Went With XLF May 24th PUTS (long) with a strike of $19.50

Buying XLF Puts Here- I think FAZ Equity Long Position works as well or SKF

If you want an equity version, the 3x Bear Financials FAZ is one choice, the other two would be the 2x Bear Financials, SKF or just shorting XLF, although I prefer more leverage.

I'll likely be looking for a XLF Put (long) strike around $20 and expiration around May 18th or 24th.

Adding UNG Long Equity Shares Back

We took profits in UNG as it made it's recent high as we knew it would pullback, I like this area as a place to add those shares back.

If this is a new position for you, UNG is a long term long trade that we feel has enormous potential. I'd have no problem bringing a new position up to a full size position here (with proper risk management)

Adding to the QQQ and IWM Put Positions

Bringing them up to normal spec size for option trades.

IOC is Nearing a High Probability/ Low Risk Long Term Equity Short

We already have a profitable short in IOC, I believe it was covered Friday a well, this is a great example of how we stalk a stock (say that 10 times fast) and let the trade come to us. If you have the capability, I'd set an alert for IOC above $83 or so, that's where we really want to pay attention either for an add-to position, pyramiding up is in my article, "Making More Than 100% on a Short" or adding as a new "Core" short position or longer term trade.

UVXY Long Equity Position

I'm going with about a 1/2 normal size position here, in other words what would normally be speculative, but keep in mind the leverage here.

I think it is possible if not likely that a slightly better price comes along, but as the market gets more volatile, it also gets more unpredictable, especially in affairs such as timing.

I'd personally not take a position that is too large and makes you uncomfortable should you have draw down. Or you may want to consider VXX which doesn't have the leverage UVXY has.

Just looking at the chart alone, this is not quite at the "U" shape we usually see in a reversal, this is a bit more "V" shaped and that suggests a little more time and possibly downside completing the process of a reversal rather than an event, but again, the unpredictability factor rises as the market becomes more volatile.

 Normally a reversal has a bit more rounding in the bottom as reversals are typically more often a process rather than an event, this is in large part because of the time it take Wall Street to re-adjust, they can't do it on the fly like we can. Still, I'd rather be a little early than try to scurry around at the last minute trying to get positions in place.

UVXY's very impressive intraday leading positive divergence. I used the other Volatility / VIX ETFs managed by other funds with different leverage and different long/short orientation to confirm UVXY.

 XIV is the non-leveraged polar opposite of VXX and as such, should have the opposite signal as VXX (as well as UVXY) which it does with a 2 min leading negative divergence.

VXX 5 min leading positive divergence.

I can go further out in the charts, but for the trade I envision (fairly quick), I don't need anything more than this.

IWM Put Position

Although I'm not crazy about the IWM 2 and 3 min charts, I like the 1 min, I like the R2K Futures and I like the current upside momentum.

I'm going to open another partial position in addition to the existing IWM May 24 $97 put.

Like the earlier QQQ Put, this will be about half the size of my normal position size until I see signals line up the way I'd like, right now I'm going for the momentum and what I see short term and in Leading Indicators.

I'll go for May 17/18th expiration and a strike of $97

SLV / AGQ

Yes, I still have a 2x leverage long ETF (UltraSilver) open, if I did not have it open, I'd open it now personally as I think SLV will move to the upside, but you must be nimble and ready to close this out pretty fast, possibly as soon as tomorrow.

I think Gold has an ok chance of a short term fast move up, but I would not play it, the probabilities and set up are not strong enough.

Futures Update

The futures are all going negatively divergence intraday as they hit the highs for the new week, the IWM (TF-Russell 2000 futures)  in particular looks much weaker on a relative basis.
Most of the currencies on a short term basis look as I described in the Leading Indicators post, they are seeing short term intraday positive divergences trying to hold them up, but a  Currency I wrote about nearly a month ago as being a more important player than anyone realized at the time has proven that lately over and over again, the Yen does not look good for the market moving forward, a rising Yen is VERY market negative.

Yen with a VERY strong intraday leading positive divergence, the Yen should pop higher sooner, I can almost guarantee it will correspond with the market's move lower.

 ES (SPX futures) negative at highs for the new week and getting worse.

 NQ (NASDAQ 100 futures) intraday negative divergence negative 1 min at highs for the week, also getting worse.

 5 min NQ chart, more important and very negative, along the lines of last night's theory.

TF (Russell 2000 futures), 1 min intraday at highs for the week with the worst negative divergence and getting much worse.

I'd keep an eye on the TICK chart for a trend reversal and momentum indicators. For buying puts, you want to buy them in to upside momentum, not after a turn down.

Leading Indicators

Other than the intraday information, there are two other things I want you to focus on that I try to offer. The first is the longer term negative divergence vs the SPX in a number of Leading Indicators, this is by far the largest I have seen since we started using this layout, it's enormous. The second thing is my view has been that before the market can turn down, tactically (tactically represents our actions to fulfill our strategic outlook, such as shorting a stock at an area we have been waiting for it to hit), the short term Leading Indicators (which are much less significant from a strategic out look, but very important from a tactical timing outlook) must go negative/dislocate from the SPX.

