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SPY down over 3% today! - Trading Journal (10.28.20)

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@mawit07
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I unfortunately miss timed the short and never reap the rewards. Instead I took a heavy loss and will post on that some other day. Probably when and if I break even. Now on to why today possibly could have been a switch in the markets to bearishness after April's run up to now.

Chart of the USD/YEN has been falling but the SPY has held somewhat higher, what was troubling was there was a correlation happening but the SPY did not extend its losses at the beginning of the week.

Yet the VIX was perking starting on Monday and as the next few days transition the VIX never could get back down.

There is still massive puts on VIX so likely traders are trying to force VIX to drop while keeping market prices elevated. Trouble is as of today VIX shot higher while markets fell over two standard deviations. The markets are on an edge here and for traders to press even further on pushing the VIX is questionable. This can create a negative feedback loop where too many puts being bought back to close the trade will force the VIX to stay elevated which in turn could create further drop in equities.

Equities are extremely oversold, but only on a short time frame. On longer time frame there are areas of concern. SPX at 3100 will need to hold or else the current uptrend from April may be lost. Currently SPX is at 3271. Needless to remind myself there is the election coming up, covid cases rising, and the lock downs starting to pick up in Europe and potentially in the US.

I intend to only go short from here to the reminder of the week but scalp only as we are in oversold territory so a big bounce may occur. On the other hand we have seen how quickly prices have drop in recent days and the markets have closed red more often in the past two weeks which means it is in a down trend.

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