Well, has this been an interesting market. Because everyone is expecting a buyable pullback, the markets are being bought quickly on slight pullbacks. There are a many indications for a technical pullback as well as a fundamental pullback, but the market seems to overlook them all.
I have also started playing more guitar of late. It is a good stress reliever. I have been breaking out and playing some Hendrix in the Trading room to entertain myself. Also, I have learned a few new songs by David Wilcox this week.
Here is a little different flavor. Some tunes to read by… Angels & Airwaves (a Dashboard Confessional meets U2 meets Blink 182 feel)
On with the post:
The expectations of a pullback on my part has lead to some slight losses on Wednesday through Friday. As well, as many missed long opportunities. However, I was up 4% for the month of April, to back up a nice March (+9%). Clawing back from a very poor performance in February (-15%).
I have been enjoying pair trading indexes.
There were three major happenings in the markets in the past week.
1) US Treasury breakdown (after a failed, breakout)
2) Nasdaq reaching the 200 day MA, creating a topping tail.
3) Market breakout above roll over pattern, (failing at the top Bollinger Bands).
Upcoming: Look for MAJOR weakness in the Small Cap (Russell)
Here is my starting point: S&P 500 daily
I was selling into the 876 level, which was breached on Thursday. I was stopped out of some positions. However, I re-established neutral to short positions in the MNX (Mini-Nasdaq) on Friday morning’s gap up.
My stance: Short-term bearish,Med-term bullish, Long-term bearish.
We are topping out into the upper end of Bollinger Bands, and on lighter and lighter volume. The stop of Thursday’s high is well-defined as a stop. Although I have been bearish (and wrong), on short-term direction, I remain in a neutral to bearish stance. I am looking for a downside target of 804-836 on the SPX.
Break of the 61.8% retracement of the 10yr Note:
I was playing support off 120’16” (Bollinger Band, and orderflow) on friday and laying off the risk in the equity mkts (ES and MidCap400) for nice profits on friday.
On Tuesday, I was long the TBT as we broke the 122 support in the 10yr note (/ZN). I was right, and then we reversed. On Wednesday, US treasuries made a strong move up (stopped me out for a small profit). I thought is was a move to a risk aversion trade. I was short the Russell and long SP in anticipation of a selloff in the higher beta names. I was wrong. Early perhaps, but wrong for now. The treasuries then broke down again, and TBT was a big winner for those who stayed with it. As the Equity market continues to rally, I see us moving back down to the lows 120 area for the 10yr Note. However, I think we have set up of a counter trend trade here… I can see a bounce off the Bollinger Bands, and a defined stop below the bottoming tail hammers on the /ZN. I would like to be short of the /ZN @ 122.
My Stance: Short-term -bullish to 122, Medium term bearish to 120, Long-term – Bearish.
New major position – MNX (Mini-Nasdaq)… playing a reversal from the 200day MA.
The Naz (NDX, MNX, QQQQ) have been on fire compared to everything. However, we found a resistance point worthy off putting on a position. A topping tail was created above the 200 day MA, and the top of the Bollinger Bands. Downside target 1273-1330. I could see a consolidation between the 50 and 200 day MAs.
My position: 2% acct position in the Jun/July 135p calendar. (I have a plan for another 2% (bullish position on pullbacks).
I gave up a 1% vol skew between Jun vs July. We are at the bottom of the Volatility range for the past 6 mos.
This position benefits for a rise in Vol, and it is Theta positive. The Breakevens are ample, IMO. 126.26 and 145. (MNX is 1:10 the size of the NDX).
I will take off half, IF we move above Thursday’s high 1418.9. However, IF we retrace off these highs, I can see a retracement to 1273 as a potential… That would also market the previous top of consolidation. More likely, a move to 1330 would be in the cards.
The Reward to Risk on my timeframe is 8:1
And finally, the SCREAMING technical short – Russell 2000 (RUT, /EMD, IWM)
I will be looking to short on a break of the trendline.
Why? We hit the 38% retracement, major topping tail reversal signal, top of Bollinger Band, Retracement to previous Wave 4 high.
My Stance: Short-term, Med-Term, Long-term – BEARISH! I am looking for a short/Med term pullback to 422-441 in the RUT.
Sell it, or at least sell against S&P or Naz. And that is all I’ve got to say about that.
Make it a great week!