July 28, 2017

Reminder to Self – All It Takes Is One

I came across a great article on the one bad trade syndrome. Recently, Slopers (Tim Knight’s Band of Followers), were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make the same mistake. Currently, my positions are teetering on max pain (stop-loss). My outlook remains with the pullback scenario that I have mentioned repeatedly the past few weeks – short-term bearish.

For those of you who have not been reading my posts the past several weeks, I have been reminding my loyal readers of the following:

For several weeks I have warned of the following:

June is also a Triple Witching month. Four times a year stock options, index options and index futures all expire at the same time. The performance of the overall market immediately following June’s Triple Witching has been absolutely horrible in years past. The week after has seen the Dow down 15 out of the last 17 years. Watch to see if the market is overbought going into the week following Triple Witching. If so, this could have the potential for a decent short-term fade to the downside.

Seasonality alone is (in almost every case) not a reason place a trade. However, when compared with the current state of the market at the time the seasonal tendency arrives, the probability of a successful trade can be increased tremendously. Always be aware of the market’s seasonal picture.

Check out the article – All it Takes is One Bad Trade

My array of various ETF puts are all down. If indeed post-June expiration is weak then my current positions do well. Again, I am watching for a close in the upside gap in IWM from 6/14 at the $65.00 level. Once that is reached I will most likely take my trades off the table. Of course, taking heed to the article, I will not allow my positions to go much higher from here. Most of the major market indexes are struggling with what looks like strong overhead resistance. Couple that with current short-term overbought levels and bearish seasonality and you can see why a high-probability mean reversion trader would find the current market a bit bearish (short-term).