Here is my current thinking:
- The market has not had a decent down day in 8 days.
- The market gapped up yesterday on ADP’s jobs report.
- Today’s employment report show only 18K jobs added in June, and unemployment rose.
- This morning, the market has gapped down.
- I could cover my shorts for a very small loss right now, but I am not going to.
- I think the last few days were built on high expectations that the “soft patch” was over.
- Today’s employment report shows that the “soft patch” may not be over.
- Therefore, I’m expecting that we may have more than one down day ahead as the market digests these expectations.
- I will continue to hold my shorts as I believe today will mark the beginning of a pullback.
- I will re-evaluate at the end of today.
Discuss…
in the first 15 minutes of the opening you would think the job report was just under the expected numbers. Strange.
It is not unusual for the market to fade the initial reaction to the report. Give it time. I think we go lower.
nice shedder
juggling pinless grenades in the TVIX universe right now, got my ass handed to me on the gap up, but added yesterday based SHOMP was wondering if I should let go at a small loss as well .. I too will hold on
somebody passed along a study to me on trading the VIX whereby if VIX closes below lower BB and then next day closes above its a buy. not sure if youre interested in backtesting somehting like this becasue there has to be a way to capitalize on these POS VIX products
cheers
Jimmy, I have ran that study and read other studies that are similar. Let me see if I don’t have a link to it. Okay, I looked, and maybe I never wrote about that setup. I will add it to the list. Here is a link to all the posts I’ve written about trading the VIX: http://ibankcoin.com/woodshedderblog/category/volatility/
Market trying to hold lows reached during the pre-market action. It hit the low and has bounced for the last few minutes.
I hate to say this but I lost on TNA trade badly. I bought TZA at 31.76. Need this market to tank badly. Horrible to say this as I am normally a bull. But, I just don’t believe we have not gone lower than we are right now.
I understand. I was a little early getting into SDS. We can’t always time things right, but once we miss timing, the trade has to be managed well or you will compound problems.
I believe we will trade lower. It may not happen today. These things take time. The professionals have nice gains here, and as they lighten up their exposure and lock in gains, we will drop. But they are not so stupid as to all sell at once.
Thanks Wood. Appreciate your thoughts.
No problem. And here we are, breaking through the lows as I type.
Bravo, trapped shorts probably propping us up so far in the early going. Real story still pending….
I agree. Still developing…President is speaking. Never good for the markets.
Agreed on the strategy, Wood. Personally, I’m still long, but my longs have been hand selected over the last few months to be things I think will be resilient to a sell off/ slow down/ dollar strength.
I’ve been a broken record about lower oil prices coming, so I won’t clutter up your comments with my ramblings.
I’d guess once this rally is shown to be broken, we go down into August, just because of the massive game of chicken being played on Capitol Hill.
From what level did you buy SDS?
Average price was $20.25. Getting close to going into the green.
Sell into this rally (originally posted 7/7 http://www.chivotrades.com) http://chivotrades.com/post/7348377117/sell-into-this-rally
Without a real or proper resolution to the issues in Europe or here in the U.S.A., in my opinion longs should be let go into this rally and cash levels upped in preparation for better buying opportunities before the summer is over. That said, shorts should be used here as a hedge only; I would not lean a book short.
I agree with you Wood!!!
Great post Chivo!
The analysis in the posted article, #1–8, (#9 and #10 are the conclusions), is either an excellent illustration of brilliant critical thinking at its best; or, an excellent example of why one should not even try to think, w regard to something quasi-infinite and unknowable like ultra-short market trends.
I myself can’t think that brilliantly, it literally makes my brain hurt to try, I know because I have tried. So instead I just wait for that thing there, to cross over the other thing, and then when it pulls back to about yonder, I hit that green button or that red button.
..And I as I paddle by, I always see brilliant pundits swimming upstream or downstream in the river of Marketflow, some drowning, some happy.
So thanks again Woody, you are a true son of the Confederacy, a good comrade in arms, and we who cannot do the kind of analytical thinking you do salute you, and appreciate your sharing it with us.
