The market has now digested Trumps first speech as president end of February going into March – as well as the Fed’s decision to raise interest rates from Wednesday.
Volatility was elevated going into Trump’s speech – and VXX was also elevated. That’s when we shorted VXX with an alert on February 28 when VXX was at 18.1. At the time, it looked like VXX was at risk of moving higher quickly.
But VXX was able to pull down – though it didn’t pull down fast enough so our VXX puts were flat even when the VXX was down.
However, after the Fed announcement, volatility was finally able to drop more deeply and we took profits. We didn’t do well on the IWM trade last week, but were able to cushion those losses with two smaller, profitable trades. Additionally, the rebound in metals has been helpful as well after the recent fall.
In terms of the metals, after the big move on Wednesday Fed Day, they have pulled back some and appear to be consolidating in a 4th wave.
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Capital At Risk: $4,400
Quantity = 20 options (puts)
Option Details: VXX June 17-strike puts @2.2, exit 2.74 avg
Pattern we predicted: short volatility into Trump speech
Entry Date: February 28 (VXX @ 18.1)
Exit Date: March 15 and 17 (VXX @ 16.3, 15.85)
Days Held: 17
% Return: 24
The S&P500 pulled back fairly significantly from the Trump speech announcement into March 1 — down into March 9.
It then bounced and hit reistance in the 2388 region ES. When there are wide swings like this – I get the sense that a triangle may be forming where there are 3-wave fakeouts in both directions.
In terms of the other indices, the Dow looks weak (it was previously strong) — and the Russell, which was the bane of my existence as it was previously weaker than everything else, is now stronger than everything else. The S&P is kind of in the middle chugging along. Expecting the S&P to stay range bound for the immediate term with fakeouts in both directions.
I mentioned in the last past that:
However, I don’t think this rally we have strong legs – at least not strong enough to break over 2400 in the immediate term.
Sure enough, it looks like the market is having trouble on the upper end resistance.
The prior chart was looking for a high around 2390ES. Looks like there was one more attempt into that region and we turned down.
Here’s a daily chart of VXX – showing our entry on February 28 (18.1) and our exit on March 15 and 17 (16.3 and 15.85, respectively).
Gold completed 5 ways down just south of 1200 with a truncated 5th. It has now bounced after the Fed announcement with a relatively high level consolidation – it’s when you compare it with silver (below) – which could be a sign that gold may be outperforming silver in the immediate term.
Silver competed 5 waves – but did make a new low on March 15 before the Fed announcement (whereas Gold did not. Since the bounce, silver has pulled back towards 17.22 after reaching a pre-market high of 17.57 — that pullback of more than .30 — is weaker than Gold’s high level consolidation.
While it’s possible we could hit b-wave fakeout resistance and turn back down in a c-wave below 17.21 — if silver and gold are to go together, I would say gold’s high level consolidation should be an indication that silver should drift higher.
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