Current Long Positions (stop-losses in parentheses): TICC (8.64)

Current Short Positions (stop-losses in parentheses): SPY (113.30), DELL (13.26), FL (13.81), URBN (36.60)

BIAS: 44% Short

Economic Reports Due Out (Times are EST): MBA Purchase Applications (7am), Empire State Manufacturing Survey (8:30am), Import and Export Prices (8:30am), Industrial Production (9:15am), EIA Petroleum Status Report (10:30am)

My Observations and What to Expect:

  • Futures are slightly down.
  • Today is extremely important for the market, as the market is right below the all-important 1130 level on the S&P.
  • Yesterday it came close to challenging it (1130), but as soon as it did a wave of selling hit the markets. 
  • A perfectly formed doji candle was formed on the S&P yesterday. This typically signifies a huge warning sign to trend followers, that a reversal is imminent. Last time we had a similar shaped doji was on 7/6 which later resulted in a 12% market rally.
  • If I had long positions here, I would start tightening my stop-losses and locking in gains.
  • Market is still extremely overbought.
  • Inverse head and shoulders pattern still not confirmed – must break through 1130 first.
  • Bear’s goal should be to drive this market below 1100 again. It would be a break of resistance and a shift in market behavior.

Actions I Will Be Taking:

  • Depending on the early morning action, I will look to add an additional 1-2 new short positions to the portfolio today.
  • A push above 1130 and I’ll close out all of my short positions.
  • Gap this morning is definitely fade-worthy.
  • Will try to push my portfolio commitment up to 60-70% short. 
  • Added URBN yesterday to the portfolio at 34.79. Stopped out of FL at 13.81.