My line in the sand is still 1308.86 on the S&P cash. Unless it is taken out, I will continue to position myself with an overall bias higher. Even if it is taken out, it will not likely be a time to sell, but it will tell me that the trend has very likely changed from up to down. I would then look for opportunities to build a much larger short position.
Needless to say that yesterday was a great day for my overall position, but it should have been much better. Missing that SDS fill last week meant that I also missed being able to scale out on the next dip and then scale back in at lower prices as the market made another high, thus bringing down my average price. The result was that I had fewer shares at higher prices against too much long option delta (which I fatefully bought on Friday's late day dip).
Three things tipped me off last week that I wanted to be more short: 1) the VIX was rising as the markets went higher on low volume. 2) Friday was a full moon. I mentioned both on Twitter, and even posted the RBS moon trading study which back tested buying the new moon and selling the full moon which returned multiples of the S&P return. I instantly lost 10% of my already meager number of Twitter followers . . . which lead me to number 3) When people are so committed to a particular frame of mind (bullish) that they reject you for presenting an alternate possibility (bearish), the trend is ready to reverse.
My job is to be consistently profitable with very low drawdowns, not to be popular.
Ideally, if 1308.86 is taken out, there will be a point of divergence at some point at which I'll hedge my remaining SDS with a new tranche of SPY or OEX calls.
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