I put that cash to work at the close and went back in heavy short in the NDX/RUT 2x inverse funds with more of a RUT tilt. This time I also added IWM puts, TZA, SRS, and SPY puts to the mix.

The trend is still ok. There is nothing saying that is changing. This is a “finesse” trade inside the up move. Sometimes these trades are stupid. We’ll see. Of course, trends change after a new high is made, so its possible here that “could” happen. However, as of this moment, that is not the case.

On a weekly basis the market is not that overbought. It could go much higher. On a daily basis, we are seriously overbought. Check how very high RSI levels resolve. Its done quickly. There will be a smack down day very soon. I’m betting its tomorrow or starts tomorrow.

I also experimented with more of my 1 minute chart trading. That was waste of time today. Lost money doing that.

Traded IWM puts most of the day, was up quite nicely on the break lower in the morning, then chopped around all day and gave back that gain and then went into the red. However, at the end of the day I caught the last trend down with IWM and SPY puts (did not tweet, but tweeted everything else). Ended the day as a slight loss. Alot of work for that.

I tested out today trading with 1 minute charts and utilizing something new, and I think on a better trending day it will work out. I also may have overtraded. Well I definitely did. I could have walked with the gain this morning.

What I wanted to do was be more short than just the index funds. Owning puts in the SPY or IWM, plus buying some of the 3x inverse etfs. This would be based on the daily overbought condition. In the past I might have done this, but now I’m going to see if we possibly gap up to 1150 SPX and fall. The SPX carved out some top resistance today “coincidentally” in an overbought condition.

1 day drop potential:
LVS, AAPL, XLF, and 390 more.

All of this could change on the open, but often the move will carry over. Especially when some of the overbought conditions are in play. We’ll see if this works in a few hours.

The 2x SPX long was purchased on 3-5 and getting out today yielded less than 1%, but a gain none the less. For whatever reason I didn’t buy the RUT or NDX. Well the RUT looked like it was too far ahead, but still, those are my usual plays and they did better. I was a little fearful of the “overboughtness” and didn’t want to be locked in with size. Because at Rydex that is what can happen.

The market is overbought. Great we all know that right? Some have been saying the market has been overbought for weeks, some months. It hasn’t been. Today or tomorrow will offer a great 1 day trade to the downside. If that happens tomorrow, I want to be a buyer into Friday.

If it doesn’t then I want to stay in cash or possibly take an extremely short term short trade.

Today was great for certain stocks of mine and I had to dig out of a hole due to the USO calls being nailed right in the morning. The C calls I sold for 210/220% was a great trade. The worst trades of the day were my day trades of FCX puts.

Oh the one stock I own is INSM. Part of a strategy that I missed buying a few weeks ago. I like the pattern as well. Probably not affected by a blip in the indexes.

How does one go from being bearish on February 23rd, explaining my reasons on Feb 25th why I am turning bullish, to being bullish on Feb 26th and buying things for the following week?

First you need to have a “system”, trading plan, whatever that tells you what you should be doing.

Second, you need to know that it is good. Backtest, forward test, whatever. Make sure its robust.

Third, follow it. Most important step.
———-

I’ve said it before, “you have to be dumb to make money.” Be dumb, follow a plan, don’t over think it. The yokles on those bear blogs have been bearish for literally the entire move up from 1 year ago today. Be dumb.

If you have a signal, a reason to play a stock, whether its a chart (its always a chart for me), or a fundamental reason, just do it.

———-

I cut back my longs purchased at the close Feb 26th from being 75% long 2x NDX and 2x SPX to 30% long 2x SPX, on Mar 5th. Everything is long and everything is up. So why am I cutting back? Its a management thing as the market is a little overbought on all indexes. Certain stocks are not. Certain stocks are. Lots of weekly breakouts setting up, so I want to be a buyer as the market comes in.

Why not get out and just get back in? I used to do this, and sometimes it would be too difficult to make that decision. So I leave a small amount in the trade in case I’m wrong and maintain an attachment to what I should be doing.

Based on the dumb principles, I bought RIMM – not in a large way. The calls that were purchased on Friday were sold for 150%/173% gains (not including commissions). I bought more calls, but the April’s this morning. Sold a half for 57%.

The same dumb principles got me into DIS, as well as other stocks. Including ICO, which dumped on me this morning due to a secondary offering. I lost 7%, yet its still on a buy. I’m not being dumb on my exit. I don’t have a reason to get out of ICO other than fear of losing more than 7%.

I’ve included a menagerie of screen shots to piece together my thoughts, the trade, and maybe you get an understanding. If not, you can ask questions, and I may or may not answer.

