10-19-14 Trade Plan

With lower highs and lows the market did what it does best in downtrends, make bigger moves lower than it does higher.  The volatility is bringing back a lot of very short term opportunities in both price directions and the actual volatility of the options.  Getting in some puts or any long IV/short delta option positions before a nice one or two day decline can really pay off especially if you have the timing required to trade the weekly cycles.  Bonds and volatility ETFs were trading great this week and after a few weeks of lack of opportunity with long stock positions it was good to change focus and make money with it.

In my opinion we are past the point of V shape straight back up reversal, this is going to take at least a month or two of chop and consolidation if we are going to reverse back up.  Which would make sense as the market waits on the only fundamental piece of information it cares about, whether or not we see more QE.  That consolidation could happen at these levels or it could happen 10% lower, as long as you are following major swing points and trend you know which direction to expect the big moves and where to define your risk if you want to trade it.


SPY and QQQ are still being sold with the previous swing high at $197 for SPY and $98.75 for QQQ.  With the big picture clearly being down I don't really care if it's making higher highs/lows on a 5 minute or 15 minute chart, that is just a distraction from the task at hand in my opinion.  Until there is clearly a different trend happening on the 130m or 65m chart it's guilty and all rallies are subject to a lower high.  Before every rally we have seen this year was a clear signal within a daily uptrend, we have neither right now.  Keep an eye on the break even levels for the year, that is where SPY is trying to be supported right now and QQQ still about 5% percent above break even.

The long/short portion of the watch list during times like these isn't really so important to me as much as the ETF section is.  Since that's where I'm doing most of my very short term trading with the exception of the occasional good setup in a stock.  There are more opportunities out there but I prefer to keep a focused approach in volatility times, at least for now.  And if I'm not seeing clear opportunity I do nothing.  That's all I got, thanks for reading and don't pick bottoms.

Trade well,
Michael