Monday, September 26, 2016

Very Bearish Set Ups Today - FYI

I have spent some considerable time today and over the weekend looking some back tests which have some similar characteristics as the current market environment.

Without going into all the different angles, if today closes below the open, the technical set up seems to be moving into a strong wave to the downside.

It is possible that today there will be a cross down in the daily stochastics, and the daily MACD, with both the weekly stochastics and weekly MACD in a down position.  This has been very bearish in the short term over the past 20 years.  Possibly when several different technical systems trigger a sell signal on the same day, there creates the possibility for some sharp short term follow through to the downside.

I will exit my UPRO trade today by the close if the close is below the open, and possibly even if it closes above the open.  The 3 day forward returns are so sharply bearish in what I have looked at, that I will make a discretionary exit based upon the new information.

Also, the put option from 1 week, all the way out to 2 months have some favorable outlooks based on the back tests.  The most simple play seems to be buying an ATM put with either 2 weeks or 2 months (or a mix of both) until expiration, and just waiting until expiration to exit.

I will make some final assessments by about 3:00 pm today and possibly post a specific trade recommendation. 


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