Wheeee, what fun!
Check out yesterday’s action on the Russell, up 1% from the gap up open (rejected at 665), down 1% and then up 1% to finish up 1.7% for the day, pretty much right where they started the mornining. Our other indexes had more conviction than the small caps, who have been our leader all year so perhaps, just maybe, they are consolidating at the 5% line (666) waiting for the other indexes to catch up? We had a similar situation in late February, where the Russell paused to wait (like a dog running ahead of it’s master) and again in later March while in April the Russell was slow to follow the other indexes as they trended lower.
Yeah, remember April when the Russell was at 740? Ah, good times… It was easy to call a top then and we hedged for disaster on April 28th so it’s not like we can’t see these things coming. It was easy to BUYBUYBUY as we tested our lows in June and July as that was the bottom of the same range (this is not rocket science, folks!) but now it is HARD to say which way we will go because we are in the middle of our range. I see too many of our Members looking for trades every day but not every day is a good day to trade. Some days are good for watching and waiting. Some weeks are good for watching and waiting…
I reiterated our 1,000% SDS spread from the weekend post in the morning in our morning Alert to Members as it’s nice to be able to commit $500 to a $5,000 pay-off that protects $50,000 worth of bullish positions from a 10% drop. That’s what insurance is supposed to do – it’s a “just in case thing.” Since the market is now on a 10% “limit down” system, we don’t need to go too crazy with our insurance as even another 9/11-type event should not, in theory, give us more than a 10% drop before the markets are halted, giving us a chance to reposition on the fly. That’s why those Fed reports are such good practice for us – we get major market-moving information in the middle of the day and we react to it within moments and we’re good enough at it that we actually look forward to those violent Fed day moves!
Another bearish trade idea yesterday was the SPY weekly $110…
