Once again, the moves after 2pm were predictably chaotic and very difficult to catch going the right direction. There were no surprises in the announcement, yet those with the power to rock the boat, went at it big time today.
Clearly, there’s no need for diversification when all 3 of the biggest ‘boats’ get rocked in nearly exactly the same way. With the steady push up from 12:40, I had closed my shorts and started some longs in TQQQ and SOXL. I’ve been trading SOXL for the past few weeks and have fallen in to a rhythm of selling and re-buying lower.
That cost me today. I mostly sold out nicely at the top, even though I was expecting it to continue up. After the flash drop to 9.11, I didn’t get my limit buys at 9.15 or 9.20 as it pushed back to 9.30s. I left them in, thinking it might drop again enough to get them. It fell to 8.81 so didn’t trigger my GTC order at 8.80, so I bought a bit more in the .90s as it pushed higher. It wasn’t a large position yet and I wasn’t thinking to put in a stop and sell for a loss. That’s why it’s better to focus on one larger position and not let it run away in the wrong direction.
Over the weekend, I suggested buying SDOW to short the Dow. I bought and sold for breakeven on Monday, then bought again Tuesday and sold early Wednesday for a decent gain. I wasn’t looking to re-buy after the FOMC drop so missed out on a quick 8.7% move up.
This week did show that although the Dow has been the strongest market of late, so potentially had the furthest to fall, picking the weakly Nasdaq was still the better choice. SQQQ raced up 14% from the low today.
Volatility remains in a total slump, posting a measly 5.5% gain. An hour long view shows just how bad it’s been compared to SQQQ.
Taking a 60 minute view of the markets shows what may lie ahead.
The Nasdaq is clearly lagging while the S&P 500 still looks fine. And we knew that markets had gone “too far, too fast” and were ready for a reversal. Being ready doesn’t necessarily mean you’re able to make the play in the heat of the moment.
The markets could gap higher tomorrow, or lower. There’s no way of knowing, so be ready for either, knowing that the S&P 500 and the Dow need more of a drop to get back to a ‘reasonable’ incline. As a reminder, Avi Gilburt wrote, “I expect a pullback to begin in the coming week. Support for that pullback is in the 3785-3830SPX region. If the market is unable to hold that support, then it opens the door to a much deeper pullback which can potentially target the 3650SPX region.” It closed 3759 today.