Pabst's Blue Ribbon Trades

Quote from Dr. Zhivodka:

Nice one P....hope you made some good loot.

Now the question is do you press you bets and go for whats behind door number 3. Or take money and run?
:D
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I added a bit by scalping ES from the short side. My options position leaves me short quite a few deltas. (1530-1470p spreads and a few 1500p's outright)

I'm looking for quite a bit more. Who knows if I get it. My work has excellent support on today's lows. We've seen a plethora of weak Friday's followed by in your face strength on Monday's. I'm gingerly fading that tendency. I believe longer time frame participants will enter the market next week as sellers.

I also think a -1000 day is a magnet. Monday after Oct opex is a historically reasonable time to be biased short.

I've discussed here before the old school axiom of single prints on the way up being single prints on the way down. Look at a daily of $NDX. Those gaps, runaway day's, ect. could be blood to sharks. Very often there's no support coming out of such strength. This is an important (not random) closing level. Think agile.
 
Well, a while ago I said the S&P might be in a big trading range. That's pretty much what is playing out so far. Perfect fakeout and reversal at the prior all-time highs - the S&P went up 20 points beyond, and that was it. Now it's puking back down 70 points and counting.

I would look to cover in the 1485-95 range on Monday, if possible. That's a near 50% pullback of the 1380-1575 rally. It's also the level that the rate-cut rally began at. It's just below the round number of 1500. There are definitely going to be stops at or just below 1500, and it will make the bears overstretch on the short side too.

The VIX is not sky-high yet, but it has spiked a bit and a down Monday will probably send it to 30. That is pretty high in most cases - there is no real major fundie news driving this selloff, unlike in August, so 30 I think is high enough for a cover. Then go long if & when you see capitulation followed by momentum to the upside. Even if you lose and the market goes down further, you will be able to get out at breakeven on the subsequent bounce.

For a move to the August lows with no bounce in between, the VIX would have to go up to like 50-60. There's no way the S&P can puke 130 points from here with only 10 points added to the VIX. You have to ask, what is going on right now that is worse for the market than August? Answer = nada. We have a dovish Fed that cut 0.5%, housing is now priced in pretty much. The chances of a crash happening now are IMO way way lower than the chance of shorts getting cocky, longs getting scared, and the market putting in a low. I find it really hard to believe there won't be another chance to short at say 1530. Crashes historically happen after a move to new lows and then keeps going, not in the middle of a range.

There has been a nice move, and today's price action has made every long nervous going over the weekend. It's the perfect setup for a capitulation Monday. That would create a very nice short from the highs, and I think that profit should be taken very soon.
 
Oh yeah - one very nice trade today was the 1525 puts. You could have had them for $1-2 several times in the last few days. That to me was crazy - even if I was a bull, I would have bought some as a hedge.
 
Thanks, Pa(b)st Prime. Excellent call.

Quote from Pa(b)st Prime:

IMO, sentiment is and becomes too bearish for a slow, grinding correction. Pure and simple the shorts outnumber the amount of long shares they can dislodge. The fundamentals and technicals are in place for a buyers strike of proportion. That get's shorts like moi' off the hook.

When I see the following I get "all in" bearish.

1. An inexplicable fall in Treasury yields. Sure stocks are heavy but a two and a half point rally in ZB this week seems like preemptive flight to quality buying. Somethings brewing. Bonds also did this the two sessions prior to Feb.27.

2. High ISE c/p (ISE is calls vs. puts not vica versa) followed by an extreme low reading. IOW's call buyers have been in force since Oct.5. to levels of July enthusiasm. However today put buyers suddenly emerged in force. Into a relatively benign market environment, eh? Why?

3. The wall of worry is gone. As we all know there's always news perceived as bad that's actually good. A cheap dollar has helped shares and higher energy signaled a thriving global economy for multinationals. Hence people who sold either stocks or bonds from 2002-2007 off either "bad" event were toast. Now all of sudden the "pundits" have discovered the benefits of what was once thought of as bearish. They're late to the party. They are now the fade. (although I look for oil to be $15 lower in 6 weeks and the $ to be 139)

4. This IS a double top of sorts. The Mch/00-Jul/02 move was 779pts. From Oct/02 to our 1576 is 790 pts. How many times from 1966-1982 did the DIA fail at 10,000? Plus how many times can the market rally Q4? It's already 17 out of the past 19. I see a replication of a 10/97 or 1998 move. The July-Aug fractal just wasn't a big enough move down to fulfill the cycle. Flip an SPX chart upside down and look at the 02/03 lows. That's our 2007 highs. We are possibly going to break as hard as we broke in summer of 2002. 1245ish.
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Recap of the 2 blue ribbon trades this week:

tuesday afternoon IBM shorted @ $119.60

next day ==> IBM -$3.90 to $115.70
IBM biggest $ loser of all big caps wednesday

thursday afternoon MMM shorted @ $94.73

next day MMM -$8.10 or -8.6% to $86.63
MMM biggest % loser of all big caps friday

Think it's easy to go 2 for 2 on shorting big caps?
Anyone want more of these blue ribbon trades next week?

