Die S&P's Die!

All the markets are being very toppy, but the NQ is acting a little strong. Maybe that is a sign of strength in Apple. In fact, I just shorted the 410 puts in Apple. I also like the weakness in the TF tonight. TF  was trading around 940, but it is seeing a good amount of weakness from that level. I am staying short this market, but oil and the Yen might interest me as a few more long plays. I would be very surprised if the ES was able to rally into the low/mid 1580's. Besides that, I have some short OTM puts in the VXX, I am bearish financials, energy, blue chips, MSFT, and I have only a few bullish positions. For now, I am keeping lots of positions on and staying very small. If any stocks get cheap that would be a great opportunity to add some theta to my portfolio.

Weak to Neutral

I don't know about this rally we are seeing. I see velocity to the downside, but the market is acting like it is short term oversold. Fortunately, the S&P's are not closing well. I am hoping to see decoupling between gold, oil, and stocks. It would be good for gold and oil to rise lightly as I am short puts in GDX and long a call vertical in USO. For others out their I would short some puts in BBRY. I have a 15,16, 17 butterfly, but I think I could add some short puts in there. The puts in BBRY are good because of the high vol. Anyway UNG (Natural Gas) seems very expenisve. I also have seen some bullishness in Natural Gas while USO is rising. This is odd tape action, but finally I am seeing very bearish action in Natural Gas with bullishness in Oil. Overall, the S&P tape actions seems fairly neutral, so I am keeping my deltas flat, until I see some weak tape action.

Covering and Waiting

I have enjoyed this down move, but I am now covering my shorts (negative delta trades). I don't see much happening in the markets tomorrow, but we may rally a little bit as the downside velocity seems to be muted as the $DJI is only down 80 points today. The TF is  also losing downside steam as it is only down 3.90, and it is trading at 900.1. The ES is also now seeing a little strength. Overall, we may see an inside day but to the upside. What does interest me is the NQ trading at 2750 which is a interesting downside move. Bonds may fall though as they are approaching 150, but they still are seeing weakness at 148 (which is expensive), and the ES may rally just a little ( I am thinking it may fall around 1560). It does look like oil, silver, and gold are finally ready to recover, and if I am lucky natural gas might all apart as oil rises. I am keeping my short delta very small until we see some kind of strength, or gap up and a little weakness afterwards. I have to admit, I hope we do not see and inside day tomorrow, so I can squeeze some more out of the market. If the ES does rally to 1560 I may short some VXX puts.

What Now?

This downside movement is great for traders. The VIX was up 43% and is now trading around 17. I really like this action, but today's overnight action is very bullish. The S&P's seem to be making higher lows and higher highs based off the tape. The interesting part is bonds are up overnight while S&P's are still strong. The yen also looks very cheap, and the yen is still strong with the S&P's , by the way, this is fairly unusual during the last year. Otherwise, gold and silver have collapsed in the last two days, and it seems time to get long. Oil also collapsed, and it may be time to get long. Unfortunately for me, I have been and long silver and oil vertical spreads through the last few weeks. As for things that look very expensive, the major market would be natural gas. I have been planning to be putting on several bearish positions, but I am going to be careful as the markets may rise into expiration Friday. My opinion in reality doesn't matter, but I do like to express my views so.

Expensive stocks: TLT, UNG, QQQ, DIA, JNJ, XLF, JPM, XRT, YHOO, PEP, BBY, MSFT, IWM, XLE, WFC,C

Cheap stocks: VXX, JCP, CLF,X, SLV, GLD, BBRY, FXI, EEM, USO, GDX, FXY

Interesting Action

There was some interesting action in all the markets today. You could kind of see a tell a few days ago from a few of  the emerging markets ETF's moving down (I am bullish on FXI and EEM) and the movement down in small caps. The broad market (SPX and $DJI) has finally reacted to this with the SPX being down over 15 points, the $DJI being down more than 100 points, and the bonds being up. Again, I am long several covered calls because they tie up enough capital, so I can don't have to put to many longs on. Covered calls also are good for delta, and they have positive time decay. Covered calls are really really good when the markets are acting toppy (like now), and they are good for high vol stocks (CLF,BBRY, JCP). I have covered calls in JCP, CLF, and I closed one out in ZNGA when the stock went up over 15% on good news . Otherwise, I am short VXX 20 puts, long the 71/70 put spread in XRT, and short the 22/23 UNG call spread, among several other positions I have. Remember it is the strategy that matters not the direction.

What is Going On ?

Bearish Positioning in the Future

Today was an okay day for me. The worst position I had was a covered call in JCP, and the best position was a short put VXX. Most of my screen was red throughout the day, and I saw okay movement. Today did seem a little light in volume because a few of my orders were very hard to fill, and there is no way some of them will fill from when I am writing this (3:58 ET). The European holiday did have more of a effect than I thought. I found it interesting that small caps were the weakest, the Dow is leading, and boring stocks are the strong ones this year (JNJ,MCD,K). This simply proves that there was a good amount of fear this year. It is only a period of time till the markets start falling. We actually may see some flow to the "hot" names (AAPL, FB, AMZN,ZNGA) during the fall. Those might be the best longs as some of them were very weak in the last year. Overall, I am looking for some downside movement, but my delta beta weighted to the SPY is 8.00. I recommend just keeping time decay in your favor as this market is very tough, and these tough markets could continue. Remember it is the strategy that matters not the direction.