No Bounce Yet

July 5th, 2010 | by Hugo Gullett |

Today sucked. My expectations were broken pretty much right away as the pattern did not play out as intended. Then very late in the day the market rallied off the lows and the indexes went green. Per the pattern that I am playing the bounce was actually too little of a move, so I’m glad the market closed red to maintain the conditions for a bounce.

Currently I’m down anywhere from 1-30% on various option positions due to vol crush. Surprisingly the Rydex funds lost very little. One trade that I cashed out with a gain of around 15% was QCOM. I took it off because it was pretty much the only green trade I had.

There was a shot to get out of all positions with nice gains very early when the market opened. My bias was to look for the open and go trade, so I wasn’t looking to take quick gains, I was looking to catch the big one. Unfortunately it didn’t happen…yet.

I don’t know if I’ve said it enough, but I’m bearish. The intermediate charts are very bearish. I’m playing for a very short term bounce.

At this point its a very risky trade and the next time I see these oversold conditions of this nature I am going to peel back and keep my position much smaller probably in the 30% range. These are very emotionally taxing trades, which probably has more to do with my position size than anything. However, these particular trades can take a number of days to work itself out.

The one thing that would have been horrible is if I had panicked this morning and sold out of my positions as the market finished better than at the morning window.

Current positions:
QQQQ calls, XLK calls (trimmed some), F calls, DIS call spread, FITB calls (small), LVS calls, XOM calls, JCP calls, and GOOG call spread. Plus I’m 100% long in the 2x funds. To say I’m exposed would be an understatement.

ERX was sold for a small gain in one account, but kept in other accounts. QCOM was sold for a gain. I also traded SPY calls intraday for a gain on the pop.

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