A few things I wrote yesterday keep ringing in my head: "keep the pressure on" and "so far it hasn't dropped a bomb yet" and "I will still be looking for signs that the market is failing to the downside." The market somehow seems to have accommodated each one.
I promptly got in the way of the first two. I took a shot with calls early on and missed getting out of them on a weak bounce by a split second. It was not 1354 that wanted to get tested. The market blew through that spot in the pre-market while I was doing my post. No way. It was the 1340 shelf from Feb. 10th-16th, and my trader friend Karen from California got it spot on. Nice call.
I took some nice profits on the SPY 130 puts that I'd been accumulating, then rode the rest down as my call tranche decayed. I was much more lucky with a later series of call trades that I played more defensively and that took a lot of the sting out of the previous calls.
The bounce in the overnight session is really helpful to me, and is what I was anticipating during yesterday's call buying excursions (...sometimes you take a wrong turn, sometimes you don't). I have my eye on the 1350-1356 area today where I will hedge with either SH, SDS, or e-minis.
The market has options now. This decline can morph into something much larger, or it can bounce higher into the 1360s, roll over, then head for new lows around 1311 (Fibonacci and trend channel support). I guess it could also gather itself and head for new highs, too. After all, I didn't see enough volume to the downside. And I saw some overlaps. So I will be playing both sides: long on dips, short on rips, until the market winks and says "nice try."
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