China got toasted last night (down over 5%), and for all intents and purposes, I'm stopped out for now. It was a good ride while it lasted, I took profits along the way, but the pattern that I was playing has likely imploded.
Today is a day to be well aware of how bonds behave. Germany's 10-year bund reached the highest level in a year. Spain's 10-year bonds are above 5% today. But the scariest thing for traders should be how US bonds are trading. This morning 10-year yield is the highest since 2011. Bond trader chatter on Twitter is that 2-year swaps are becoming "unglued."
Obviously, this has affected S&P futures negatively. Friday's bounce, while encouraging for a while, did not close well, and was unable to crest the key level at 1599.19, a bad sign. I was playing the bounce using VIX puts and closed them out EOD.
I will say one thing: if there was ever a set up for an End Of Quarter bounce, this is it. The market is in the perfect spot for an epic fake out. With the "official" Elliott Wave (from Elliott Wave International) in another "wave 3 down" scenario, the stakes are high from this perspective. Any hesitation to break down to 1536 could yield a massive reversal. Incredibly, the target could be 1650.