Today was the day to put up or shut up. Thanks to my junk longs, I had one of my most profitable days of the year even with my portfolio technically be slightly delta negative. The day got off to a nice start as I sold JAVA in the pre-market up 72%. Only a junk long position, but with a move like that, even a 1/2% position moves the needle a bit.
I also added some HUN, TIE and AIV at very attractive prices. When I am shooting for junk longs, I often set a limit order at an attractive price way below the closing price. If I get hit great, if not, that’s fine too.
With the VIX near 40 and VXX near my stop price, a added a little more VXX. As the market moved higher, I trimmed some junk longs like HIG back to their original 1/2% position size. Also trimmed back my long position in UYG ETF back to 1% position size.
I had my limit orders set this morning hoping for a pop from the fed announcement. I’m now heavily short and stepping up to the plate.
- Added more SPY short at $80.15
- Added AAPL short at an average price of $102
- Added SMH short at $18.95
- Added IYT short at $47
The big retracement we’ve been waiting and hoping for is now officially here. Hello retracement, welcome and thank you for stopping by.
$SPX should continue to meet a lot of resistance right here. I would be surprised if it just plows through tomorrow although it is not impossible. There is price momentum available which is unfortunate. Makes this not a slam dunk trade. Also hard to miss the cup like formation although the basing action is pretty short and pretty steep so not a long term basing action that you get from a conventional cup and handle. I wouldn’t be surprised to see a pullback to the 746 FL and then a push through but I will be surprised if we just fly through 805.
SMH is right at resistance. Easy to set a stop in the $19.50-$19.75 range.
If you look at IYT on the 10 year chart, this is a classic retracement.
IWM has also retraced back to resistance.
VIX at 40 is right at support.
GLD closing right at resistance (SLV and PTM look similar).
The Fed broke the dollar today.
Can C and BAC take out resistance too?
As a technician, I definitely feel the right move was to short at these levels and dig into the short side. What is my plan if I am wrong? I have stops which are nearby now on IYR and XLE. If there is a real breach of 805, I expect another big rally which will should cause a lot of short covering from people like me. If IYR and XLE commit suicide, that should lighten me up. IYT and SMH are also pretty tight stops and XLU is reasonably tight as well. If the VIX breaks 40, my VXX position should also get stopped out. My AAPL short is also tight at just above $104.5.
So I’m short, but if the market decides to humble me and deviate from plan that has been working perfectly, I will be lightening up very quickly back to a neutral account to avoid getting murdered.
I do not have stops on my 20% short position in SPY or in my 9% short position in QQQQ. If there is a huge breach of 805, I don’t want the ship to change direction to quickly in the event there is a big fakeout. That would be the nightmare scenario and I will not take the risk of that happening. I would rather just run away with my tail between my legs back to neutral. At that point, price momentum will be high enough that the threat of a big move higher will be pretty low. Not a time to get long.
So there you go. The charts are very convincing that shorting the rally at resistance today was the way to go. Now let’s see if the market cooperates.