Daniel
Thanks Daniel! Typically I’m like you, I just wait for my signals to arrive and then I act on them. Unlike most days, I’m home from work today and I had time this morning to think through the process. Had I been at work, I don’t know. I might have done something differently. This SDS position is not based on any sort of short signal, and so therefore my exit is discretionary as well. This discretionary trading is not my forte. I need clear entry and exit signals. However, every once in a while, I get a moment of clarity and discretionary trading is relatively easy and without stress.
I think for the most part that one has a very difficult time thinking through something that is quasi-infinite and unknowable. Perhaps this time it will be different?
“..Perhaps this time it will be different?”
–Um, isnt that the one thing that we, as technical analysts, are never supposed to say if we can help it?
🙂
However, on a more serious note, I think I disagree with your statement above, when you said, “I was a little early getting into SDS. We can’t always time things right…”
In my opinion, you were actually a tad late.
Based on your thinking, and the mean reversion odds, you were borderline reckless (or bold) in how long you waited. I mean, how long does anything other than a smallcap company linger THAT long outside of 3 std deviation bands from a std. Bollinger MA of 20? Blowoff momentum-moves always involve alot of sheer guesswork; and a well educated guess (like yours) is about as good as it gets. The alternative is paralysis, or simply not involving oneself in the opportunity either way.
Ultimately, we can NEVER time things perfectly ‘right’, except for the odd top tick or bottom tick here or there, which matters as much to an investor over a career as how many hole-in-ones a Pro Golfer lucked into over the years. Not much. So, AS IT HAS THUS FAR TURNED OUT… and, yes, IN this case…
Discretionary/Anticipatory market timing is the trickiest there is, and I myself do try it at times, but I’m always careful to turn off my thinking cap beforehand. GUT FEEL is a shorthand term for something real, a gestalt composite sense, and it is inhibited imo by ANY kind of inaccurate self-assessment– either inaccurate self-reinforcement and praise, or inaccurate self-correction or criticism.
The point where you legged into your position was sound; the way you took it was sound; the way you have managed it thereafter has been sound. It did not surprise me to read, above, that you had an oppty to step off the merry-go-round ca. breakeven… had that been your preference. Such 3-deviation reversion-moves OFTEN provide that sort of second chance to re-assess, even if they go initially against one.
You did not act out of emotion, or as a ‘revenge trade’… As it turns out, there was more upside. So. That cannot be the be all and end all of whether the move was ‘tactically early’; as mentioned above, by the time you acted, the far greater likelihood–in my experience of these breadth thrust zones and their pullbacks–was that you would be late, and have missed it with most of your allocated capital, and been moaning the Why Was I Such a Coward sitting on my Hands blues.
Or, another way of putting it is, wow, man, I was EVEN earlier in that trade than you!!
Have a great weekend Woody. Thanks again for all.
Daniel
Strong close…now what?
Not sure. I’m going to run some tests over the weekend and try and model the recent action. My gut says hold tight that there will be more downside ahead.
To me the markets basically ignored the horrendously bad job report. In the past, it would not be out of possibilities that the Dow would have been down at least 200 points. I managed to lose my TNA trade and holding a loss on my TZA trade. Needless to say, I have not managed the trades well. Today was a very bad day for me. I just do not understand the markets now. It seems to just have ignored a horrendous (worse than bad) job report. Even the raise in the unemployment rate did not seem to matter. Of course, the markets were down but not consistent in past situations similar to today. Have a great weekend.
I remember reading the phrase many times, “Employment is a lagging indicator.” What I suspect is the continuing movement of money out of some types of bonds.
Wood – I noticed we finally got some PDip signals on Friday – first in a while. It might be interesting to somehow chart frequency of PDip entries/open positions v market action – not sure what it might show – but a study like – return after no PD entries for 5 days is…..or what happens when no open positions, etc. Obviously, PD trades begin to show up when we start seeing pullbacks/sector rotations – but notice how few we have at this point – whereas on other days, we’ll see 20-30 possible entries show up.
Cheese, I agree, and have thought about running those types of tests many times. Unfortunately they are beyond my abilities to run. I could probably figure out something by hand, but it would take a great deal of time.
I think an easier and likely just as valid test is just to look at the ROC over X days. When it is a very positive ROC, like it is now, the PD is not going to be giving signals. When it is negative ROC, there are likely to be signals generated.