I’ll make this relatively brief as trading is really busy this morning (see the twitter feed). It is odd to think that trade-structures repeat, but apparently on occasion they do. The year 2000 analog I’ve been harping about continues to be a guide as it called for the large down move this week (year 2000 on the lower part of the chart to the right, 2014 $SPY on top). The scaling is different on the chart, but it’s the structure comparison that is the key aspect here. Per the analog and technically we are getting close to a short term bounce.
Outside the Bollinger band now the $SPX basically hit the 50MA overnight and that’s where it bounced. This is the level I want to trade against. As we moved very quickly and are deviating hard to the downside from the 5EMA and 8 MA I expect a bounce to at least test one of the two in the next couple of days. Hence, I’m positioning long in $ES again.
The analog points to a short lived bounce for 2-3 days at the most followed by further downside. We had a bounce into the 1827 area which was met with strong selling and a drop of 18 handles overnight. As we are moving rapidly short term oversold, have large POMO today and are touching key technical areas I will aim to add some calls on weakness at the open. As weeklies may be too erratic today I may likely go for next week’s expiry to give me flexibility in potentially holding over the weekend. However, I may just as likely go flat into the weekend, it really depends on the action. If we reach targets today I may as likely just exit. Asia has become a risk factor and markets are beginning to notice. Bottom line: Today will be fast, erratic and will require some flexibility.
So my take: I’ll cover some more puts at the open, lock in additional profits and trade from the long side today.
1. Yesterday you guys saw me trying to long the $ES a few times and getting stopped out. I had several multiple larger $ES run trades and to risk trading $ES long as a hedge against shorts is a good intra-day strategy. Days like yesterday are largely unpredictable but you can trade against levels which I did for the invariable bounce as I kept taking profits on the large shorts. One of the advantages of futures is that they are dirt cheap to trade in terms of commissions. Less than $5 per contract, adding a 0.5 point stop is tight but keeps risk very well defined. All my stopped trades added up to 4 handles which were netted out to even by one of my multiple point intra-day trades, and of course, at the end of the day I caught a 7 point run and so the strategy proved very profitable.
Additionally my overnight short $ES brought in another 7.5 handles and so I’m already 14.5 points ahead on the day trading. Love the flexibility.
2. I finally caught up to track the recent concluded trades and I updated the tracking page on the website here.
Good luck the next couple of days, it will not be boring!