The futures are up just above the October highs this morning and indicate a gap up in the indexes that will probably put the S&P opening right around those highs at 1100. From my take on the relationships of the sizes of legs up and down over the past year in conjunction with last night's post, I would say a reasonably good chance exists that the S&P will make a top of sorts in the 1100-1107 range which would be about 1% gain from yesterday's close.
As I've mentioned several times before in somewhat similar situations, it doesn't feel right to enter a bearish trade here, but I think that's all the more reason to do it. So I am going to post a trade with a stop here and probably update it later today.
I expect SPXU to open near 38.50 today, and will use that as a rough guide for the position sizing of this trade.
New SPXU trade:
Buy SPXU with a market order today at the open or ASAP. Place a GTC sell stop at 36.50 immediately after entry and use roughly $2/share as your risk amount for position sizing and follow the normal guidelines for position sizing if you need guidance.
If the market does not hold this gap up, and there is a substantial sell off, then I will likely suggest moving the stop closer and increasing the position size before the close today so that the total risk is still the same as it was on the first entry this morning.
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A few follow up stats. SPY closed higher the last 7 days. Today it gapped up > than 0.5%. In the past, these gaps have tended to be exhaustive in the short-term and lead to short-term declines.
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