After a classical morning reversal, most risk assets fell again today and had various bearish technical patterns on daily charts. Major equity indices made lower lows and lower highs and some broke below trendlines. August SPX options saw implied vol up 0.8 to 0.9 and August FXI was up 1.3 vol points ahead of employment. Calendar put spreads struck below recommended in our August 5th commentary did well. Despite weakness in many large components, NDX did not close below 1600 today, awaiting employment. We hedged bearish options trades in stocks which fell 2-3% on the day. To bet on further downside, calendar put spreads, ratio put spreads and butterflies look the best. Bank index (BKX) hit $45 and reversed closing near the open, potentially a beraish candle reversal pattern but sector retains its relative strength. Investors seemed to bottom fish in stocks like BA and LXK which are rebounding from bad fundamental news and sell recent high beta winners such as RIMM. This overall trend is likely to continue.

Foreign currencies which have been correlated to equities such as the euro and the canadian dollar also fell but FXE August implied vol was actually down on the day. Crude oil futures could not make it above $72 for several days, all confirming resistance in risk assets. 1×2 put spreads in currency ETFs such as FXE look attractive to play a decline back into the old range.

Ten year note yield spiked to 3.798% but did not close above 3.75%. 3.59-3.60% still seems likely but supply may limit large gains. So modest upside trades in TLT or SHY seem warranted.