Cool

Today when I watched the Dow shot up 100 points early again, my heart was sinking. Why I always added the puts in front of another rally? I really wanted to sell to cut loss. But then I told myself to wait and see. It turned out to be a great decision.

1. By 10:30 MST, the market was almost flat, erased all the gains due to "great" economic news.
2. And the ISEE number told me people were expecting a great rally. So I added IWM puts again. Too bad I was still recovering from the shock early, I didn't add ultra short ETF at the same time.
3. Then the market dropped, like I expected. And before close I sold all most IWM puts I added the last three days for a good profit.
4. Of course, the ones I added today gave me the best profits, and the ones I added two days ago were pretty much even.
5. Sometimes, you can just do it daily to reduce risk and increase profit at the same time.
6. And I watched the market rallied back at the close. Since today's action again is good sign for bears, I added MZZ before the market close.
7. That's what a cool head can do to you. I need to be more like this in the future.
8. My actions to sell most of the QQQQ puts early on 6/26/07 was a great decision, today's decison to hold and then add IWM puts was another great decision. If I can keep up like this, I can make a little money out of this market.
9. It's good to be on the right side.

Market:

1. I think the market shifts to the bear side, if we had news like this a month ago, we'll have triple digits gain for sure.
2. We had iPhone debut, RIMM blowout number, "great" spending number, etc. And all the market did was to give up 100 points, went down 100 points and then closed down 14 points?
3. I don't expect it go straight down from here, but I feel like it tests at least 1460 in S&P 500, if not lower.
4. Now S&P twice broke 50MA intraday and could not hold, and closed below 50MA. The more it spent time under 50MA, the more stronger the resistance is.

You create your own luck

Today the market was very volatile, specially around 2:15PM, up the first 10 minutes, and then down the next 10 minutes. Eventually the market closed flat.

After hour, RIMM had a great earning and announced 3 for 1 split, up 29 to 194 in AH.

1. I lost more money this year in RIMM puts than any other positions, and I sold RIMM puts one month ago. Now I can feel the pain lot of shorts feel right now. Will lost another great percent tomorrow.
2. This is the lesson I learned, I will never ever short hot stocks, no matter how overvalued they are. Yes, if you catch the end of the move, you'll make a fortune, but if you don't, you'll lose all.
3. And stocks like BIDU continued its push, now at 162. Don't touch it.
4. You make your own luck, so don't complain, don't focus on a few stocks.
5. Change if it's not working, learn from painful lessons, that's the only way to make money in the stock market.

Today's action:

1. Today I did't have chance to sell the IWM puts and SDS I bought yesterday. I thought I could sell them early in the morning for a profit, and add them later after Fed spike. I was wrong.
2. SDS is OK, but the IWM puts dropped while IWM was flat. I don't understand this, maybe the ^VIX was off, maybe people were just too confident that Fed would deliver again.
3. I added IWM puts again when market was up, then again after Fed and the Nasdaq was up 0.7%. Since the market closed flat, these puts I added today are ahead, but yesterday's put are underwater.
4. Also added TWM today. I sold my TWM yesterday at 63.40, today bought it back at 61.5. Also bought MZZ. I like TWM and MZZ better than SDS on the way down. These newly added short ETFs were profitable as well.

Today's market:

1. Today's market action is good for bears, it could not move higher after one snap back rally.
2. I think either it will consolidate, or it will move lower. To retest 1490, and then 1460 is a very likely path in July for S&P500.
3. Of course, a few bounces along the way.
4. S&P could not regain its 50MA and made a shooting star today. DIA closed above 50MA, also made a shooting star. Nasdaq is the strongest recently. Russell 2000 is the weakest among major indices. They all made shooting star today.
5. The market is still on the edge, both bulls and bears are nervous, today bears won a small victory, considering bulls pushed it up all day long.
6. Checking last two weeks, bears gradually gained control over bulls, with S&P500 broke down 50MA and stayed down for 5 days in a row. Since it's the main index, I think it will carry Dow and then Nasdaq with it, heading lower into summer.

BX and ISEE indicator:

1. The BX indicator once again showed its magic, it's up all day long with light volume, then it closed in red for 4th days in a row! This is the largest IPO since Google, that tells us something.
2. ISEE jumped from 116 (yesterday's close) to 171 after 12:30(MST), and closed at 152. It's a bearish divergence and we should head lower in the near future. Seems like too many people were betting a great rally after Fed, so the market should go the opposite way.

Snap back rally

I thought we won't have a snap back rally, but I was wrong. And market gaped down and then gradually rose to a very strong close, volume is light considering the strong price move.

