accumulation in to the pullback), BIDU should make for a good long position which would be along the lines of a sub-intermediate swing trade up.

You may want to set some price alerts lower to remind you.

TNA (3x long small cap bull) Charts

The fill was $68.15 so the P/L was a loss of - 3.78% (of position, not portfolio).

 The larger intermediate charts are already negative so it just takes the short term ones connecting and this position is trouble so I'd rather be flat here or even add some more short exposure than carry this right now, I'll likely revisit this as a long, but ultimately it's in big trouble in primary terms.

 2 min chart in bad shape so the 1 min breaking down is not good news for TNA near term.

The 5 min going positive sending TNA higher for several days and in to distribution. The 5 min mark is my minimum in most cases for a trade signal.

On  a 4 hour chart we see in line or uptrend confirmation transitioning in to the first sign of distribution in to higher prices at the relative negative, but by the time we hit a leading negative divegrence, there's big trouble, although this is more of a primary trend. *Leading Divergences are almost always significantly stronger than relative divergences.

Closing TNA (long) Trading Position

Don't be surprised if URTY follow shortly.

Charts coming.

MCP Position Update

The intraday averages: SPY, QQQ, IWM are seeing more deterioration in their intraday charts.

I've decided to at least clean up the MCP Feb $5 calls, I can still give March some time, but February is getting tight.

I'm setting price alerts to hopefully catch another move and above $5.24, I'll watch it from there to look for an exit point.

MCP Trade Update

First this only is relevant (for me) to the March MCP $5 calls which I decided to leave open yesterday, the MCP equity long will stay open.

I may close the calls if the charts go negative intraday, so far they are strong, but a bit too parabolic.

Compare the Market Averages intraday charts to MCP...

 QQQ intraday going negative

IWM already negative

SPY intraday negative

MCP intraday perfectly in line, but price is a bit parabolic so far.

The 3 min chart looks good so I'd probably need to see 1-3 min go negative before I'd close the March Puts and feel pretty convinced that it's going to pullback.

For now it's something to keep an eye on with  a pretty decent gain there.

Some Other Charts...

 In the last post I showed you a close up of the ES 5 min chart going negative as volume picked up after Europe opened, here's the intraday 1 min chart which is in line with price.

The NASDAQ Futures 5 min chart also in a bad leading negative divegrence, the growing size has me considering realigning short term trades to lean more bearish as of right now the trading portfolio is leaning slightly bullish, but a couple of positions are non market correlated.

 Russell 2000 5 min leading negative divegrence. It's not just the strength of the divergence, it's the size and this is getting to be quite a bit bigger than the day and a half from last week.

VXX  shows where we bought puts at distribution on a 5 min chart and calls, it's still looking good for a move higher. If I were to add to or start a position here (trading only), I'd likely chose UVXY long with its 2x leverage.

 USD/JPY 1 min overnight, this was negative last night and stayed that way (distribution).

The Yen started going positive at the same time USD/JPY went negative, right after Europe opened.

 And the USD over night believe it or not, in any case the spike on Yellen is out of correlation with ES, it does have a leading negative divergence, but I'm growing more... "interested" in whether the correlation of the last few years is now breaking apart.

 USD/JPY 1 min VS ES (purple), note the difference at the Yellen comments this morning (red arrow).

On a larger scale (30 min), ES has outperformed the carry cross because of the snowball momentum effect from a head fake/ short squeeze so it has some catching dow to do, but I'm still interested to see if the correlation is breaking apart.

Yesterday I mentioned it's been about a week since last trading GLD/gold which we were doing excellent with as it had such a reliable inverse correlation vs ES (red arrows), but recently that has vanished, I don't know if that's short term or we have a new market dynamic, either way we'll figure it out and be trading gold again soon, but not until we know where the edge is.

A.m. Observations

There's only one thing that matters to me this morning after a Carry cross ramp in to the wee hours of the morning and that's this...

It's an intentional ramp in low volume hours and when they start to pick up it starts to fall apart (just after Europe's open.

Is anyone surprised by what Yellen said? Do you really think Bernanke and Yellen wouldn't have coordinated? He was there to lead us through QE as he's a scholarly expert on the subject, she's there to lead us out of QE.

All of the rest is make what you can in between.

ONE THING TO KEEP AN EYE ON IS THE BREAKING UP OF CORRELATIONS, I MENTIONED GOLD YESTERDAY, THE CARRY TRADES ARE SHOWING MORE AND MORE DISTORTIONS WHICH LIKELY MEANS THEY ARE LARGELY CLOSED.

As far as everything else, not much has changed since last night, it's just a matter of managing positions and setting up the next round of trades and trying to stay a few steps ahead of the herd.

I'm not a big fan of early a.m. trade, but I'll be keeping an eye on it and deciding whether or not I want to add to two short term trading positions (both bearish), VIX calls and SPXU long.