DIVERGENT

1090 is still the level to watch. On a day where markets are ripping, the divergence in small caps wages on.

1090 in the Russell is the outer edge of this years range. This level serves as the first important reference point to manage positioning.

Earlier this week we discussed setting up a trade here. It’s possible this level might get rejected here today, and should be the upper end of how the markets consolidate and accept price.

If you are a bear, and think this market is headed materially lower, you have to take a swing here based on how easy this trade is to manage.

We’re going to develop a watchlist of 5 longs and 5 shorts tonight. Bring your top ideas.

OA

A long term theme I am very bullish on and MYGN has been a rock in this environment.

More later,

OA

I’ve dialed down the Russell 2000 to a monthly view.

As they say, from failed moves come fast moves. 1090 is that level.

This move in treasuries is unreal. Short bond funds are being blown off the map this morning. The capitulation in crude yesterday, 15 minutes into the pit close is something I’ve seen only a handful of times in the last few years.

I’m doing nothing here as of yet. For those of you trading options, please be aware that options are not an attractive instrument into market panic. Premiums are elevated into earnings season already, and with the added fear factor volatility levels are at relative highs for the year.

When fast moves start to settle, prices will chop around a little more. Volatility will bleed during this time, so in essence, you aren’t missing out by waiting on trading any options. Should you decide to pull the trigger on a few option plays, make sure you keep your time frames short in duration, and look to use strike prices that offer intrinsic value, not time value.

In these types of panic moves, sell puts on stocks you wish to buy. Sell calls against longer term stock positions. Collect premiums rather than pay them.

Be back with some ideas a little later,

OA

Volatility creates noise. There is so much action out there to digest that now everyone has an opinion. Even those that have had opinions with no substance in the past are now the most vocal experts out there right now. If you have noticed that your twitter following of 10-12 people consisting of mostly family members and friends has now doubled in the last few weeks to include lost sheep looking for market advice, you are now in a position to make a very important call that almost anyone participating in financial markets will listen to…

“What happens from here?”

When volatility presents itself to the markets, they become less predictable. I’ve made a name and reputation in my career in the business of predicting things. Continue to scoff at this as lately I’ve found myself on the wrong side of a relentless move. Ignore what I have to say later this afternoon and find yourself in a very tough predicament in terms of market positioning.

Later today on After Hours with Option Addict, I’ll present a market set-up that will occur from only slightly higher prices. Through this, you will have a high probability location to trade the market from either side of the fence. I’ll lay it all out along with ideas after the close.