1. When I saw the market erased the loss in first 30 minutes, I knew it's a snap back rally. Market was oversold, bears are nervous.
2. I sold all my ultra short ETFs today, and most of put options. I had small gains in short ETFs and big losses in these puts. If I didn't sell them, I'll be in very bad shape again.
3. To prove a point, I also added DIA calls, I think you can play two side of the market. I sold it for 5% gain, if I was patient enough to close it before the market close, I could get 20% gain.
4. Just before the market close, I added SDS, IWM puts. I want to keep the shorts and puts. And I added them back at much lower price. For example, I sold SDS at 53.50 and buy it back at 52.50. This really encourages me to do short term trade to get myself in better entry price.
5. Now I'm mostly in cash, with some ultra shorts and index puts.
6. I really improved myself in my trading, when market goes against my prediction, and I react quickly to avoid disasters.

Fed, CDO and liquidity:

1. Fed meeting is tomorrow, we'll have reaction for sure. I think we'll have negative reaction if Fed doesn't move to hint the future cut.
2. But Fed really can't hint cut at this stage, it will destroy the dollars.
3. And Fed can't increase the weight on rate raise either, it will destroy the housing market and move the bond much higher. So Fed will keep pretty much the same position, with a little twists in the statement. I don't expect they drop a bomb.
4. CDO issues are not over, and market will notice the risks again down the road, so liquidity will dry up sooner than later, that will be really bad for market.
5. And housing market won't get better any time soon.
6. So don't expect strong growth in this year.
7. Do expect a weak market ahead of us.

Some market observations:

1. TWM dropped the most among all ultra shorts, this indicated to me this is a short covering rally, since IWM is bears' favorite index to short.
2. ^VIX dropped too fast.
3. ISEE didn't rise as much as I expected.
4. S&P500 is still under 50MA.

Action plan:

1. I think today ^VIX dropped 18% to 15 is good sign for bears, because the risk premium are quickly removed, again.
2. So my plan is to gradually add shorts and puts back.
3. I still think we'll have a 10% cut in S&P 500 ahead of us, maybe not from current level, maybe another 1-2% upside in S&P 500.
4. Tomorrow I expect two possible paths to the Fed statement:
5. Open flat and move higher in front of the Fed meeting, then sell off after.
6. Open lower and move lower ahead of the Fed, then another snap back rally after.
7. But there is another remote possibility which I like the most, we open lower and move lower ahead of the Fed, then we sell off after, erase all today's gain and some.
8. I probably won't add shorts or puts until after the Fed meeting, to be safe.
9. I may sell the shorts and puts I bought today to take profit, and then add them back when the snap back rally happens again.

Sit

I correctly called the market actions since last Thursday, and as a result, my shorts and puts recovered greatly. But several day trades are not as good as I hoped, fear of losing forced me to cut loss, turned a winning trade into small losses.

Today market again could not put together a rally, and we closed lower again. You can feel the bears and bulls are on the edge, that's why we can easily pushed up 60 points and next hour down 20 points.

1. Now for me, with lot of shorts and puts, time to sit and find my positions good exit.
2. It's not a time to add shorts aggressively again, only on very strong rally.
3. S&P 500 is joined by Dow to break the 50MA. Nasdaq is not far behind.
4. Short the rally and cover shorts when we have a Feb.27 like sell off. This is the ideal game plan. But market is never this easy.
5. Even though the market looks broken, it may still have a few rallies left, so don't get caught in the rallies.
6. Hopefully this time the market finally and slowly roll over, to the down slope, for months to come.

Blackstone indicator:

1. BX lost 5% again to close below IPO price.
2. This tells me the bull market is over, at least for short term.
3. BX is a great indicator so far.

Reversal day

Today is a reversal day, no matter whatever reason bulls and bears can find to explain the down day, it's a reversal day! Specially after we've been down two out of three days, and we're in a bull market, today's reversal has significant meaning. Bulls find it's hard to get a rally, and bears find it's easy to get a down day. These feelings will be enhanced if we continue on a down path.

1. Many traders are very bullish now, think we'll get a bounce back rally. Even some bears think the same way. This to me is an indication we have more down leg to go. Almost everyone are on the same page, the market goes the other direction. But I don't know how mutual funds managers are thinking, which is the deciding factor here.
2. I think we may pass through 1490 on S&P 500 and test 1460 soon.
3. Of course since we're at 50MA for Nasdaq and just above 50MA for Dow, it's interesting to see if bulls can push the market to rally one more time, if they can't watch out below.
4. It's been a pattern since early March, we always rallied from 50MA; and this time S&P500 is the first to give up 50MA.
5. Don't be oversmart to think you can catch a bounce and then a correction at the same time. It may work this way, it may not.
6. From ISEE, looks like it's still very bullish, which makes me think we have more down side to go, and S&P500 and Dow are not oversold yet, and frankly, on a down trend, we'll get oversold easily, just like on an up trend, we'll get overbought easily.
7. I expect at least a lower close some time this week, how do we get there, I'm not sure. We may get a bounce tomorrow.

