Is It Different This Time?

It does feel different this time. The markets are selling off and we are approaching last week’s lows. The ES slammed into that key 1635ish zone again and from that level we scooped up the BTD (Buy the Dip) crowd.  The rally off the lows was semi-fantastic with high $TICK readings and the whole nine yards. Of course, the selling pressure on the downside $TICKs this morning was much worse, creeping into -1300 territory which is quite serious.

So what gives?  Bulls are in no way shape or form out of the woods. We had a nice rally back to resistance but bears sharpened their claws and dug in at the 1652 level, and at this point they mean to give it the college try to the downside. At this point this market is very simple.  If we are below 1653, shorts are in charge. If we break up through that level, then shorts throw their hands up in frustration for the 112th time this year.  Which way am I leaning? At this point I’m looking for weakness.  I realize that amounts to blasphemy in this market, but that’s what I see.  Stops are at 1653 on the indexes. For stocks, GOOG looks like it wants to check into a hospital.

AAPL and gold are up and nearly everything is down, including bonds, which made a 52 week low today. This is ominous (i.e., why aren’t they spiking up in a flight to safety?). The rule of thumb for BTD is to buy the first dip, but not the second dip. In other words, be very, very careful on the long side here. We’ve seen this all before this year – this market goes down. It looks ugly. And, just when it looks ugliest, it bounces back to new all-time highs. What I’m saying is, I’ve been watching the markets for a long time and markets always revert back to the mean.  We’ve come a long way, baby. This is a time to be cautious on the long side. Even TSLA is done, or appears to be done. For intraday plays, I’m focusing on buying puts and selling call credit spreads on rallies. It’s still to be seen if I would hold those overnight. Just don’t count on bulls to bail you out of trouble. Focus on your risk. Don’t try to be right.      Good Trading,