Current positions:
-30% long 2x SPX (looking for a market pullback to get more long, will include NDX, RUT)
-bot C April 4 calls
-DIS calls (trimmed down even more of that position today for 144% gain. The last bit I’m letting run.
-bot DSX, EGLE
-rolled my IBM calls to further out strike and went even smaller on the trade.
-bot INSM, PXLW
-still have that small piece of RIMM calls (will look to buy back, with a pullback tomorrow as the trend is still CLEARLY up) Be dumb, don’t be an idiot.
-bot USO calls (I sold them due to fear midday that my profits were deteriorating, got back on the dumb train, because the charts say so)
-ERX still holding in other accounts. Would like to buy this one back for my main account also.

I also want to be a buyer of gold again as I sold out of my gold positions last Friday.

Today I bought a few things from some of the charts I posted to Chart.ly last night.

-FST and sold some calls against it
-ICO

-DIS calls, can’t find a reason why I shouldn’t be long the stock. There are many right now like this.
-CHK /NG futures looking like they want to make a short term move higher and the daily chart has that 21d spring thing going for it. Very similar to JASO chart below.
-JASO (Got long today due to daily chart, but the weekly is up on my signals and only 2 cents away from its buy signal. High beta play, if my theory on Crude/Coal moving higher, Solar tends to react.)

I’m very long here, being dumb (in a good way), just following trends.

Currently long 2x index funds, DGP, ABAT, USO calls, ERX, CLNE, CZZ. If you want the particulars, check the twitter feed.

These longs worked out. I cashed them though at the morning pricing around 10:45, and took my gains. It ended up being a better hold till 4pm. DIS calls went out at a profit, was looking to get back in, but waited. I was in and out with DGP, sold for a small loss, but went back in eod.

Market has broke out. How long it will last is anyone’s guess. For now swapping from a bearish bias last week to a bullish bias this week has paid off. I think we are going higher – for now. Likely to come from a dollar pull back and euro bounce.

Many charts did this and is why the market is teetering for me on being a long or short trade. POT, AAPL, GLD, etc.

It is also why I’ve been trying to game the move ahead of time, but because of the volatility its been a losing game. However, any way you slice it today’s action was bullish. The market needs to hold it though.

We could wake up again tomorrow with the same red morning, but the charts are up until they are not.

-If I don’t see a large down close tomorrow, I’m getting long. A small down move that doesn’t change my signals I’m long.
-If we go bonkers to the upside tomorrow, I’ll reluctantly take a long.
-If we are slightly down and my signals stay green, I’ll go heavy long.

I executed my shorts somewhat poorly today. Well some might enjoy making money, but today would’ve been a golden pot. I covered alot of my high beta shorts (put options and what not) on the gap down in the morning. The reason I did this, was that I thought maybe we would sell off on tomorrow’s Bernanke speech instead. Right around 9:45 I was looking right as the market started to rally. Like I said I made money today, but it was a fraction of what could’ve been. I still was more than 50% short via 2x index funds at 10:45. I cut my NDX position in half there, but kept a full inverse RUT position.

At the close I put back on FAZ, the money I took off in the index funds I put back on (100% short there), and MGM puts. Looking for a slight extension tomorrow or even another shocking drop.

Based on the way things are setting up, I’m looking at a short in AAPL, GOOG. If the market does not selloff further, I will look to go long some things, but my personal feeling is that the market wants to go lower and closing below this level in the chart is an important item. We are resting on the 21dema, but things look precarious. Stocks like JPM, GS, could be on the cusp.

However, the market went my way, but so slightly. What I worry about is that the market works off its overbought condition by going sideways. That is something that would be the most difficult place for me to buy.

What I’d like to see is a down move that occurs all week. Giving back last Friday’s weekly candle.
I sometimes focus on the indexes, and I sometimes focus on individual stocks, currently I’m all indexes. Not sure if that is the best thing here, but that is where my head is.

I’m long IWM puts, SPY puts, FAZ, BZQ, TZA calls, inverse 2x NDX, inverse 2x RUT funds.

I hold 2x index funds NDX / RUT. Bought near close, BZQ, IWM March 62 puts.

Like I said I will change my whole thinking if we don’t move down immediately next week.

I lost money last week due to the tecnical bias from the week prior. Not that it made up for it, but had a sweet short trade in AAPL.

Ended up selling around 201.20. Bought the puts for 5.19-5.2 and sold for 5.55-5.6.

Its just not uncommon for the market to shake out swing traders 1-4 times before giving a nice fat trend to chew on. We just had 1 confirmed and if we move down it will be a second one.

Now remember I posted this chart on Feb 9th. Showing where the top resistance was, we got there. We closed above it. You might remember me saying “Friday’s count”, everything in between is BS.

We are likely to gap open down below the 1094.5 – 1096.78 area. ES shows a print of 1094.75 right now. A close below that 1094.5 level is a key item for me to attempt a short trade. It may also change the weekly picture on my signals. That is not a guarantee though.

I won’t be surprised if we go lower, but close around 1094 tomorrow. Lower is better and provides the most clear picture for what I should do next.