To OTC Journal Members:
 

The Trade That Paid: At the Tipping Point?

Friday was pretty ugly in the markets, and I would almost be jubilant if it were all about one trade. However, it's not, and Friday was not a positive for the bigger picture.

It was a 1 - 2 punch in the gut for the economy- Oil spiked $10.75- about 8% in one day. That's an absolutely unbelievable move. Unemployment stats showed the economy lost 49,000 jobs- unemployment surged to 5.5% in the largest one month gain in 22 years.

I know a short squeeze when I see one- oil didn't surge 5.5% on Friday because demand skyrocketed. Moves like that are fueled by someone having to buy, not wanting to buy.

Proving out the old adage that even a blind squirrel can find an acorn every now and then, my suggestion to get shorter the market in Thursday afternoon's late edition proved as prophetic a call as I can make. I had simply observed that the trendless market seemed to be providing selling opportunities on surges, and buying opportunities on pull backs.

For those who have been following my coverage of this short in the NASDAQ, you know I took a small position in QQQQ puts on Thursday just before the close.

I invested $6350 late in the trading day on Thursday in the July 50 puts, and sold them Friday morning a couple of hours into the trading session for $8,000- that's 26% overnight- I'll take that any day. 

My thesis that the NASDAQ 100 has been ready for a sizable pull back has not proven out so far, and I'm still holding 2,000 QID at $38.65. This stock will go up as the market goes down. That position has been making me feel like it's a rough day out on the ocean - nauseous as I keep going up and down.

QID closed Friday at $38.78- putting me back in the money by a few cents. I was thinking of selling and closing out the position, but decided to see what happens next week.

It would appear we are once again at the point where the Bulls might just throw in the towel. Here's a chart of the NASDAQ 100- note how the index closed perfectly on the uptrend line (yellow line) on Friday.

If this index can continue down through the yellow line convincingly, the post March uptrend will be broken to the downside, and then the retracement levels will come into play.

So, I decided to hang in there on QID as we just might be at a tipping point into a corrective phase in the NASDAQ 100. If it holds, the uptrend is intact, as the news isn't going to get a heck of a lot worse.

Friday was nice, but I believe there could be some real money to be made in a 61.8% retracement down to the 1817 level. Stand by for the next chapter. We could still be range bound, or we might see the change in character I have been expecting.

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