A Near Perfect Reversal

This is what I was waiting for. The strong move up from 2/25 needed a last gasp, and we certainly got one. But do I think this is THE final high? Maybe. . . maybe not.

Friday's action was typical of what goes on behind the scenes in the S&P. S&P options expire in the morning; OEX expires End Of Day. As much as I'd love to chalk it up to the magnetism of the Equniox, the opening gap up merely squeezed the most possible $$$ out of the expiring calls, sucked in new longs, and flushed them. The late afternoon down/up spike was the most incredible OEX option action I've seen in a while. Too bad my trading plan didn't allow for it. OEX 530 calls, expiring in less than 45 minutes, went from .01 to close at .50 bid. Do the math.

No, Friday I went with my intuition that it would be a trend down day and tried to avoid getting too cute and overtrading by trying to hedge it. I really just wanted to see what the decline had in it. Still, that last spike down felt like a real suckers play. In hindsight, I wish I took a shot there.

Here's what I'm noticing: we didn't reach a higher high on Friday. Had we, I'd be much more bearish. Also, volatility as measured by the VXO made a shooting star, not what I'd like to see at a top. Nor did I like the action in my VXX position. Some traders whom I respect say the VXX is very flawed. Maybe it is, but I've done quite well with it up until Friday. Perhaps volatility is saying there's some complacency yet to be dealt with?

I still want to allow for an End Of Quarter markup. We're too close and too high for one last attempt not to be made. But we are setting up for a nice correction. We came down on big volume: a classic Wyckoff sell signal. It doesn't matter that it was op ex and there's usually higher volume anyway. The market spoke loudly: get ready for supply to be in control.