Action today:

1. I sold the put options I bought last Friday and sold them after market touched low and then started to bounce. Not the best price, but it's great I didn't sell early morning after market took off to highs, and the profit is good.
2. The best play is DIA puts I added around 11:30am (MST), I sold it after 1:30(pm) for a good profit too. Maybe I need to do this often.
3. After I sold the QQQQ puts, I added QQQQ puts again before the market close, but chose a lower strike price, to reduce exposure, but keep more put positions in the market. Time will tell if this is a bad move or good move.
4. Tomorrow we'll have more data coming in, how market reacts to these is very important.

Blackstone indicator:

1. BX is the largest IPO in the last few years, and it's action tell us more about the market than anything else.
2. It opened Friday at 38 and closed at 35.
3. Today it closed at 33.
4. Checking the chart, it is straight down from the opening on Friday, there is no rallies during two days of action. This seems to me, indicates a market top. If a private equity firm like BX can't get investors interested, it means the end of this bull run.
5. And Blackstone people are very smart, and they pushed the IPO days early, also an indication of more bad news for market to come.
6. I'll continue to watch the new found BX indicator, if you check them, even during today's market rally, it's down. So tomorrow, if market is up and BX is down again, I'll be comfortable shorting; but the other way around, I'll be worried.
7. Pretty sure people knew the price path for FIG, since it's IPO closed at 31, today it closed at 23. If BX follows the same path, we have more cut for BX.
8. BTW, Blackstone doesn't have the courage to take the symbol BS, which is an disappointment.

Crucial week

Next week will be a critical week, with lot of data coming in and major indices sit close to their 50MA, S&P500 is just below, and Dow, Nasdaq just above 50MA.

Three cases to play out:

1. Rally without testing 1490. One possible script is the market gap down on Monday, then it's possible an opportunity to close short, market likely will rally back for the day and rest of the week. I expect the rally may take us to all time high, but won't go higher from there. Bulls are running out of steam.
2. Testing 1490. If the market move down gradually on Monday and close at the low, then we can expect a test on 1490 on S&P500, which will bring Nasdaq and Dow to its 50MA if not lower. Market can hold and then have a small rally; then go down from there.
3. Break 1490. If the market break 1490 on Monday with huge volume, then I expect a straight down to 1460 before we can talk about any rally.

COT:

1. I checked recent COT on S&P500, Dow, Nasdaq and ES(S&P500 e-Mini), the latest data are on June 19th. The first two are bullish, while the last two somewhat bearish.
2. COT is bullish if commercials increase its long or cutting its shorts.
3. Large speculators used to have great track record, but they're on the wrong side in recent years.
4. What strikes me is, we have commercials increase its longs and large speculator increase its shorts on June 19th's S&P 500 COT report, on a large scale which is rare, so it's should be a bullish sign, then we had two more than 1% down day on Wed. and Fri., and Thursday only up 0.5%.
5. Is it possible that this time large spec got it right, not the commercials?
6. Something is going on from the latest COT. Something has to give.
7. Anyway, it's a time to be quick and decisive on my part. Rather be safe than sorry.

Action plan:

1. I think market will likely to test 1490 and then rally back above 1500, but won't touch all time high, before it go down again.
2. So I need to take some puts out when it's approaching 1490 and enter more later.
3. I don't expect market go straight down to 1460, unless we have some very bad news in CDO or economic data.
4. If market closes higher on Monday with light volume, then it's similar to Thursday, we can expect more down days in the week.

Better

Market dropped over 1% again today, that's two out of three days. Not bad at all for shorts. It's better than Wednesday.

1. But countless bounces after sell off made me nervous, as a result, I sold some of my DIA puts, only to see them closed up another 15% after I sold them.
2. This is the golden rule, whenever you hold them they will drop; and when you sold them, they will rise. But I still have lot of puts, and I added QQQQ puts after I sold DIA puts. These are July puts, we still have 4 more weeks to go.
3. The reason being, Dow and S&P 500 dropped about 2% this week, and Nasdaq only dropped about 1%, so if this time the correction is for real, Nasdaq has more catch up to do. And the premium on QQQQ is lower than DIA, I think, so I did the switch.
4. I need to improve my execution in the future, find better enter and exit prices. On Wednesday I didn't sell, and they bounced on Thursday, today I sold, I hope we'll have another sell off on Monday.
5. From TA perspective, S&P500 broke down below 50MA, and if it takes out the June 7th low of 1492, we can sell a real correction, next target is 1460. Then all the way to 1400.

Plan:

1. I need to sit tight to do two things:
2. If it's another one time wonder on Monday (another 1-2% down), then I need to sell them all.
3. If it's just the start of the correction (5%-10%), then I need to sit tight to ride them to the expiration date.
4. How do I know if it's 1 or 2? This is up to me to decide. I think a sharp drop on Monday, I'll sell another set of positions. If it's a less than 0.5% drop, I'll sit on them.
5. I will sell when we have another 2-3% drop next week. Also I'll use VIX, ISEE, RSI numbers to help me to find the short term bottom and sell puts close to the bottom. It's a very difficult task.
6. I'll keep the short ETFs for now.