The last 7 trading days I got the impression that “R Option” was trading as a counter-cyclical vs a market timer model. As you know, “R Option” is my best companion when navigating the markets. Its assistance is so critical what that with the help of investors we created a hedge fund.

Today was not different, I was adding risk last week when the markets were not that strong and today with the markets above 2% on the day: the system starts to lower the risk. I am a firm believer that nobody can predict future price with certainty and that market opinions are just to be tested with an outstanding risk management and position size analysis.

To summarize, I most likely will close some trades and lower exposure to the SPX and NDX too early and I am happy and calm.

Note this Twitter post for a simple note on market structure

You can find a chart update in this post each day after the close.

I have added this chart to the sticky post of the blog, right under the SP500. This will update automatically each day after the close.

INTRADAY AND DAILY PRICE ACTION HAVE AUTO-CORRELATION:

The VIX and daily returns on Indexes experience clatters of volatility, thus when we have a large block of outliers in any direction you can expect to have similar ones an opposite forces on the other side.

Of course the most difficult part is to know when.
In the BOX 1 it took 7 trading days to the down side to have a strong day to the upside. In BOX 2 it have taken 3 consecutive negative days to have a strong day.

Tomorrow we this chart will show the return for today on the SPX about +2.01%.
You can copy the link for future references. https://bit.ly/2FeTUub
For tomorrow I do not know the price action. But if bears are done selling, the low should be respected

Data from Refinitiv:

Futures for the Nasdaq bounced following a brutal sell-off in heavyweight technology stocks, while Asians shares lost gains. European shares were higher, although sentiment remained fragile after AstraZeneca suspended global trials of its COVID-19 vaccine. Oil futures clawed back some of the losses they sustained in the previous session. Gold prices slipped on a stronger dollar. Job Openings and Labor Turnover (JOLTS) data is scheduled for release later in the day.