10 year treasury note

So far this week, the market played the way as I predicted over the weekend. It's down 1% after a flat day on Monday. But tomorrow will be another key day, will the market keep moving lower, or the dip buyers will show up? We have economic data tomorrow to digest, but now the key is 10 year treasury note. Put things in perspective, the market is just 2-3% off its all time high, and bond suddenly rises to a level to drain the liquidity out of the stock market, from FA perspective, we have more down side to go.

1. So if tomorrow is another down day, I need to reduce the short dated puts.
2. If tomorrow is a big rally day, I'll consider to add long dated puts or short ETFs.
3. I will play the shorts and puts for the short term, until my sense of the market direction changes.
4. Dow, S&P500 and Nasdaq all point to a turn in the market, and I expect a 10% correction from the top for the short term, so rally will be used to add shorts, and sharp drops will be used to reduce shorts.
5. I will be careful, even though the global markets showed some weakness recently, Chinese stock market took off again, with bad news poured in: higher than expected inflation; natural disastrous weather in south (flood) and north (drought), and yet the market moved up more than 2% two days in a row. Talking about insanity. I hope U.S. market will not follow China's lead.
6. From the chart, the 10 treasury year note will touch 5.5% before it will take a break, and today's auction of 10 billion bond only got 11% purchases from foreign countries, and mortage companies are selling like this is the last chance to get out.
7. The 10 year note breaks out to a 5 year high today, with big volume. If it holds, it has the potential to go much higher, like 6%, that will further drain liquidity out of the stock market, so I'll watch it closely.
8. Due the high interest rates, I don't see gold and PM go anywhere, I'll wait for lower price on PM stocks in the summer.
9. Today I sold some ITM DIA puts and used about 1/2 of the sales to add some OTM DIA puts, this is speculative play, I want to cash and still have exposure in case the down turn is not over, let's see if it's a correct play.
10. Now I wish I have more cash, for traders with lot of cash, they can afford to short some of the momentum stocks like AAPL, GOOG, AMZN, CROX, and RIMM. As long as you have deep pocket, you know eventually these shorts will play out great for you. Yes, these stock can still run up another 5 to 10%, but will be at least 20-40% lower some time this year. For CROX, AMZN and RIMM, I expect at least a 30% cut.
11. But I stop playing these momentum stocks now since I've been burned in RIMM for buying puts since last November, when it's 120. Now it's 167.
12. So if you're rich, you can afford to make mistakes and still can make money. If you're poor and want to make money, be really careful to not lose money first. And don't bet against just one or two stocks, bet against a basket of overpriced stocks, you will win eventually. But who has the patient and time?