Everything is proceeding as I have foreseen.
We drew the S&P bounce chart for you yesterday and we said we expected a run to our strong bounce line at 1,910 from 1,877,75 at the time. The long play paid off at $50 per point, per contract for a lovely $1,612.50 per contract gain (you're welcome) and this morning, in our Live Member Chat Room as well as the Chat in our Options Opportunity Portfolio, we took advantage of the overshoot to 1,924(also noted on yesterday's chart) to short the S&P again and, as you can see, that's paying off nicely already.
We don't officially trade Futures in the OOP but, once in a while, I'll throw a pick out there along with our usual options trading. MU was our most recent long position and they release earnings after the close so I can't tell you what our play was because it's still gettable for our Members but tomorrow I'll tell you how well it went.
Overall, we are pretty sure this “rally” is fake, Fake, FAKE!!! and that's how we're playing it so expect us to be adjusting our hedges and cashing in some longs as we get ready for what could be a major leg down in the markets. For those of you who haven't been following along and aren't well-prepared for a market downturn, I refer you to my weekend post: “Hedging For Disaster – Now, Are You Ready To Listen? ”
As you can see from Declan's SPX chart (full post at Chart School) the S&P needs to get back over 2,020 just to get back to where we bounced after the Aug 24 disaster and that was a VERY QUICK (2-day) recovery to 1,993. Today is day 2 of bounce 2 and are we at 1,993? No, we are not.
Therefore, this bounce is WEAKER than the last bounce and, much like a bouncing ball that's losing it's kinetic energy, the S&P 500 is losing it's energy as gravity begins to take it's toll (see the classic “Stock Market Physics” for more on how this works). For a full run-down of all of our bounce lines, see yesterday's morning post.
