Non-Farm Friday Is America Working?

What a crazy start to 2016!  

Of course, it is no crazier than the 3rd quarter of 2015 so far, when we had our August crash followed by a slow September bounce that led into a mega-rally that closed our year off back at the highs. At the moment, we are playing with the premise that it’s the highs that were wrong – NOT our current 1,900 level on the S&P.  We’re not expecting any big rally here – just consolidation. 

This is nothing new, of course.  Back on December, 2nd, in: “Which Way Wednesday – S&P 2,100 Yet Again,” I noted:

The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I’ll tell you how much money we made shorting and you’ll say “why do I never catch these great trade ideas” and I’ll say it’s because you’re not patient enough to wait for the pattern to reset itself and just make the obvious play.  

This is the 11th time the S&P has been over 2,100 since May and, so far, it’s been like a little money machine for us all year long on the short side.  I know this time may be different and the last 10 times may have been different too, which is why we stop out if we don’t get confirmation from the other indexes that things are toppy but, when it works – it’s good for $250, $500, $1,000+ PER CONTRACT in the Futures at $50 per point to the downside. 

By the way, I know we’ve been talking a lot about the Futures lately and that’s because our portfolios are mainly in CASH!!! That means we have plenty on the sidelines to play with and the quick in and out entries on the Futures (with much lower friction costs than day-trading stocks or options) are a good way to amuse ourselves while we wait for buying opportunities. In fact, those 2,100 short on /ES are up $10,000 PER CONTRACT at S&P 1,900 and the Russell shorts are up $8,000 per contract and the Nikkei shorts are up $16,250 per contract and this is the part where you say: “why do I never catch these great trade ideas?”