My goal is to go 5 for 5, but only if the good traders of ET want more of this golden info..
 
Quote from Bob Rowshan:

Recap of the 2 blue ribbon trades this week:

tuesday afternoon IBM shorted @ $119.60

next day ==> IBM -$3.90 to $115.70
IBM biggest $ loser of all big caps wednesday

thursday afternoon MMM shorted @ $94.73

next day MMM -$8.10 or -8.6% to $86.63
MMM biggest % loser of all big caps friday

Think it's easy to go 2 for 2 on shorting big caps?
Anyone want more of these blue ribbon trades next week?

My goal is to go 5 for 5, but only if the good traders of ET want more of this golden info..
More...

Only shorts though, right? :D :D :D
 
Quote from Pa(b)st Prime:

Only shorts though, right? :D :D :D
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You don't want any longs now, do you? (not that I could produce em)

Going long anything between 10/19-10/29 is a losers game!!
 
Unfortunately put spreads (in this case with 1 month left) are poor vehicles in a rising volatility environment. Yea my 1530's are pumped. But they ain't anywhere near as pumped as those 1470's I'm short. Hence grabbing a profit on the spread is a poor do. That's one reason why I own 1500's outright. I needed some outright long gamma more than the additional short deltas that came with.

As far as lack of "news." I made the following point to friends back in August, true crashes don't telegraph themselves.

The woes of July are still upon us though and ya know what? Central Bank's are impotent in sanitizing it.

All of you should look at most of the 20th century on a year to year basis with this resource: http://theoptiontrader.com/HistoryCharts/DJX_DAILY/DAILYHISTORY_DJX1969.htm

Those failed Dow attempts at 1000 were all made in a p/e environment much like today's. (high but not euphoric)

The breaks then didn't come on "news" either. Just on the general 70's malaise that the best day's of the U.S. were fading. I sense that tide shifting back once again. The Brazilinization of America continues......

Quote from Cutten:

Well, a while ago I said the S&P might be in a big trading range. That's pretty much what is playing out so far. Perfect fakeout and reversal at the prior all-time highs - the S&P went up 20 points beyond, and that was it. Now it's puking back down 70 points and counting.

I would look to cover in the 1485-95 range on Monday, if possible. That's a near 50% pullback of the 1380-1575 rally. It's also the level that the rate-cut rally began at. It's just below the round number of 1500. There are definitely going to be stops at or just below 1500, and it will make the bears overstretch on the short side too.

The VIX is not sky-high yet, but it has spiked a bit and a down Monday will probably send it to 30. That is pretty high in most cases - there is no real major fundie news driving this selloff, unlike in August, so 30 I think is high enough for a cover. Then go long if & when you see capitulation followed by momentum to the upside. Even if you lose and the market goes down further, you will be able to get out at breakeven on the subsequent bounce.

For a move to the August lows with no bounce in between, the VIX would have to go up to like 50-60. There's no way the S&P can puke 130 points from here with only 10 points added to the VIX. You have to ask, what is going on right now that is worse for the market than August? Answer = nada. We have a dovish Fed that cut 0.5%, housing is now priced in pretty much. The chances of a crash happening now are IMO way way lower than the chance of shorts getting cocky, longs getting scared, and the market putting in a low. I find it really hard to believe there won't be another chance to short at say 1530. Crashes historically happen after a move to new lows and then keeps going, not in the middle of a range.

There has been a nice move, and today's price action has made every long nervous going over the weekend. It's the perfect setup for a capitulation Monday. That would create a very nice short from the highs, and I think that profit should be taken very soon.
More...
 
Quote from Bob Rowshan:

You don't want any longs now, do you? (not that I could produce em)

Going long anything between 10/19-10/29 is a losers game!!
More...

We're so on the same page bro (always' have been) it ain't funny. Although if a crash scenario does not develop early next week I can build a technical case for a bounce into the first week of Nov. I really don't see a bona fide reason for futures to facilitate trade above 1544 again. It's all on the back of tech though and I'm quite cognizant that the glamour stocks in NDX are yet to turn down. That could either be failed window dressing before next weeks plunge or a harbinger of NDX once again making new highs.
 
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