*Note that all Leading Indicators are compared to the SPX which is always green unless otherwise noted*

I'm going to put up the SPY Arbitrage and CONTEXT, you may be able to compare some L.I's to the SPY Arbitrage and see where there has been pressure (red) or manipulation (green) through the 3 assets used to make up the model : HYG, TLT and VXX.

 Right now (30 min+ delayed) the SPY Arbitrage is near reversion to the mean, or fair value according to the model.

The CONTEXT model for ES (SPX Futures) has seen a pickup recently in risk assets globally that typically trade with ES, there's about an 8 point positive differential the model is suggesting, so we'll have to see what this means, if this is building longer term or suggesting an intraday pop from here or just more effort to try to entice longs to step in (although that seems like a waste of time).

Here are the assets...

HYG High Yield Corporate Credit- a VERY Liquid Credit ETF used by smart money as banks have largely taken credit off their balance sheets making trading credit in large size very difficult.

This is a great example of HYG moving to a short term negative divergence or dislocation with the SPX instead of moving up or even leading it like we saw during certain days last week. Since the capture, Credit hasn't moved up at all, in fact further down making today's Prices in the major averages look VERY exposed to a downside move.

 The divergence between HYG and the SPX is starting to form, the SPX can make volatile moves up and down or even just up, so long as HYG keeps diverging to the downside, we are in good position to enter shorts as far as timing goes.

 TLT-Long term Treasuries (20+ years) saw a stronger move down Friday morning than the SPX did on the upside, this looks like the kind of manipulation used to support the market knowing smart money in credit (which often leads stocks) was moving out Friday and today, pulling the SPX down as far as arbitrage, this was an easy way to respond to counter that pressure, it is manipulation short term.

 TLT 15 min chart shows the longer term divergence we are looking for, remember that TLT tends to move almost the mirror opposite of the SPX so the correlation at the left (green arrow) is the natural correlation, moving from flight to safety to risk on and back. However since March when breadth indicators went in to the trash can, there has been an obvious flight to the safety of Treasuries as they have moved up WITH the SPX when they should have been moving down, especially at all time new highs. Someone is building a safe position in expectation of something much uglier longer term and is willing to give up short term gains to build that protected position. The fact TLT actually moved higher just shows that this is REAL Demand, not trumped up manipulation.

 VXX (Short term VIX Futures) shows this morning a move in the VXX that wasn't in scale with the SPX around 11:15, this is manipulation of VXX to benefit the market, look at the SPY arbitrage chart at the same time and you'll see it's near the high for the morning as this lever was being piulled to keep the SPX afloat.

Longer term this too has a mirror opposite relationship with the SPX seen at the green arrow, but recently VXX has failed to make a lower low while the SPX makes a higher high or a series of them, this is VIX futures being bid in an effort to grab protection, similar to TLT.

Right now VXX is being pressured to move the market higher, this is VERY clear. TLT is seeing the same movement because HYG is making a quick drop lower, VXX and TLT are being used to counter that to keep the market from dropping prematurely, but drop it will, I feel very certain of that short term as well as longer term.

Some currencies...*Despite what the daily or longer term implications are, intraday as in the last hour, all of them, FXA and the Euro have been pressured up to help the market (but the move is very small), the Yen and $USD have been pressured down to help the market, again the moves very small compared to what we see intraday below.

 As mentioned last night, the $AUD (Aussie) looked like it would head lower, this is a huge leading negative divergence in the currency vs the SPX and is not good for the market, this is market negative.

FXA in the shorter term divergence I'm looking for on a 15 min chart, this one is there, the others need to join, mostly credit and they are moving.

As I said, the longer term negative dislocation is the largest I have seen, the fact the $AUD is leading the market negatively this bad is a simple reflection of how bad the Chinese economy is and it has been the global growth driver.

The Euro intraday is also negative vs, the SPX, this is a lot of negative pressure on the SPX, no wonder they've resorted to manipulating volatility and treasuries to hold the market up.

Longer term major dislocation in the Euro, this use to track the SPX nearly tick for tick, this is showing obvious weakness in Europe. The fundamentals aren't good, the market can't ignore them forever, especially with the F_E_D's new posture.

The $USD is moving up with the SPX intraday, this is the opposite of the normal correlation and pressures all risk assets, stock, commodities, etc. Again more negative pressure on the SPX intraday.

 Yields intraday remain supportive, this is largely a function of the manipulation of treasuries discussed above under TLT.

Yields longer term with a gigantic negative leading divergence, this suggests a move down larger than anything we have seen since 2009.

 Commodities intraday fell out with the SPX, as a risk asset they are not willing to take on any more risk.

This is the longer term dislocation, the largest I can track in the history of coomods. This tells you something about demand for raw materials and global manufacturing.

g.

 High Yield Credit is less liquid and therefore must move before HYG in most cases because of the liquidity problem. Since capturing this chart, it has gone even more negative.

Credit is a much bigger market than stocks and much better informed, thais is why they say, "Credit Leads, Stocks Follow". So far, Credit's lead to the downside does not bode well for the market.

Finally HIO as an independent measure of risk appetite is negatively divergence, it has been the last few days, but now more than ever.