Oil update

We will go on to discuss oil (/CL) but let's start with the general market (/ES / SPX) update briefly. In our previous post, we mentioned that we were surprised to see market tank down 2% yesterday morning. Because the market internals were poised for sideways/ bullish posture.  Well, we were positioned short; we still are positioned short (ST/ IT/ LT) with trimmed positions. 

Our outlook for 1-3 days (VST) was neutral/ bullish. The futures market (/ES) is up ~ 1% as of now. For the next 1 - 3 days, we remain neutral. We would not be surprised if we see /ES ~ 1980 one more time before driving south. 

But, we remain flexible as always. Opinions do change with the market changes.

VST - Neutral

ST/ IT/ LT - Bearish

_________________________________________________

Previous oil update here (please see chart in this post)

This is where we stand today (chart below): 

/CL rallied ~ 28% bottom to top. We do not have positions in /CL = none. But, based on our trading methodology, we would have taken 50% off the position on a good rally like that one. And ride the rest with the house's money.

The chart was obviously aimed at IT/ LT traders but if you score 25% profit in 3 days, would you say no? :) 

Anyways, the outlook for oil is

VST/ ST - neutral = get stopped out while you are still profitable

IT/ LT - Bearish ( we don't see any change in the outlook even after the rally) until next turn

GLTA!

Market update

Previous market update here

Oil update coming in the next post :)

There is no change in the current market update:

ST/ IT/ LT - All on sell signals

As mentioned in our previous market update, we have taken 50% off on 08/21 at ~ SPX 2000 on . 

On 08/26, at SPX 1925, another 25% off ST position has been taken off. 

Currently holding: 

25% of ST position (will close on signal turn)

50% of IT position (will close on signal turn)

100% of LT position (will close above /ES 2035 and turn into a "buy")

We have taken good profits into this slide since 08/20. There is no way we are going into red on these positions. 

ST commentary:

Currently market futures (Emini /ES) are down 41 points. We are positioned short and the signal turn has not come to buy yet. But, the current structure doesn't support this 2% down today = surprise. Hence, we anticipated that the market rally towards SPX 1987 - 2030.  

One of the reasons is chart below, our guage was in neutral mode as of close yesterday:

We anticipate the guage into bearish mode if the market closes in big red today, as futures indicate now. The chart is not a holy grail. But, based on the chart, we expected the VST rally to continue or at least sideways. Even though our positions are all short. The last time we posted this chart was here . 

Either way, let the market work its way downward. A change can be anticipated in the VST if /ES 1943 is broken to the upside. 

IT commentary:

There is a long time for this slide to go. May be we have seen the bottom on 08/24, we have no idea of telling. But, that slide has created a situation that the market should work its way up slowly rather than make a immediate V shaped rally. 

LT commentary:

Trend is down till proved otherwise. If /ES 2035 is broken up, then we will evaluate if the market may see new highs. 

GLTA!

What happens next - Part 2

Current market rating here

I am posting 3 scenarios on what to do if you are short, long, neutral right now.

We took 50% off the ST and IT positions on 08/21 at market close, explanation below. I will let the other 50% of the positions stop themselves, higher or lower, when the turn signal is initiated. LT positions will be stopped on a close of > /ES 2035.

Anyway, where does the market go from here. As I posted in my previous post, I have no clue. Up? Down? Sideways for several days? No idea. Everyone out there is throwing darts at the market, one of the darts will hit the bulls eye. My experience tells me that instead of guesstimating what the market does next, it is best to have plans on how to manage the positions. 

• Have a plan to do if XYZ happens
• It doesn't matter if that doesn't happen, you still have a plan B if PQR happens

In other words, be flexible in this market. If you are chopped by market whipsaws, that is still ok. Take a walk and come back to trade another time. I do have suggestions on what to do if you are:

• Short right now: If you are short from ~ 100 SPX points above like us, take some off the table. That way, your profits will be ensured. Because what if the markets rally straight up from here? You have profits, so take some off the positions. Then, there are 2 scenarios. Market goes up or down. If market goes down, wait for the turn. Close the positions when the market turns. If the market goes up from here, have a stop at about SPX 2065. You still end up profitable being in short positions on this "mini crash" because you scaled out already.
• Long right now: Depends on what level you were long from. We sure hope that you didn't enter long positions at SPX 2100. If you did, you should have been stopped out before 6% down. If you entered long somewhere around, 2025 - 2050, you still should have been stopped by now. If you didn't close the longs on friday at market close and are expecting a rally next, we cannot help. Because there is no guarantee rally is going to come next. May be it will rally. May be it will not. We don't see the rally yet. Without any buying in the market in the last 3 days, how can you expect the market to rally? There are no indications right now that market will rally. That may change come Monday, but we have to see the evidence. 
• No positions right now: This is the best place to be in. :) Cash is King!!! Traders who are in cash are at a huge advantage. Traders who are short right now, have to close their short positions and then take longs - in other words, they have to be ultraflexible about 2 moves; There is a high chance that this group may miss the next up move. If you are in cash now, you are obviusly relaxed and will see the next turn better without getting whipsawed.

Do not try to trade counter trend moves, you will lose the opportunity. We were short on ST, IT, LT positions prior to market open on 08/21. But, we were "expecting" VST counter trend move upwards. We knew for sure that the market did not bottom, hence clearly mentioned this was a VST move. But, the VST move did not materialize and we got stopped at /ES 2005. As a result, we were down 0.6% on the VST move AND we lost the opportunity to profit on the VST short positions from /ES 2021 to 1970. May be VST, but still 50 points is a big move. 

Hence, do not try to trade counter trend moves.

Do not guess the up moves. 

Be nimble

GLTA!

What happens next - part 1

Yesterday we tried something foolish  , more on that foolishness in the next blog post. But, let's try to understand where we stand in this market "crash" and what is next. 

Ivanoff suggests this is a market bottom like Oct. 2014. Technical trader says puts haven't been this high since March 2007, hence this is THE BOTTOM. Is it? May be both are right. What if they aren't right? Are we trying to playing a guessing game on who is right or wrong? Are we gambling with our money on guessing?

I am going to post tomorrow what our game plan is. Hence, watch out!

1st let's look the current situation from my perspective. Last market update was this. Our market guage suggested a decline. We got a 3% decline. So, what is the next scenario? Chart below.

1) Market bottom like Ivanoff suggests and bear crushing rally!

2) What if market declines further for 1-2 days and then rally for few days and further decline?

3) Who knows what happens? And why exactly are we trying to guess!

This post is about perspective, so let's just do that. Chart below. 

More puts have been bought in several instances before. And does more puts bought = harder the market crash? I don't think there is a linear relationship between extent of market decline vs puts. It is not wise to guess based on "VIX hasn't risen more ever" or "puts are high" this time. 

So, what do we do? That is for tomorrow. Thanks...........